Final Results

RNS Number : 9124T

Zinnwald Lithium PLC

22 March 2023

 

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the UK Market Abuse Regulation. With the publication of this announcement, this information is now considered to be in the public domain.

Zinnwald Lithium plc / EPIC: ZNWD.L / Market: AIM / Sector: Mining

22 March 2023

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

Final Results

Zinnwald Lithium plc, the German focused lithium development company, is pleased to announce its final audited results for the year ended 31 December 2022.

The Company's Annual Report and Financial Statements for the year ended 31 December 2022 will be posted to shareholders today and will be available on its website www.zinnwaldlithium.com.

OVERVIEW

Building value at strategically located integrated Lithium Hydroxide ("LiOH") project in Germany

· March 2022 - proved the viability of LiOH production & potential to produce economically significant amounts of commercially saleable by-products including fertiliser.

· September 2022 - published a PEA reporting positive economics: pre-tax NPV8 of US$1,605m, IRR of 39.0%, $192m EBITDA and a payback of 3.3 years.

· Continued to strengthen the team as the Project advances towards construction.

Key corporate activity post period end

· February 2023 - appointed Tamesis Partners as joint corporate broker and financial adviser to broaden interaction with institutional investors focused on the mining space.

· March 2023 - signed agreement with Ocean Partners Ltd for it to acquire Erris Zinc Ltd, which owns the Abbeytown Project, in return for a royalty and future cash payment once Abbeytown goes into production. 

· Today - secured first industrial cornerstone investor, AMG Advanced Metallurgical Group ("AMG"), which will acquire a 25% stake in Zinnwald as part of a wider placing, done at a premium to current share price, raising a minimum of £14m (€16m). 

Outlook

· Multiple work streams underway including advancing the BFS towards completion by the end of the year.

· Robust cash position with €2.1m cash at 21 March 2023, excluding the expected minimum £14m net proceeds from the fundraise announced today.

· Ideally positioned to build value given high demand for domestic supplies of sustainable critical minerals including lithium.

CHAIRMAN'S STATEMENT

As the largest provider of climate financing in the world, the EU, together with its member states, is focused on facilitating a green transition and tackling the adverse effects of climate change.  However, its planned reforms are simply not possible without the rapid transition to electric vehicles and a large scale build out of energy storage capacity.  Central to this is an order of magnitude increase in the supply of batteries. 

The need to source a supply of critical materials that support green energy technologies from within the continent is clear. This was highlighted by European Commission president Ursula von Leyden who said in her October 2022 State of the Union address, "lithium and rare earths are already replacing gas and oil at the heart of our economy". Accordingly, a new Critical Raw Material Act (the "CRMA") was introduced on 16 March 2023 to address risks to supply and advance new domestic mining projects. The CRMA proposes a comprehensive set of actions to ensure the European Union's access to a secure, diversified, affordable and sustainable supply of critical raw materials, including lithium.  The CRMA also sets clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify EU supply including at least 10% of the EU's annual consumption for extraction and 40% for processing. 

This bodes well for Zinnwald as it develops its 100% owned integrated lithium hydroxide ('LiOH') project in Germany positioned to support the European battery storage and EV manufacturing sectors from the end of 2026. 

Having proved the viability of LiOH production in March 2022, as well as the potential to produce economically significant amounts of commercially saleable by-products, our focus then turned to the re-design of the Project that culminated in the publishing of a PEA that fully described the new technical plan for the Project in September.  This reported positive economics: pre-tax NPV8 of US$1,605m, IRR of 39.0%, $192m EBITDA and a payback of just 3.3 years.

The PEA emphasised other positive attributes of the Project including its location in a mining district at an historic underground mine with existing infrastructure, availability of skilled labour, and support of the Saxony authorities and local community.  Furthermore, it highlighted the Project's strong ESG credentials with the potential to be a zero-waste project with high-demand by-products including fertiliser, limited water use, and low-cost sustainable mining strategy focused on minimising C02 emissions. 

We are now seeking to further optimise the Project's economics by evaluating the potential to increase the mining rate resulting in higher lithium product output. During 2022, the relevant approvals required to commence two drilling campaigns were sought and subsequently granted enabling the start of an infill drill campaign at the key Zinnwald Lithium Deposit in July, and an exploration drill campaign at one of our satellite deposits, Falkenhain, in September.  Initial results from these programmes indicate the potential for an increased resource at Zinnwald and the potential for significant lithium resources at Falkenhain which could represent possible feed material for the core project.  The data acquired will be collated to optimise the mining plan and fed into the Bankable Feasibility Study ('BFS'), which we currently anticipate publishing towards the end of the year.

In tandem, other sizeable work programmes are underway to refine and optimise our plans including the development of processing technologies, continued Environmental Impact Assessment ('EIA') and other permit application processes, the evaluation of options for the construction strategy and further work/negotiations on infrastructure aspects of the Project. 

Corporate

Today we have announced a major milestone in the development of the Company in the securing of our first industrial cornerstone investor, AMG Advanced Metallurgical Group ("AMG").  As part of a wider placing, to be done at a material premium to our current share price, we will raise a minimum of £14m and AMG will acquire a 25% stake in Zinnwald.  This is a significant endorsement of our strategy to have AMG as a partner, which is one of the most advanced Lithium companies in both Germany and the wider EU.  We are also pleased that our existing substantial shareholders, Henry Maxey and Mark Tindall have all elected to subscribe to maintain their shareholdings.

At the start of 2023 we appointed Tamesis Partners as joint corporate broker and financial adviser.  Tamesis has initiated research coverage of the Company.  We look forward to working with Tamesis to broaden our interaction with institutional investors focused on the mining space.

In addition, we were pleased to announce that we have entered into an agreement with Ocean Partners Ltd for it to acquire our subsidiary Erris Zinc Ltd, which owns the Abbeytown Project, in return for a royalty and future cash payment once Abbeytown goes into production.  As we previously stated, our core focus is on the Zinnwald Lithium Project and we believe that Abbeytown will be better advanced as part of a business focused on the commodity and the region.  As such we are confident that Ocean Partners will be excellent stewards of the project and that the transaction will deliver value to Zinnwald from this asset.

Financial Overview

The Group maintains a disciplined approach to expenditure and has a €2.1m cash position as at 21 March 2023, which excludes the expected minimum €16m proceeds from the fund raise announced today.

Outlook

As the leading battery technology in use today, lithium-ion batteries are destined to be an enduring technology and whilst the record levels of lithium pricing reached during 2022 may not be repeated demand is expected to remain high. Benchmark Mineral Intelligence suggests that we need to increase production of lithium-ion batteries from 0.6TWh a year to 20TWh by 2050, which will require a 20-fold increase in lithium supply, while the IAE says 50 new average sized lithium mines are needed by 2030 to fill the projected supply gap. Zinnwald expects to deliver one of those mines.

In line with this, we are pushing forward as hard as possible on multiple work streams including advancing the BFS towards completion by the end of the year. I look forward to providing updates on our progress as we focus on ensuring the underlying value of our asset is more fully reflected in our share price.

Finally, the progress made during the year is testament to our team, which we continue to strengthen as the Project advances towards construction. I would like to take this opportunity to thank them all for their continued hard work and I look forward to working with them in the year ahead as we focus on delivering on our overriding objective, which remains to generate value for all our shareholders.

Jeremy Martin

Non-Executive Chairman

22 March 2023

THE ZINNWALD LITHIUM PROJECT

The Zinnwald Lithium project (the "Project") is located in southeast Germany, some 35 km from Dresden and adjacent to the border of the Czech Republic.  The Project concept is for an underground mine and associated, on site, mineral and chemical processing to produce a battery grade lithium hydroxide.

The Companies business model is predicated around utilising its inherent advantages to enable it to become a sustainable project serving the European lithium market:

· Location : German project in the heart of the European automotive and chemical industries and within close proximity of several major battery "Gigafactories" currently in production or planned. It is one of the few lithium projects that will provide domestic European primary lithium supply. Security of supply and shorter supply chains are becoming increasingly important. Europe does not currently have a domestic source of lithium supply and there are relatively few projects within the EU

· Established mining region : The Project is located in an established mining area that has been mined historically for 400 years and as recently as the early 1990s. Mining is well understood by local communities and authorities and the State of Saxony, in which the project is located, recently published a raw materials strategy highlighting the role that mining for critical raw materials can play.

· Low impact : The Project is based around an existing underground mine, thereby minimising surface impact. Existing infrastructure in the area will be utilised to access and exploit the ore body which will further minimise the impact on the environment and communities.  In addition, the Project has been designed with the potential to be a low or "zero-waste" operation as the majority of both its mined product and co-products have their own large-scale end-markets:

o  Its initial mined waste product, quartz sand, is benign and can be used in the construction industry. 

o  The leach residue from the chemical process can be used as back-fill in the mine

o  Its primary co-product is high grade Potassium Sulphate, which is primarily used as a fertiliser and for which the market is large.

o  Its secondary co-product is Precipitated Calcium Carbonate ("PCC") typically used as a filler in the paper making process.

· High Regulatory standards : The Project will be permitted under EU environmental rules, which are some of the strictest globally.  OEMs will be able rely on the production being in compliance with EU Battery Chain directives. Furthermore, the Board and management are committed to maintaining the highest levels of transparency and corporate governance consistent with being a UK listed Plc.

· Sustainable : The Project incorporates several key elements that are advantageous in terms of sustainability relative to competing global sources of lithium supply

o  The process has limited water use relative, in particular, to brine producers. 

o  The process flowsheet is less energy intensive than traditional spodumene-based production as it involves a single pyrometallurgical step at a lower temperature than is required in a spodumene-based process.

o  Overall transport costs and emissions are reduced by being an integrated operation located close to end markets especially when compared to Australian sourced spodumene concentrate processed in China.

o  German energy sources currently include a higher overall "low carbon" component than some regions that are currently important suppliers of lithium.

· Leading Partners : The Company is committed to working with highly credible partners that can help to ensure the delivery of a landmark Project.  International technical partners currently include SRK, Metso:Outotec, K-Utec, Epiroc and GLU/GICON.

Geology and License Areas

The Project is in a granite hosted Sn/W/Li belt that has been mined historically for tin, tungsten, and lithium at different times over the past 400 years. Lithium is contained in lithium-bearing mica, which is called "zinnwaldite", a member of the siderophyllite-polylithionite series, which contains up to 1.9 wt.% lithium. It is enriched in 10 parallel to subparallel zones below the historic tin mineralization. Individual lithium- bearing greisen beds show vertical thicknesses of more than 40m. The mineral assemblage consists of quartz, Li-F-mica (zinnwaldite), topaz, fluorite and associated cassiterite, wolframite and minor scheelite and sulfides.

The Project comprises four license areas, as follows:

The advanced Zinnwald core project area

The Zinnwald core project area covers 256.5 ha and already has a 30-year mining licence to 31 December 2047.  In May 2019, our now 100% owned subsidiary, Deutsche Lithium GmbH ("Deutsche Lithium" or "DL") first announced an identified resource at this license area as follows:

· Measured plus Indicated Mineral Resource estimate containing 35.51 Mt at a grade of 3,519 ppm containing 124,974 t Li at cut-off grade of 2,500 ppm Li. This represents approximately 665,000 tonnes of lithium carbonate equivalent ('LCE'), comprising approximately 357,500 tonnes of LCE in Measured Resources and approximately 307,500 tonnes of LCE in Indicated Resources

· Estimated Inferred Mineral Resources of 4.87 Mt at a grade of 3,549 ppm containing 17,266 t Li metal (approximately 92,000 tonnes LCE)

Falkenhain, Altenberg and Sadisdorf satellite areas

· Falkenhain - the license covers an area of 2,957,000 m² and, in 2022, the license was extended for a further three years to 31 December 2025.  DL commenced a 10 drill-hole exploration programme in September 2022 with the results from the first drill hole published in January 2023. 

· Altenberg DL - the license covers an area of 42,252,700 m² and is valid to 15 February 2024.  DL is currently evaluating historical data, which will be used to define new exploration targets in the area.

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

Project Plans - Revised Strategy

The Group's management team took the decision following the completion of the acquisition of the remaining 50% of DL in June 2021 to reposition the Project to better reflect the significant and rapid developments in the Global and European Lithium markets.  The Project's revised strategy is now to focus on a larger scale operation that produces battery-grade LiOH products; to optimise the Project from a cost perspective; and also to minimise the potential impact on the environment and local communities. All aspects of the Project from mining through to production of the end product will now be located near to the deposit itself in an area with developed infrastructure, energy sources, services, facilities, and access roads and rail. Power and water are provided by existing regional supply networks.  It is also located close to the heart of the German automotive and chemical industries. 

To progress this revised strategy, the Group has taken a number of steps in the further definition, design and study work required, which culminated in the publication on 7^th September 2022 of the "Preliminary Economic Assessment ("PEA") for the revised Zinnwald Lithium Project.

PEA Mine Plan

The Project includes an underground mine with a nominal output of approximately 880,000 t/a ore at estimated 3,004 ppm Li and 75,000 t/a barren rock. Ore haulage is via a 7km partly existing network of underground drives and adits from the "Zinnerz Altenberg" tin mine which closed in 1991. The mining operation for the Project is planned as an underground mine development using a main ramp for access to the mine and for ore transportation from the mine to the surface via access tunnels.  The estimated mine life covers >35 years of production. The optimisation of bulk-mining methods has been a key consideration to realise increased total mined tonnage. The cross-section map of the area shown below shows the drainage access tunnel, the two access mining tunnels and the historic talings facility at IAA Bielatal.

PEA Processing Flowsheet and Metallurgical Test Work

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

        Permitting and Environmental Studies

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

Economic Analysis in the PEA

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

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

Project Development Plan

The preliminary project schedule outlined below is based on the assumption that the Project will be fully funded throughout both its next stage of producing a BFS and then into construction; all environmental and other regulatory permits will be granted without delays; external agencies and suppliers will be cooperative; and management of the execution will be by competent EPCM / EPC groups.

STRATEGIC REPORT

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

Highlights

12 Months to 31 December 2022

· Completion of PEA on revised Project plan showing robust economic results. 

· Testwork confirmed viability to produce battery-grade Lithium Hydroxide

· Testwork confirmed viability to produce economically significant by-products.

· Hyper-spectral scanning tested to produce accurate quantitative information on ore types and grades.

· Lithological ore-sorting proven to be viable in pilot tests.

· Commencement of in-fill drilling campaign at Zinnwald license area.

· Commencement of exploration drilling campaign at Falkenhain license area.

· Commenced discussions with owners of local infrastructure.

· Engaged SRK Consulting (UK) Ltd to provide competent person support.

· Joined the EU funded Horizon Europe "Exploration Information Systems" project.

· Strengthened the operational team in Germany.

· Entered into Option Agreement to acquire more land in vicinity of Altenberg.

Post period end to 21 March 2023

· First Industrial Cornerstone Investor (AMG) and wider Placing raising a minimum of £14m.

· First drill results on Falkenhain exploration license.

· Appointment of Tamesis Partners as co-broker and first research published.

· Simplified and focused the Company by selling the non-core Abbeytown Lead-Zinc Project.

Strategic Review

Company Overview - Background and evolution

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

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

Company Strategy

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

· Complete a Bankable Feasibility Study on the Revised Project following on from the PEA.

· Further refine the Processing Flowsheet that supports the primary production of battery grade lithium hydroxide and its co-products, Potassium Sulphate (fertilizer) and Precipitated Calcium Carbonate.

· Expansion of the size of the Project by increasing Mineral Resource Estimates to include the "Albite Granites" and increase size of annual mining throughput with improved ore-sorting technologies.

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

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

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

· Exploration work to advance the satellite licenses to increase the potential size of the overall resource.

· Advance the plant engineering towards AAC Class 3.

· Minimising the carbon footprint by optimising Lithium plant location and transportation.

· Finalisation of the selection of the optimal chemical processing site location.

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

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

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

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

Operational Review

Germany

During 2022, the Group has made significant progress on the Project, including the publication of its PEA on the Revised Project.  For further details see the section on Zinnwald Lithium Project above.  As part of this progress the Group completed the following matters during the year, and after the year end, to underpin the Project plans.

RESOURCE DEVELOPMENT

The Company has already commenced an infill drilling programme at the core Zinnwald license with the objective of better defining the Resources and Reserves that lie within the ore body, as well as determine the detailed early years' mining plan. This will likely lead to revised Resource and Reserves Estimate to be included in the BFS. The Company has also commenced an exploration drilling campaign at its nearby Falkenhain license to determine the potential for expansion of both the project's resources and the production level.

The Company has engaged SRK Consulting (UK) Ltd to provide competent person support for the drill campaign and geometallurgy.  The drilling is being conducted by GEOPS Bolkan Drilling Services Ltd.  The Company has also leased and taken occupancy of new warehouse space in Freiberg that is being used for core storage and core logging and processing of new drill core. The facility has been outfitted with the latest safe and environmentally friendly equipment.

In-fill drilling at Zinnwald Lithium Deposit

In August 2022, the Company received its final permits and started an in-fill drilling programme at the core Zinnwald Lithium license. The purpose of the in-fill drilling programme is to study the mining scale variability of the ore with the view of applying larger scale mining methods. The ultimate aim is also to support the plan to consider the Albite Granites (previously referred to as "Ore Type 2" in the PEA) for the Mineral Resource and future mine plan, with potential to materially increase the total Mineral Resource.

As at the end of 2022, the Company had completed 13 drill holes and 4,311m at the core Zinnwald deposit.  The results of the assay at the first four drill holes were announced in detail in an RNS on 23 November 2022.  In summary the included long mineralised intervals such as 2,503ppm Li over 86.4m and 1,846ppm Li over 121m within which there are several high-grade core intervals including of 4,286ppm Li over 4.6m and 4,345ppm Li over 6.5m.  So far in 2023, the Company has completed a further 15 drill holes, taking the total drilling to 9,587m.  Further assay results will be published in due course.

Exploration drilling at Falkenhain Licence Area

In September 2022, the Company received its final permits and started an exploration drilling programme at Falkenhain.  This exploration licence is located 7km north from the core Zinnwald License.  The licence area was historically extensively explored for occurrences of tin and tungsten with drilling undertaken most recently from 1963 to 1990. The Company has performed a detailed review of the historic data including assaying samples of the surviving core from these campaigns. The outcome from this work has identified the potential for a lithium resource.

The Company has designed an exploration drill campaign of ten diamond drill holes to test the historic drill data and better determine the resource potential of the licence.  The first drill hole was completed to a depth of 600m and the assay results published on 30 January 2023 showing significant intercepts of thick high-grade lithium mineralisation including 80m at an average 2,879 ppm Li and 51m at an average 3,421 ppm Li.

In September 2022, the Company was informed by the Saxony Mining Authority ("SOBA") that its application to extend its exploration license at Falkenhain was successful. The exploration license is now valid until the 31 December 2025.

PROCESSING AND FLOWSHEET

Mining and Geometallurgy - TheiaX, Metso-Outotec, Tomra, UVR FIA

TheiaX GmbH, a local German company, reported initial hyperspectral core scanning tests on both existing drill core from previous drilling campaigns, and crushed ore samples from the previous pilot tests. The hyperspectral scanning produced clear quantitative information on Zinnwaldite (Li-mineral), Muscovite, Clay minerals and Topaz from both the drill core and the crushed product. In comparison to standard one metre assay intervals, the hyperspectral imaging produced information on five cm intervals and detected lower grade inclusions from the core giving a very clear indication that online hyperspectral imaging could be used for value-based bulk or particle sorting of crushed ore.

After successful preliminary test work, pilot ore-sorting tests were carried out by Tomra in Hamburg, Germany to test the amenability of Zinnwaldite ore for particle sorting. All Zinnwaldite lithologies, ore and waste, were tested.  The pilot confirmed that >10 mm crushed material particles can be effectively sorted with off-the-self ore-sorters.

The objective of these testwork campaigns is to reduce ore processing costs by removing waste and low-grade material from the Mineral Processing circuit before the expensive grinding, drying and magnetic separation stages, as well as minimising the quantity of fine material produced as by-product.  It could also lead to an increase in total Mineral Resources. The current Mineral Resource excludes Ore Type 1 lenses thinner than two meters due to processing cost per tonne waste rock mined. With better understanding of the small-scale grade variation and application of sorting process, it may be possible to lower the Li cut-off grade of Ore Type 1.  In addition, a considerable amount of lithium at the Project is contained in the "Greisenized Granite" rock, which could potentially be included in Mineral Resources. This material can be understood as an alteration halo surrounding the Ore Type 1 and is estimated at 214 Mt at a Li grade of 1700 ppm. It is currently not included in the Project's Mineral Resources of 40.4 million tonnes (35.5 million tonnes measured and indicated plus 4.9 million tonnes inferred), as set out in the PEA.

Additional tests to further confirm the mineral processing assumptions for the Albite Granites as part of the future mining feed are being undertaken at UVR FIA GmbH in Freiberg. This principally considers the processing characteristics, mineralogy, and geo-metallurgy of the Albite Granite, which also holds significant amounts of lithium bearing mineralisation.

Pyrometallurgy - IBU-tec

Calcination (roasting of pre-treated Zinnwaldite concentrate) testwork was carried out by IBU-tec Advanced Materials AG. The calcination testwork focused on pre-treatment of the concentrate with different additives, agglomeration and roasting of the agglomerate. The test targeted the possibility of utilising cheaper additives and a higher leach rate of lithium and potassium from calcine. The tests for calcine leaching of the calcined material were carried out by K-UTEC.

The tests indicated that Flue Gas Desulfurization ('FGD') Gypsum is suitable for the purpose. FGD Gypsum is readily available and inexpensive and would represent a cost saving versus using primary gypsum. The tests also showed an increased lithium recovery rate of 90% (previously 87%) and an increased potassium recovery rate of 70% (previously 50%) from Zinnwaldite ore compared with what was demonstrated in the 2019 FS.

Hydrometallurgy - Production of battery-grade LiOH and co-products - K-UTEC

In March 2022, the Company announced the successful completion of pilot scale testwork that demonstrated the technical and economic viability of producing high purity (>99.9% purity) lithium hydroxide from Zinnwaldite concentrate is technically and economically viable.  The test work also confirmed the potential to produce economically significant amounts of commercially saleable co-products, such as high-purity potassium sulphate ("SOP") and precipitated calcium carbonate ("PCC").

In these tests, almost 50kg of battery grade LiOH was produced out of several tons of Zinnwaldite concentrate. The test work was conducted in Germany by a leading industry specialist, K-UTEC AG Salt Technologies ('K-UTEC') and verified by a third-party laboratory through chemical and physical analysis. The lithium recovery from the Zinnwaldite concentrate to the LiOH was proven to be above 80% and comparable to lithium processes from other types of lithium resources. Non-saleable side streams were proven to contain very low amounts of soluble, possibly environmentally problematic elements. 

The Company further commissioned K-UTEC to conduct a technical scoping study for SOP and PCC  product optimisation, which confirmed the ratios of high grade technical / fertiliser grade SOP products that can be achieved. This work specifically considered the operational aspects of producing various quantities of SOP products and will form the basis for higher level engineering studies.

OTHER OPERATIONAL MATTERS

Access to infrastructure

In March 2022, the Company was granted access to portions of the existing mining infrastructure in the vicinity of the Project for inspection purposes. This infrastructure includes a 4km drainage tunnel, and disused ventilation and access shafts, which potentially could be used as part of its operations.  The infrastructure was found to be in excellent condition and easily accessible. The Company continues to develop its plans for the possible utilisation of this infrastructure to beneficially impact the Project and is also in discussion with the owners of the assets for access and usage.

Land in Altenberg

In August 2022, the Company announced that it had entered into an option agreement with Projektgesellschaft Altenberg mbH, an entity owned by the town of Altenberg in Germany, that gives the Company the right to acquire approximately 14,000 square metres of industrial land in the Europark industrial area near to Altenberg.  The option agreement is valid until August 2025.  The land subject to the option agreement is adjacent to land already owned by the Company and combined would bring the Company's total land holding in this area to approximately 30,000 square metres. This industrial land has the potential to be used for access and other operational aspects of the Zinnwald Lithium Project. 

Partnerships

The Group has further strengthened its relationships with leading partners, whose credibility the Group believes will ultimately support its position with future project finance partners:

· SRK Consulting UK Ltd is providing Competent Person ("CP") support and guidance for the Project.

· TheiaX GmbH is assisting with cutting edge hyperspectral scanning of drill-core to be used in the geo-metallurgical optimisation of the Project.

· Metso Outotec is providing expert support in advancing the mineral processing concept and engineering, including verification of historic engineering, the development of a conceptual study to produce engineering deliverables to enable a smoother transition into basic engineering and support of further development stages of the Project. 

· Epiroc is developing plans for an electrically powered mining operation.

· GICON / GLU is proving support in the permitting process of mining assets in the state of Saxony.

Co-Broker Appointment

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

Staffing in Germany

The Group has further strengthened the team in Germany in 2022, adding skills in several key disciplines including geology, mining, and logistics.

ESG and Sustainability

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

Lithium Market in 2022

Building on an extremely strong performance in 2021, the lithium market in 2022 continued to perform with spot prices exceeding US$80,000 ton.  Contract pricing, typically a better indicator of overall supply-demand dynamics, was also very robust with SQM, one of the world's biggest suppliers, announcing an average price for 2022 of US$52,000/t.  Pricing is supported by a growing consensus around a supply / demand imbalance, with several market commentators anticipating a persistent deficit of supply.  The impact on long term lithium hydroxide price expectations has been a consistent rise. In Q3 2021, Benchmark Minerals (a leading lithium industry consultancy) forecast a long-tern price of $12,110, but this was before the step change in balance in the market.  In March 2022, Roskill forecast an inflation adjusted long term price of $23,609 per tonne through to 2036 with a nominal rate of $33,200/t by 2036.  In its year-end review, Fastmarkets produced a 10 year forecast for Lithium prices that showed prices above $30,000 per tonne for the rest of the decade and still above $25,000 per tonne by 2032.  Zinnwald in its PEA assumed a long term price of $22,500/t.

The global lithium market is expanding rapidly due to an increase in the use of lithium-ion batteries for electric vehicle and energy storage applications. In recent years, the compound annual growth rate of lithium for battery applications was over 22% and is projected by Roskill to be more than 20% per year to 2028.  This expansion is being driven by global policies to support decarbonisation via electrification. This is underpinned by Carbon Emission Legislation (COP26, EU Green Recovery, Paris Accord); Government regulation and subsidies; and Automakers commitment to EVs. Global electric car sales totalled 4.2 million units in 2021, more than double the level in 2020 and up ~ 200% versus 2019 with no slowdown anticipated in 2022. 

Benchmark Minerals highlighted that there are 282 Gigafactories at various stages of production/ construction, up from only 3 in 2015 (by May 2022, this number had gone over 300).  If all these plants came online in the planned 10-year timeframe, it would equate to 5,777 GWh of battery capacity, equivalent to 109 million EVs.  This would require 5m tonnes of lithium each year, as compared with 480,000 tonnes produced in 2021.  It noted that the lack of supply is not due to any geological constraints but to a simple lack of capital investment to build future mines and estimated $42bn needs to be spent by 2030 to meet anticipated demand for lithium. 

Arguably the most transformative event in the lithium industry in 2022 came in August when the US Government announced the Inflation Reduction Act ("IRA"), which is described as the largest piece of federal legislation to address climate change ever promulgated.  It comprises a total of $391billion in provisions relating to energy security and climate change and includes $270 billion in tax incentives.  Some of the largest allocation areas included $128 billion for renewable energy and grid storage and $13 billion for electrical vehicle incentives.  As part of this Act, in October 2022, the White House made $2.8 billion of direct grants to boost domestic EV battery production ranging from recycling facilities to lithium processing plants.  Companies such as Albermarle, Piedmont Lithium and Lilac Solutions all received sizeable grants in relation to lithium processing facilities.

The IRA triggered a strong response from the EU driven by concerns around the scale of incentives and subsidies and the risk to European industry.  In January 2023, the European Commission set out its own "Green Deal Industrial Plan" that aims to ease state aid rules that would "enhance the competitiveness of Europe's net-zero industry and support the fast transition to climate neutrality. The Commission will also protect the single market from unfair trade in the clean-tech sector and will use its instruments to ensure that foreign subsidies do not distort competition in the single market, also in the clean-tech sector."  The Plan is based on four pillars: simplifying regulations; speeding up access to finance; skills development; and open trade to provide a 'more supportive environment' to boost the EU's manufacturing capacity for the green transition to meet its climate targets. Brussels wants Europe to be the first climate-neutral continent by 2050, and to cut its emissions by at least 55% by 2030.  A "Net Zero Industry Act" is due in 2023 with the potential for a longer term European Sovereignty Fund to invest in emerging technologies.

Ireland

During the period, the Group retained its sole license at Abbeytown and has met all expenditure requirements to maintain the license through to June 2023.  On 13 March 2023, the Company announced the terms of an acquisition agreement with Ocean Partners Ltd for them to acquire Erris Zinc Ltd, the owner of the Abbeytown Lead-Zinc license in Ireland.  Ocean Partners shall acquire Erris Zinc for €1 and commit to spend €130,000 over the next three years to the end of 2025 on exploration work at Abbeytown.  Zinnwald shall receive a 1% Net Smelter Royalty and a €200,000 cash payment due six months after commencement of commercial production from Abbeytown.  Zinnwald shall have the right to buy back Erris Zinc for €1 in March 2025, if the committed exploration spend has not been made.

Share Price performance in 2022

The Board shares the frustration of shareholders at the weakness of the Company's share price in 2022.  The wider equity markets, especially for smaller companies, have been under sustained pressure in 2022 primarily due to macro-economic factors including rising interest rates, uncertainty caused by the conflict in Ukraine and low anticipated economic growth.  Zinnwald has had two specific equity events that occurred at the end of December 2021 (the distribution of 91m Zinnwald shares owned by Bacanora Lithium Plc on completion of its takeover by Ganfeng Lithium Ltd; and the expiration of the lock-in on the majority of the 50m Zinnwald shares originally issued to creditors of the SolarWorld AG estate) which resulted in there being a number of material shareholders that were unlikely to be natural holders of the Company's shares.  The Board understands that majority of these shareholders have sold all or the majority of their holdings over the course of 2022.  The Board believes that this "overhang" has now cleared, as evidenced by the improved share price performance so far in 2023.  The Board is grateful for the new and existing shareholders that have absorbed this volume of shares. 

Outlook

The Company is primarily focused on the delivery of a BFS by the end of 2023, further building on the technical concept detailed in the PEA published in September 2022.  The PEA demonstrated a robust Project with very attractive economics and the team is working hard to advance this to the next stage.  The funds raised in the share placing announced today will primarily be used to deliver this BFS, and thereafter to finance the detailed engineering and design work required to reach a Final Investment Decision.

As part of this BFS work, the Company near-term priorities are the completion of the in-fill drill campaign at Zinnwald, which should result in the completion of an updated Mineral Resources and Reserves Estimate (MRE), as well as determine the detailed early years' mining plan.  The Project's historic MRE was based solely on the Greisen beds and excluded the Albite Granites. One of the goals of the ongoing in-fill drilling programme is to materially increase the MRE, which could, in turn, accommodate greater mining capacity for an expanded Li-product output. Historic estimates quantified the tonnage potential of the Albite Granites alone at above 200Mt, an estimate that the Company is working to verify.  The Company will also continue its exploration drilling campaign at its nearby Falkenhain license to determine the potential for expansion of both the project's resources and the production level.

The Company will continue to develop the technologies planned for its processes. Individual processing methods and stages are well established in mining and other industries. As the recognition of Zinnwaldite as a source for battery metals is more recent, the application of methods such as high-intensity magnetic separation has not previously been used in beneficiation of this specific type of lithium ore but is utilised and well established in the beneficiation of other ore types. Evaporators and crystallizers are common processing methods in the production of fertiliser salts. The Company has also completed the initial phases of testing bulk and particle sorting techniques designed to increase the type of resource available to the Project. The Company will also continue to refine its plans for reducing its overall CO₂ footprint and operating costs, such as via the use of electric mining equipment.

The Company has already commenced its EIA and other permit process, including baseline studies and other reports.  This will be a high priority area over the coming quarters.

The Company will continue to liaise with individual, State and Federal owners of local infrastructure regarding access rights and/or acquisition.  The Company will also advance negotiations for service contracts for electric power and natural gas with local power companies as well as supply contracts for required reagents and materials.

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2022

		31 December 2022	31 December 2021
	Notes	€	€
Continuing operations
Exploration projects impairment		-	(1,583,566)
Administrative expenses		(1,850,129)	(1,122,534)
Other operating income		42,948	779
Share based payments charge	25	(545,225)	(7,779)
Operating Loss		(2,352,406)	(2,713,100)
Revaluation gain on joint venture	7	-	1,038,252
Share of loss of joint venture	10	-	(52,911)
Finance income	9	191	455
Loss before taxation		(2,352,215)	(1,727,304)
Tax on loss	12	-	-
Loss for the financial year	30	(2,352,215)	(1,727,304)
Other Comprehensive Income		(138)	181
Total comprehensive loss for the year		(2,352,353)	(1,727,123)
Earnings per share from continuing operations attributable to the owners of the parent company	13
Basic (cents per share)		(0.80)	(0.74)

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

GROUP STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2022

		31 December 2022	31 December 2021
	Notes	€	€
Non-current assets
Intangible Assets	14	18,966,165	16,165,085
Property, plant and equipment	15	327,528	48,621
Right of Use Assets	16	185,285	-
		19,478,978	16,213,706
Current assets
Trade and other receivables	20	309,795	121,845
Cash and cash equivalents		3,164,585	8,291,991
		3,474,380	8,413,836
Total Assets		22,953,358	24,627,542
Current liabilities
Trade and other payables	21	583,660	638,660
Lease Liabilities	16	140,149	-
		723,809	638,660
Net current assets		2,750,570	7,715,176
Non-current Liabilities
Deferred tax liability	22	(1,382,868)	(1,382,868)
Lease Liabilities > 1 Year	16	(47,795)	-
		(1,430,663)	(1,382,868)
Total Liabilities		(2,154,472)	(2,021,528)
Net Assets		20,798,886	22,606,014
Equity
Share capital	26	3,316,249	3,316,249
Share premium	27	20,289,487	20,289,487
Other reserves	28	1,367,868	822,781
Retained earnings	30	(4,174,718)	(1,822,503)
Total equity		20,798,886	22,606,014

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022

	Notes	Share Capital	Share premium account	Other reserves	Retained earnings	Total
		€	€	€	€	€
Balance at 1 January 2021		2,278,155	7,362,699	814,821	(95,199)	10,360,476
Year ended 31 December 2021
Loss for the year		-	-	-	(1,727,304)	(1,727,304)
Other comprehensive income:
Currency translation differences		-	-	181	-	181
Total comprehensive income for the year				181	(1,727,304)	(1,727,123)
Issue of share capital		1,038,094	13,217,816	-	-	14,255,910
Share issue costs		-	(291,028)	-	-	(291,028)
Credit to equity for equity settled share-based payments	25	-	-	7,779	-	7,779
Total transactions with owners recognised directly in equity		1,038,094	12,926,788	7,779	,	13,972,661
Balance at 31 December 2021 and 1 January 2022		3,316,249	20,289,487	822,781	(1,822,503)	22,606,014
Year ended 31 December 2022
Loss for the year		-	-	-	(2,352,215)	(2,352,215)
Other comprehensive income
Currency translation differences		-	-	(138)	-	(138)
Total comprehensive income for the year		-	-	(138)	(2,352,215)	(2,352,353)
Credit to equity for equity settled share-based payments	25	-	-	545,225	-	545,225
Total transactions with owners recognised directly in equity		-	-	545,225	-	545,225
Balance at 31 December 2022		3,316,249	20,289,487	1,367,868	(4,174,718	20,798,886

GROUP STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2022

		Year ended 31 December 2022		Year ended 31 December 2021
	Notes	€	€	€	€
Cash flows from operating activities
Cash used in operations	33		(1,904,776)		(495,174)
Net cash outflow from operating activities			(1,904,776)		(495,174)
Cash flows from investing activities
Investment in Deutsche Lithium as Joint Venture		-		(735,800)
Purchase of remaining 50% of Deutsche Lithium		-		(1,500,000)
Cash acquired on purchase of Deutsche Lithium		-		486,213
Exploration expenditure in Germany		(2,802,075)		(948,157)
Exploration expenditure in Ireland and Sweden		-		(37,455)
Purchase of property, plant and equipment		(351,217)		(8,437)
Proceeds on disposal of equipment		26,471
Interest received		191		455
Net cash used in investing activities			(3,126,630)		(2,743,181)
Cash flows from financing activities
Proceeds from the issue of shares		-		6,927,255
Share issue costs		-		(243,436)
Lease payments		(96,000)		-
Net cash generated from financing activities			(96,000)		6,683,819
Net (decrease) / increase in cash and cash equivalents			(5,127,406)		3,445,464
Cash and cash equivalents at beginning of year			8,291,991		4,846,527
Cash and cash equivalents at end of year			3,164,585		8,291,991

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

1.  Accounting Policies

1.1  Company Information

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

The Group consists of Zinnwald Lithium Plc and its wholly owned subsidiaries as follows as at 31 December 2022.

Name of undertaking	Registered office	Nature of business	Class of shares held	Direct holding	Indirect holding
Deutsche Lithium Holdings Ltd	United Kingdom	Exploration	Ordinary	100.0%	-
Erris Zinc Limited	Ireland	Exploration	Ordinary	100.0%	-
Deutsche Lithium GmbH	Germany	Exploration	Ordinary	-	100.0%

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

On 26 February 2018, Zinnwald Lithium Plc acquired the entire issued share capital of Erris Zinc Limited on incorporation.  Erris Zinc Limited is a company registered in Ireland.  Its registered office address is The Bungalow, Newport Road, Castlebar, Co. Mayo.  F23YF24.

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

1.2  Basis of preparation

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

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

The € to GBP exchange rate used for translation as at 31 December 2022 was 1.12759.

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

1.3  Basis of consolidation 

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

In regard to its shareholding in Deutsche Lithium, for the period from 1 January 2021 to 24 June 2021, the Board concluded that whilst it had significant influence over Deutsche Lithium (50% shareholding, 1 of the 2 co-managing directors and a casting vote on operational matters), it did not have control over that company and consequently the investment was accounted for using equity accounting rather than consolidated. On conclusion of the acquisition of the remaining 50% of Deutsche Lithium on 24 June 2021, the Company now consolidates the full results of Deutsche Lithium. Business combinations are accounted for using the acquisition method. Identifiable assets acquired and liabilities assumed are measured at their fair values at the acquisition date.

All financial statements are made up to 31 December 2022. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

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

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

1.4  Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the group and company have adequate resources to continue in operational existence for the foreseeable future. The Group had a cash balance of €2.1m at the year end and keeps a tight control over all expenditure. The Board has a strategy to enable the curtailing of a number of areas of expenditure to enable it to meet its minimum fixed costs for the next 12 months, even without raising further funds, whilst still maintaining all licenses in good standing.  However, as announced at the date of this report, it is completing a material fund raise to finance further development of the Project and meet Group expenditures. Thus, the going concern basis of accounting in preparing the Financial Statements continues to be adopted.

1.5  Intangible assets

Capitalised Exploration and Evaluation costs

Capitalised Exploration and Evaluation Costs consist of direct costs, licence payments and fixed salary/consultant costs, capitalised in accordance with IFRS 6 "Exploration for and Evaluation of Mineral Resources".  The Group and Company recognises expenditure in Exploration and Evaluation assets when it determines that those assets will be successful in finding specific mineral assets.  Exploration and Evaluation assets are initially measured at cost.  Exploration and Evaluation Costs are assessed for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount.  Any impairment is recognised directly in profit or loss.

1.6  Property, plant and equipment

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

Leasehold land and buildings  No deprecation is charged on these balances

Plant and equipment    25% on cost

Fixtures and fittings    25% on cost

Computers    25% on cost

Motor vehicles  16.7% on cost for new vehicles, 33.3% on cost for second-hand vehicles

Low-value assets (Germany)  100% on cost on acquisition for items valued at less than €800

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

1.7  Non-current investments

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

1.8  Impairment of non-current assets

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

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

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

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

1.9  Cash and cash equivalents

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

1.10  Right of Use Assets and Lease Liabilities

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

· Lease of low value assets; and

· Leases with duration of 12 months or less

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

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

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

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

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

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

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

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

· initial direct costs incurred; and

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

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

1.11  Financial assets

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

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

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

Financial assets at amortised cost (debt instruments)

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

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

Impairment of financial assets

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

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

Derecognition of financial assets

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

Financial liabilities

Other financial liabilities

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

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

Derecognition of financial liabilities

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

1.12  Equity instruments

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

1.13  Employee benefits

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

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

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

1.14  Retirement benefits

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

1.15  Equity

Share capital 

Ordinary shares are classified as equity.

Share premium 

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

Merger reserve

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

Share-based payment reserve

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

1.16  Share-based payments

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

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

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

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

1.17  Foreign exchange

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

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

1.18  Exceptional items

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

1.19  Joint Arrangements

Up to 24 June 2021, the Group's core activities in relation to the Zinnwald Lithium project were conducted through joint arrangements in which two or more parties have joint control. A joint arrangement is classified as either a joint operation or a joint venture, depending on the rights and obligations of the parties to the arrangement.

Joint operations arise when the Group has a direct ownership interest in jointly controlled assets and obligations for liabilities. The Group does not currently hold this type of arrangement.

Joint ventures arise when the Group has rights to the net assets of the arrangement. For these arrangements, the Group uses equity accounting and recognises initial and subsequent investments at cost, adjusting for the Group's share of the joint venture's income or loss, dividends received and other comprehensive income thereafter. When the Group's share of losses in a joint venture equals or exceeds its interest in a joint venture it does not recognise further losses. The transactions between the Group and the joint venture are assessed for recognition in accordance with IFRS.

No gain on acquisition, comprising the excess of the Group's share of the net fair value of the investee's identifiable assets and liabilities over the cost of investment, has been recognised in profit or loss. The net fair value of the identifiable assets and liabilities have been adjusted to equal cost.

Joint ventures are tested for impairment whenever objective evidence indicates that the carrying amount of the investment may not be recoverable under the equity method of accounting. The impairment amount is measured as the difference between the carrying amount of the investment and the higher of its fair value less costs of disposal and its value in use. Impairment losses are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised.

1.20  Segmental reporting

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

1.21  New standards, amendments and interpretations not yet adopted

Aside from the impact of IFRS 16, as noted above, there were no new standards or amendments to standards adopted by the group and company during the year which had a material impact on the financial statements.

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

• IFRS 4 and IFRS 17 - Insurance Contracts (effective 1 January 2023)

• IAS 12 amendments - Income Taxes: Deferred tax relating to single transaction (effective 1 January 2023)

• IAS 1 amendments - Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current (effective 1 January 2023)

• IAS 1 amendments - Presentation of Financial Statements: Disclosure of Accounting Policies (effective 1 January 2023), and

• IAS 8 amendments - Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (effective 1 January 2023)

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

2  Judgements and key sources of estimation uncertainty

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

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

Critical judgements

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

Share-based payments

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

Joint venture investment

The Group applied IFRS 11 to all joint arrangements and classifies them as either joint operations or joint ventures, depending on the contractual rights and obligations of each investor. The Group held 50% of the voting rights of its joint arrangement with SolarWorld AG. The Group determined itself to have joint control over this arrangement as under the contractual agreements, unanimous consent is required from all parties to the agreements for certain key strategic, operating, investing and financing policies. The Group's joint arrangement was structured through a limited liability entity, Deutsche Lithium GmbH, and provided the Group and SolarWorld AG (parties to the joint venture agreement) with rights to the net assets of Deutsche Lithium under the arrangements. Therefore, this arrangement was classified as a joint venture up to 24 June 2021 when the Company acquired the remaining 50% of Deutsche Lithium and thereafter consolidated its full results.

The investment was assessed at each reporting period date for impairment. An impairment is recognised if there is objective evidence that events after the recognition of the investment have had an impact on the estimated future cash flows which can be reliably estimated. In addition, the assessment as to whether economically recoverable reserves exist is itself an estimation process.  Under IFRS 3, on acquisition of the additional stake in the joint venture, the Company remeasured the fair value of its original investment in the joint venture and recognised a gain.

Impairment of Capitalised Exploration Costs

Group capitalised exploration costs had a carrying value as at 31 December 2022 of €18,966,165 (2021: €16,165,085), which solely relate to the Zinnwald Lithium Project, Management tests annually whether capitalised exploration costs have a carrying value in accordance with the accounting policy stated in note 1.6. Each exploration project is subject to a review either by a consultant or an appropriately experienced Director to determine if the exploration results returned to date warrant further exploration expenditure and have the potential to result in an economic discovery. This review takes into consideration long-term metal prices, anticipated resource volumes and grades, permitting and infrastructure as well as the likelihood of on-going funding from joint venture partners. In the event that a project does not represent an economic exploration target and results indicate that there is no additional upside, or that future funding from joint venture partners is unlikely, a decision will be made to discontinue exploration.

In Germany, Deutsche Lithium's core mining license at Zinnwald is valid to 31 December 2047, which underpins the PEA published in September 2022 .  Deutsche Lithium has additional exploration licenses at Falkenhaim (recently renewed for a further three years to 31 December 2025) , at Altenberg to 15 February 2024 and at Sadisdorf to 30 June 2026.  The PEA showed a material increase in size and output of the Project and underpinned a pre-tax NPV of $1.6m and a post-tax NPV of $1.0m and post-tax IRR of 29%.   Accordingly, the Board has concluded that no impairment charge is required for these assets.

In Ireland, the Group retains a single license at the Abbeytown Zinc Project (PL 3735), which is valid to 2025. The historic exploration work identified excellent mineralisation in its drill holes and the metallurgical review has shown a good quality concentrate can be produced.  The Group is no longer focussed on Ireland and put the license on care and maintenance in 2021 whilst it looked for a Partner to take the asset forward.  The Company fully impaired the carrying value of this asset in its 2021 accounts and accordingly no further impairments are required. In March 2023, the Group announced that it would be selling the Abbeytown Project to Ocean Partners Ltd in return for a 1% Net Smelter Royalty and a €200,000 payment due six months after the start of commercial production. 

In Sweden, in 2021 the Company surrendered all assets and licenses to the Swedish authorities.  The assets had been fully impaired in previous periods and all balances have been removed from the Group accounts in 2022.

3  Financial Risk and Capital Risk Management

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

Foreign Exchange Risk

The Company operates internationally and is exposed to foreign exchange risk arising from one main currency exposure, namely GBP for its Head Office costs and the value of its shares for fund-raising and Euros for a material part of its operating expenditure. The Group's Treasury risk management policy is currently to hold most of its cash reserves in Euros, as the majority of its current and planned expenditure will be on the Zinnwald Lithium Project in Germany.  The Company took advantage of the strong GBP:Euro exchange rate at the end of 2021 to convert £5m of cash raised in December 2021 into Euros to match its planned spend for 2022.

Credit and Interest Rate Risk

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

Working Capital and Liquidity Risk

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

4  Segmental reporting

The Group operates principally in the UK and Germany with a largely dormant subsidiary in Ireland.  Activities in the UK include the Head Office corporate and administrative costs whilst the activities in Germany relate to the work done by Deutsche Lithium on the Group's primary asset of the Zinnwald Lithium Project. The reports used by the Board and Management are based on these geographical segments. As noted earlier, the results of Germany were reported as an Investment in Joint Venture for the period to 24 June 2021, and from thereon are reported on a fully consolidated basis.  Non-core Assets primarily relates to the historic Abbeytown Zinc Project.

	Non-core Assets	Germany	UK	Total
	2022	2022	2022	2022
	€	€	€	€
Administrative expenses	(6,308)	(453,620)	(1,364,522)	(1,824,450)
Share based payment charge	-	-	(545,225)	(545,225)
Project impairment	-	-	-	-
Gain/loss on foreign exchange	-	-	(25,679)	(25,679)
Other operating income	-	42,948	191	43,139
Loss from operations per reportable segment	(6,308)	(410,672)	(1,935,235)	(2,352,215)
Reportable segment assets	8,837	19,225,340	3,719,181	22,953,358
Reportable segment liabilities	-	1,855,795	296,677	2,154,472
	Non-core Assets	Germany	UK	Total
	2021	2021	2021	2021
	€	€	€	€
Administrative expenses	(6,270)	(151,979)	(1,206,383)	(1,364,632
Share based payment charge	-	-	(7779)	(7779)
Project impairment	(1,583,566)	-	-	(1,583,566)
Gain/loss on foreign exchange	(1)	-	242,099	242,098
Other operating income	-	779	1,038,707	1,039,486
Share of loss from joint venture	-	(52,911)	-	(52,911)
Loss from operations per reportable segment	(1,589,837)	(204,111)	66,644	(1,727,304)
Reportable segment assets	15,144	16,242,874	8,369,525	24,627,543
Reportable segment liabilities	-	1,664,143	357,386	2,021,529

5  Operating loss

	Group
	2022	2021
	€	€
Operating loss for the year is stated after charging / (crediting)
Exchange (gains)/losses	25,679	(242,098)
Depreciation of property, plant and equipment	49,990	7,077
Depreciation of Right of Use Assets	93,405
Amortisation of intangible assets	995	829
Ireland and Sweden exploration projects impairment	-	1,583,566
Share-based payment expense	545,225	7,779
Operating lease charges	70,591	39,098
Exploration costs expensed	412,722	143,735

6  Auditor's remuneration

Fees payables to the company's auditor and associates	2022	2021
	€	€
For audit services
Audit of group, parent company and subsidiary undertakings	62,774	41,952
For other services
Taxation compliance services	4,343	3,500

7  Other gains and losses

	2022	2021
	€	€
Gain on re-measurement of initial 50% interest in Deutsche Lithium	-	1,038,252

8  Employees

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

	Group		Company
	2022	2021	2022	2021
	Number	Number	Number	Number
Directors	5	5	5	5
Employees	14	6	1	-
	19	11	6	5
Their aggregate remuneration comprised	Group		Company
	2022	2021	2022	2021
	€	€	€	€
Wages and salaries	1,300,065	870,447	709,370	589,688
Social security costs	142,586	111,925	86,266	71,302
Pension costs	98,457	38,005	52,067	38,005
	1,541,109	1,020,377	847,703	698,995

Aggregate remuneration expenses of the group include €559 516 (2021: €225,499) of costs capitalised and included within non-current assets of the group.

Aggregate remuneration expenses of the company include €nil (2021: €Nil) of costs capitalised and included within non-current assets of the group.

Directors' remuneration is disclosed in note 32 .

9  Finance income

	Group
	2022	2021
	€	€
Interest income
Interest on bank deposits	191	455

10  Share of results in Joint Venture

	Group
	2022	2021
	€	€
Share of loss in joint venture	-	(52,911)

11  Impairments

Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:

		2022	2021
	Notes	€	€
In respect of
Intangible assets	14	-	1,583,566
Recognised in
Administrative expenses		-	1,583,566

The impairment losses in respect of financial assets are recognised in other gains and losses in the income statement.

12  Taxation

	Group
	2022	2021
	€	€
Loss before taxation	(2,352,215)	(1,727,304)
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)	(446,921)	(328,188)
Disallowable expenses	171,828	11,531
Non-taxable gains	-	(197,268)
Unutilised tax losses carried forward	275,093	513,925
Taxation (credit) / charge for the year	-	-

Losses available to carry forward amount to €5,525,000 (2021: €3,730,000).  No deferred tax asset has been recognised on these losses, as the probability of available future taxable profits is not currently quantifiable.

13  Earnings per share

	2022	2021
	€	€
Weighted average number of ordinary shares for basic earnings per share	293,395,464	232,669,857
Effect of dilutive potential ordinary shares
-  Weighted average number of outstanding share options	5,695,342	2,265,890
Weighted average number of ordinary shares for diluted earnings per share	299,090,806	234,935,747
Earnings
Continuing operations	(2,352,215)	(1,727,304)
Loss for the period for continuing operations
Earnings for basic and diluted earnings per share distributable to equity shareholders of the company	(2,352,215)	(1,727,304)
Earnings per share for continuing operations
Basic and diluted earnings per share
Basic earnings per share	(0.80)	(0.74)

There is no difference between the basic and diluted earnings per share for the period ended 31 December 2022 or 2021 as the effect of the exercise of options would be anti-dilutive.

14  Intangible Assets

Group	Goodwill	Germany	Ireland	Total
	Exploration and Evaluation costs
	€	€	€	€
Cost
At 1 January 2021	-	-	2,023,706	2,023,706
Revaluation - on acquisition of subsidiary	1,038,252	-	-	1,038,252
Additions on acquisition of subsidiary	4,493,222	8,303,416	-	12,796,638
Reallocated to Germany E&E assets	(5,531,474)	5,531,474	-	-
Deferred tax provision on fair value	-	1,382,868	-	1,382,868
Additions - group funded	-	948,156	35,566	983,822
At 31 December 2021	-	16,165,914	2,059,272	18,225,286
Additions - group funded	-	2,802,075	-	2,802,075
At 31 December 2022	-	18,967,989	2,059,272	21,027,261
Amortisation and impairment
At 1 January 2022	-	829	2,059,272	2,060,101
Amortisation charged for the year	-	995	-	995
At 31 December 2022	-	1,824	2,059,272	2,061,096
Carrying amount
At 31 December 2022	-	18,966,165	-	18,966,165
At 31 December 2021	-	16,165,085	-	16,165,085

Intangible assets comprise capitalised exploration and evaluation costs (direct costs, licence fees and fixed salary / consultant costs) of the Zinnwald Lithium project in Germany, as well as the now fully impaired Ireland Zinc Project.  The licenses for the old Sweden Gold Projects were returned to the Swedish authorities in 2021 and accordingly are excluded.

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

15  Property plant and equipment

Group	Leasehold, land and buildings	Fixtures,  fittings and equipment	Motor vehicles	Total
	€	€	€	€
Cost
At 1 January 2022	9,817	24,642	32,427	66,886
Additions - group funded	31,173	263,695	56,349	351,217
Disposals - group	-	(10,864)	(22,183)	(33,047)
Exchange adjustments	-	(278)	-	(278)
At 31 December 2022	40,990	277,195	66,593	384,778
Depreciation and impairment
At 1 January 2022	-	13,143	5,122	18,265
Depreciation charged for the year	-	37,498	12,492	49,990
Depreciation on disposals	-	(10,864)	-	(10,864)
Exchange adjustments	-	(141)	-	(141)
At 31 December 2022	-	39,636	17,614	57,250
Carrying amount
At 31 December 2022	40,990	237,559	48,979	327,528
At 31 December 2021	9,817	11,499	27,305	48,621

Company				Computers
				€
Cost
At 1 January 2022				4,665
Additions - group funded				696
Exchange adjustments				(278)
At 31 December 2022				5,083
Depreciation and impairment
At 1 January 2022				1,364
Depreciation charged for the year				1,291
Exchange adjustments				(139)
At 31 December 2022				2,516
Carrying amount
At 31 December 2022				2,567
At 31 December 2021				3,301

16  Right of Use Assets and Lease Liabilities

In May 2022, Deutsche Lithium GmbH entered into a commercial lease agreement for and office and core shed property in Freiberg, Germany.  The duration of the lease is for 2 years.  The instalments for the lease are €12,000 per month, fixed for the duration of the lease. 

The right of use asset and lease liability was recognised on 1 May 2022 on inception of the lease.  Movements in the period are shown as follows:

	€
Right of use asset
Initial Recognition on 1 May 2022	278,690
Depreciation charged in the period	(93,405)
Balance as at 31 December 2022	185,285
Lease Liability
Initial Recognition on 1 May 2022	266,690
Interest charged for the period	5,254
Lease payments in the period	(84,000)
Balance as at 31 December 2022	187,944
-  Recognised in Short Term Payables	140,149
-  Recognised in Payables >1 year	47,795

17  Fixed asset investments

Company				2022	2021
				€	€
Investments in subsidiaries				14,523,375	14,523,375

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

Movement in non-current investments

			Shares in group undertakings
Cost
At 1 January 2022 and at 31 December 2022			14,523,375
Carrying amount
At 31 December 2021 and at 31 December 2022			14,523,375

The investment in Deutsche Lithium Holdings Ltd comprises the following balances

	€
Original investment in DLH - Prior to AIM IPO in 2017
Initial acquisition of shares in Erris Resources Ltd (now DLH)	169,089
Acquisition of remaining 50% of Deutsche Lithium GmbH
Carrying value of investment in Deutsche Lithium GmbH at 24 June 2021	4,534,972
Shares issued to acquire the remaining 50%	7,281,062
Cash paid to acquire the remaining 50%	1,500,000
Fair Value adjustment on revaluation	1,038,252
Value of Investment	14,523,375

Remeasurement of fair value of initial holding in Deutsche Lithium 

Under IFRS 3, on acquisition of the controlling stake, the Company remeasured the fair value of its original investment in Deutsche Lithium.  In terms of calculating that revaluation and any resulting gain or loss, the Directors noted that both transactions were conducted on an arms-length basis with unconnected third-parties. The Directors considered that there was a significant control premium in acquiring the second 50% of Deutsche Lithium and used an estimate of 30% in its calculations of the revaluation of the fair value of the initial shareholding.

	€			€
Value of second acquisition	8,781,062		Control premium (30%) of Net Value	2,388,525
Less: Cash in company	(486,213)		Fair Value of original investment	5,573,224
Less: Free Carry eliminated	(333,100)		Cash	486,213
			Release of obligation	333,100
Net Value of second acquisition	7,961,749		Value of second Acquisition	8,781,062
			Carrying Value at 24 June 2021	4,534,972
			Gain recognised on revaluation	1,038,252

On consolidation as at 24 June 2021, a calculation was required under normal acquisition rules to calculate the goodwill arising at the date of acquisition, but taking into consideration the 50% already owned at that date.  The previously held 50% investment in Deutsche Lithium at Fair Value is derecognised and replaced with the assets and liabilities of Deutsche Lithium, so that going forward it is consolidated in full as normal as a subsidiary undertaking.  The Directors have concluded that there should be no adjustment to the carrying value of Deutsche Lithium's Net Assets.  The Directors undertook a detailed review of Deutsche Lithium's balance sheet at the time of the Company's acquisition of the remaining 50% of Deutsche Lithium it did not own and concluded that no adjustments were required.  Since that date, Deutsche Lithium has continued with the same accounting policies, which are in accordance with those of the Company. 

Fair Value of consideration given to acquire the controlling interest	€
Cash payment of €1.5m	1,500,000
Issuance of 49,999,996 new ordinary shares	7,281,062
Total consideration	8,781,062
Fair value of 50% investment in Deutsche Lithium as at 24 June 2021	5,573,224
	14,354,286
Fair value of net assets acquired in Deutsche Lithium as at 24 June 2021	(8,822,812)
Goodwill - re-allocated to Deutsche Lithium intangible exploration assets at 31 December 2021	5,531,474

18  Trade and other receivables - credit risk

Fair value of trade and other receivables

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

No significant balances are impaired at the reporting end date.

19  Financial Instruments

	Group		Company
	2022	2021	2022	2021
	€	€	€	€
Financial instruments at amortised cost
Trade and other receivables	309,795	121,845	5,204,018	1,233,814
Cash and bank balances	3,164,585	8,291,991	2,748,145	7,998,680
	3,474,380	8,413,836	7,952,163	9,232,494
Financial liabilities at amortised cost
Trade and other payables	583,660	614,859	75,780	270,430
	583,660	614,859	75,780	270,430

20  Trade and other receivables

	Group		Company
	2022	2021	2022	2021
Amounts falling due within one year:	€	€	€	€
Amounts owed by group undertakings	-	-	5,157,859	1,179,869
Other receivables	248,692	83,982	14,026	21,891
Prepayments and accrued income	61,103	37,863	32,133	32,054
	309,795	121,845	5,204,018	1,233,814

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

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

	Group		Company
	2022	2021	2022	2021
Euros	256,008	63,591	271,911	156,367
British Pounds	53,787	58,254	4,932,107	1,077,447
	309,795	121,845	5,204,018	1,233,814

21  Trade and other payables

	Group		Company
	2022	2021	2022	2021
Amounts falling due within one year:	€	€	€	€
Trade payables	321,277	313,391	10,468	66,498
Other taxation and social security	34,974	23,802	34,974	23,802
Other payables	13,082	13,509	-	-
Accruals and deferred income	214,327	287,958	65,312	180,130
	583,660	638,660	110,754	270,430

All Trade payables have been settled since the year end. 

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

	Group		Company
	2022	2021	2022	2021
Euros	459,637	330,443		-
British Pounds	124,023	308,217		270,430
	583,660	638,660		270,430

22  Deferred taxation

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

Group				Liabilities	Liabilities
				2022	2021
				€	€
Deutsche Lithium intangible assets - fair value adjustment				1,382,868	1,382,868

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

23  Retirement benefit schemes

Defined contribution scheme				2022	2021
				€	€
Charge to profit or loss in respect of defined contribution schemes				52,067	38,005

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

24  Share based Incentives

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

Share Option Plan (2017)

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

	Year ended 31 December 2022		Year ended 31 December 2021
	Average exercise price in £ per share	Number of Options	Average exercise price in £ per share	Number of Options
At beginning of year	£0.0920	1,900,000	£0.094	3.350.000
Granted during the year	£0.1810	4,000,000	-	-
Lapsed during the year	£0.0965	(1,700,000)	£0.085	(300,000)
Exercised during the year	-	-	-	(1,150,000)
At end of year	£0.1748	4,200,000	£0.092	1,900,000
Exercisable at the year end		1,533,333		1,900,000
Weighted average remaining exercise period, years		3.99		1.27

Option classification
	Issue Date	No of Options	Exercise Price	Expiry Date
	29 October 2020	200,000	£0.05	28 October 2025
	15 January 2022	4,000,000	£0.1810	15 January 2027
		4,200,000	£0.1748

RSU Scheme (2020)

The first awards of RSUs under the new scheme were made on 15 January 2022 relating to the initial performance period from 1 October 2020 to 31 December 2021.  A total of 1,909,531 RSUs were issued, which will be included on the register for next year's disclosure.

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

	Year ended 31 December 2022		Year ended 31 December 2021
	Ave Exercise Price	Options	Ave Exercise Price	Options
Beginning of Period	-	-	-	-
Granted	n/a	1,909,531	-	-
Lapsed	-	-	-	-
Exercised	-	-	-	-
At end of period	n/a	1,909,531	-	-
Weighted Ave remaining yrs		1.50		-

RSU Classification
Issue Date	No of RSUs	Vesting date
15 Jan-22	1,909,531	16 January 2024

The awards of 3,406,780 RSUs for the 2022 Performance Period will be issued in March 2023 following publication of these accounts.

PSU Scheme (2020)

The first awards of PSUs under the new scheme are expected to be issued in January 2024, based on the initial performance period from 1 October 2020 to 31 December 2023.  The maximum potential issuance under the first performance period is 6.000,000 PSUs, if all performance metrics are achieved.

The second awards of PSUs will be made in January 2025 relating to the second performance period from 1 January 2022 to 31 December 2024.

The third awards of PSUs will be made in January 2026 relating to the third performance period from 1 January 2023 to 31 December 2025.

25  Share based payment transactions

	Group		Company
	2022	2021	2022	2021
	€	€	€	€
Expenses recognised in the year
Options issued under the Share Option Plan (2017)	347,400	7,779	347,400	7,779
RSUs issued under the RSU Scheme (2020)	197,825	-	197,825	-
	545,225	7,779	545,225	7,779

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

26  Share Capital

			Group and Company
			2022	2021
Ordinary share capital			€	€
Issued and fully paid
293,395,464 ordinary shares of 1p each			3,316,249	3,316,249
			3,316,249	3,316,249

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

Reconciliation of movements during the year:
			Ordinary Number	Ordinary Value
			€	€
Ordinary shares of 1p each
At 1 January 2022			293,395,464	3,316,249
Issue of fully paid shares (cash subscription)			-	-
At 31 December 2022			293,395,464	3,316,249

27  Share Premium account

	Group		Company
	2022	2021	2022	2021
	€	€	€	€
At beginning of year	20,289,487	7,362,699	20,289,487	7,362,699
Issue of new shares	-	13,114,010	-	13,114,010
Exercise of share options	-	103,806	-	103,806
Share issue expenses	-	(291,028)	-	(291,028)
	20,289,487	20,289,487	20,289,487	20,289,487

In 2020, the Company's share premium account was cancelled by Special Resolution and by Court Order on 15 September 2020 and the funds were converted to retained earnings.

28  Other reserves

	Merger reserve	Share based payment reserve	Translation reserve	Total
Group	€	€	€	€
At 1 January 2021	688,732	126,070	19	814,821
Additions	-	7,779	181	7,960
At 31 December 2021	688,732	133,849	200	822,781
Additions	-	545,225	(138)	545,087
At 31 December 2022	688,732	679,074	62	1,367,868

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

	Share based payment reserve	Translation reserve	Total
Company	€	€	€
At 1 January 2021	126,070	19	126,089
Additions	7,779	181	7,960
At 31 December 2021	133,849	200	134,049
Additions	545,225	(138)	545,087
At 31 December 2022	679,074	62	679,136

29  Financial commitments, guarantees and contingent liabilities

Bacanora Royalty Agreement

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

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

Osisko Royalty Agreements

Deutsche Lithium Holdings Ltd ("DLH", formerly Erris Resources (Exploration) Ltd ("ERL") entered into Osisko Royalty Agreement 1 with Osisko on 16 September 2016 pursuant to which it granted a royalty to Osisko for a 1 per cent. net smelter return on the sale or disposition of all minerals provided from the Abbeytown Project. The royalty is based on published spot prices in relation to minerals delivered for processing and actual amounts received where raw ore or concentrates are sold. Osisko shall be entitled to elect to receive the royalty on precious metals in kind rather than cash. This royalty was granted to Osisko in consideration of Osisko's payment of C$500,000 to DLH. The royalty is perpetual and as such the agreement (and obligation on DLH to pay the royalty) shall continue indefinitely.  Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome can be considered probable or reasonably estimable and hence no provision has been made in the financial statements. On 13 March 2023, the Company announced an agreement to sell Erris Zinc Ltd, which owns the Abbeytown Project to Ocean Partners Ltd.  As part of this transaction, this Royalty will be novated from DLH to Erris Zinc Ltd ahead of completion of the sale.

The Osisko royalty does not apply to the Zinnwald Lithium project.

30  Retained earnings

	Group		Company
	2022	2021	2022	2021
	€	€	€	€
At the beginning of the year	(1,822,503)	(95,199)	(251,044)	989,461
Loss for the year	(2,352,215)	(1,727,304)	(1,666,477)	(1,240,505)
At the end of the year	(4,174,718)	(1,822,503)	(1,917,521)	(251,044)

31  Events after the reporting date

On 30 January 2023, the Company announced the first drill hole results from the planned 10 hole exploration dill hole campaign at Falkenhain.  This first drill hole was completed to a depth of 600m and the assay results showed significant intercepts of thick high-grade lithium mineralisation including 80m at an average 2,879 ppm Li and 51m at an average 3,421 ppm Li.

On 6 February 2023, the Company appointed Tamesis Partners LLP as joint corporate broker and they published the first independent research note on the Company.  Tamesis is a specialist ECM and advisory house with a focus on the mining sector. Tamesis will support the Company with research coverage and access to an incremental audience of institutional and strategic investors.

On 13 March 2023, the Company announced the terms of an acquisition agreement with Ocean Partners Ltd for them to acquire Erris Zinc Ltd, the owner of the Abbeytown Lead-Zinc license in Ireland.  Ocean Partners shall acquire Erris Zinc for €1 and commit to spend €130,000 over the next three years to the end of 2025 on exploration work at Abbeytown.  Zinnwald shall receive a 1% Net Smelter Royalty and a €200,000 cash payment due six months after commencement of commercial production from Abbeytown.  Zinnwald shall have the right to buy back Erris Zinc for €1 in March 2025, if the committed exploration spend has not been made.

32  Related party transactions

Remuneration of key management personnel

The remuneration of key management personnel is as follows.

		2022			2021
	Remuneration	Pension	Share option charge	Remuneration	Pension	Share option charge
	€	€	€	€	€	€
Jeremy Martin	76,150	-	21,712	58,289	-	3,889
Anton du Plessis	295,229	29,959	135,222	375,454	26,128	-
Cherif Rifaat	175,732	17,832	62,603	116,578	11,877	-
Graham Brown	46,862	-	13,027	34,974	-	3,890
Peter Secker	46,862	-	13,027	-	-	-
	640,835	47,791	245,593	585,295	38,005	7,779

Transactions with related parties

During the year the group entered into the following transactions with related parties:

			Consultancy and expenses
			2022	2021
			€	€
Group
Erris Gold Resources			-	14,289

Aggregate consultancy and expenses include €nil (2020: €Nil) of costs capitalised and included within non-current assets.  There were no amounts outstanding at the year end.

In 2021, Henry Maxey, a substantial shareholder in the Company, entered into an agreement with the Company (the "Commitment Agreement") to subscribe for New Ordinary Shares in the December 2021 Placing for up to a value of £4.0 million. The Board considered that the Commitment Agreement was an important factor in the Placing proceeding and, as part thereof, therefore issued 258,064 New Ordinary Shares to Mr Maxey, equivalent to approximately £40,000 at the Placing Price. 

There were no related party transactions in 2022.

33  Cash (used in)/generated from group operations

	2022	2021
	€	€
Loss for the year after tax	(2,352,215)	(1,727,304)
Adjustments for:
Investment income	(191)	(455)
Lease interest	5,254	-
Gain on disposal of equipment	(4,288)	-
Impairment of intangible assets in Ireland and Sweden	-	1,583,566
Depreciation of property, plant and equipment	49,990	7,077
Depreciation of Right of Use Assets	93,405	-
Amortisation of intangible assets	995	829
Gain on remeasurement of initial interest in Joint Venture	-	(1,038,252)
Share of loss of Joint Venture	-	52,911
Equity-settled share-based payment expense	545,225	7,779
Movements in working capital:
(Increase) / decrease in trade and other receivables	(187,951)	79,969
(Decrease) / increase in trade and other payables	(55,000)	538,706
Cash used in operations	(1,904,776)	(495,174)

34  Cash (used in)/generated from operations - company

	2022	2021
	€	€
Loss for the year after tax	(1,666,477)	(1,240,505)
Adjustments for:
Investment income	(191)	(455)
Group loan impairments	-	1,298,726
Gain on remeasurement of initial interest in Joint Venture	-	(1,038,252)
Depreciation and impairment of property, plant and equipment	1,291	(1,039)
Share of loss of Joint Venture	-	52,911
Equity-settled share-based payment expense	545,225	7,779
Movements in working capital:
Decrease in trade and other receivables	7,787	27,400
(Decrease)/increase in trade and other payables	(159,675)	281,919
Cash used in operations	(1,272,040)	(609,438)

*ENDS*

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

Anton du Plessis Cherif Rifaat	Zinnwald Lithium plc	[e-mail]
David Hart Dan Dearden-Williams	Allenby Capital (Nominated Adviser)	[phone]
Michael Seabrook Adam Pollock	Oberon Capital Ltd (Joint Broker)	[phone]
Richard Greenfield Charles Bendon	Tamesis Partner LLP (Joint Broker)	[phone]
Isabel de Salis Paul Dulieu	St Brides Partners (Financial PR)	[e-mail]

Notes

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

 

END

 

 

FR FLFVRVIIFFIV