CLON Clontarf Energy Plc

10^th June 2024

Clontarf Energy plc

("Clontarf" or "the Company")

Preliminary Results for the Year Ended 31 December 2023

Clontarf Energy, the oil and gas exploration company focused on Ghana and Bolivia today announces its preliminary results for the year ending 31 December 2023.

The Company expects to shortly publish its 2023 Annual Report & Accounts and a further update will be made in this regard as and when appropriate.

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

For further information please visit http://clontarfenergy.com or contact:

Chairman's Statement

Our principal activities during this period were driving ahead Clontarf's lithium business in South America, by participating in the 2024 Bolivian convocatoria, and helping develop the EU's Critical Resource Initiative, especially by identifying key offtakers and financing sources.

•  Laboratory testing of samples provided by YLB (the Bolivian State Lithium Company), and previous sampling campaigns, are encouraging.

•  The initial NEXT-ChemX pilot plant is under construction at a trusted partner's industrial site in India.

•  The next stage is to submit all details requested by the Bolivian authorities, under a new "stream 3" of the expanded 2024/25 convocatoria.  Because of the high level of interest, and logistics' challenges, the authorities have adjusted dates and details for sampling, site visits, financial criteria, and detailed negotiations.  This has inevitably sown confusion among shareholders and the wider market, so Clontarf has sought to promptly and frequently update the market as the process evolves.  Despite the unavoidable confusion due to evolving policy and community engagement, Clontarf believes that our planned schedule is again on track as explained below:

The authorities have re-focused on the maturity of the technology offered, especially whether a hybrid plant is already being commissioned or built - as well as financial criteria.  This makes sense, since a proven Direct Lithium Extraction (DLE) technology can be funded by offtakers, who are keen to secure supplies of battery-grade Lithium.  Effectively, this now means that all 21 companies that were qualified for Phase 3 of the convocatoria now progress to Phase 4, albeit in 4 different streams.

Throughout this process, the EU Commission has shown vision and leadership in bringing together "Team Europe", while facilitating infrastructural investment for Bolivia to join the ranks of Lithium exporters.  The EU dialogue with Bolivian authorities has helped to streamline and improve selection criteria.  We are optimistic that the EU's "Global Gateway" development initiative, perhaps treating Bolivian Lithium as a Beta project, may de-risk qualifying projects and finance infrastructural investment, which typically constitutes two-thirds of capex of new projects in virgin locations.

Following official clarification, Clontarf now joins 5 other companies in stream 3 of Phase 4, including Russian State-backed groups, as well as Argentine, South Korean, and Bolivian companies.

The 7 companies in stream 4, are generally still at the laboratory stage of DLE development.

In stream 1 are 3 Chinese companies and an Italian entity, with State-backing or strong balance sheets.

The 4 companies in stream 2 include French, Chilean, South Korean, and Australian companies with plant operating experience.

We therefore anticipate early negotiation for the collection of bulk samples, to be followed by site-visits to pilot-plants, as originally planned.

Industry background

Some shareholders who have contacted us have been distracted by the reported wild swings - first up, then down - in the supposed 'spot prices' for Lithium salts during 2023.  Please note that high-purity Lithium salts are more a specialty chemical than a fungible commodity.  Lithium is not like gold or crude oil.  There is no meaningful 'spot price', since realised prices differ by application, buyer, purity, types of impurity and volume.  In that sense it is like natural flake graphite, where the achieved price in high-value, typically low-volume applications is a multiple of small flake or amorphous graphite used in standard refractories, pencils, etc.  Almost all (circa 98%) of high-purity Lithium salts are sold via long-term contracts.  That is why the average import price of Lithium into Japan, for example, was so much higher than the reported market price.

Similarly, media reports of applications like BEVs (Battery Electrical Vehicles) either displacing conventional ICE (Internal Combustion Engine) cars - or alternatively being deserted by motorists - are misleading: all market penetration follows the 'S-curve' (or f/1-f) pattern: first come the 'early adopters' willing to take risks and maybe pay a premium for new technology.  Many of these also had an ICE in the garage, so had fewer concerns about range anxiety on occasional long trips. 

As EVs go mainstream, salesmen must convince less ideological, and typically less wealthy middle-class consumers.  Finally, there will be hold-out purists like Classic car owners or 'petrol-heads' who will be harder to convert.  The expected changes in penetration rates were exacerbated by arbitrary official policies, such as unsustainable subsidies and in some markets other incentives like free parking, free tolls, lower car tax, etc.  As EVs penetrate, pressure increases to recover forgone income, leading to reduced subsidies.  Protectionism restricts the penetration of the most competitive Chinese cars, which is why VW's Chinese sales soared 91% in 2023, while its European sales slowed.  Accordingly, we never expected new ICE sales to end by 2035 or 2040.

During 2023, 80% of Lithium demand was in EVs.  Now it is about 75%, but the overall market grew by circa 30% in 2023 to 925k tonnes of Lithium Carbonate equivalent (LCE).  The fastest growth is in high-value new applications, with standard computers, smart phones and battery storage gaining share. 

We do not see such growth rates often in this industry.  There is much more uncertainty over future supply than likely demand.  Almost every new hard-rock Lithium project faces opposition, and delays.  The best grade and minerology deposits have been prioritised, meaning that developers must now make secondary deposits work.

We offer a clean solution:

Simultaneously, more consumers and regulators worry about the dirty mining and processing of hard rock.  By contrast, South American brines are much cleaner and easier to process, since much of the hard work has been done by Mother Nature.  Hence the increased interest in South American brines, of which the biggest and best, largely unexplored resources are in Bolivia.

Clontarf's lithium strategy is therefore to play a vigorous part in strengthening critical raw material value chains between the EU and Latin America:

Rising geopolitical tensions are both a threat to the collective West and an opportunity for Clontarf: Past failure of Chinese and Russian players to deliver opens the door to European organisations but these must deliver without delay.

Bolivia is open to offtake arrangements and preferential access, under applicable laws, in return for EU soft infrastructural loans and financing of green-field projects.

Bolivian funding can be facilitated through "Team Europe" combining local operating skills with off-takers and financiers.

But progress will be expedited with overt EU cover to de-risk investments.  EU diplomacy is the catalyst that can overcome past market failures.

Given market product diversity, offtake agreements should ideally be negotiated with end-users, but EU support will be conditional on an appropriate percentage offtake, which the operator or EU can allocate and trade, as appropriate.  Industrial minerals tend to be sold on long-term contracts, with pricing varying with quality and volumes, as well as application.  The EU's priority is offtake, rather than exact commercial terms, which are best left to YLB and offtakers to agree based on their specific requirements.

As part of the EU Commission's "Team Europe" approach, Clontarf Energy, and its technical JV partner NEXT-ChemX, have agreed in principle to cooperate with a leading group active in this sector - whose credibility and record in Critical Resource Minerals may help conclude offtake arrangements and financing for production plants.  This may, in turn, help negotiate development contracts under the current or future Bolivian convocatorias.

While initially focused on Bolivia, this cooperation may extend to other projects in the South American 'Lithium triangle' or elsewhere.  Futher updates will be made when appropriate.

Reducing Bolivian financing costs:

Bolivia is not for beginners.  Like many mineral-rich countries, including the DRC and even Argentina, it is more challenging to finance than say Australia: i.e. early-stage projects may not yet satisfy normal banking requirements of 'the 4 Cs'; collateral (because of the Bolivian Constitution and Lithium Law, and the legal system), cash-flow (because sales will be made by YLB, under law), capacity to repay (because of majority YLB ownership and therefore control), and character (because ultimately decisions will be made by politicians, rather than professional managers or functionaries.  Some of these challenges were apparent, as the ground rules evolved during 2024.

Clontarf's 34 years' experience is that it is better to anticipate and avoid issues in South America, rather than resolve them later.  But this is not always possible in a dynamic situation, so we must remain flexible.

Apart from raw materials investment cycles, there have historically been political cycles: sometimes more free trade oriented, at other times inclined to tax more.

Infrastructural support:

'Green-field' exploration and development varies from 'brown-field' projects in developed economies (like Europe or much of North America) in that solid infrastructure (access roads, mains electricity, fresh water, natural gas, repair and maintenance services, education and catering) is usually in place or available cheaply and quickly.  This is true only partly, and only for the south-western portion of Uyuni in Bolivia.  There is little infrastructure available elsewhere.  Typically, such infrastructural investment is about two-thirds of total capex for new operations in new regions.  This explains why historically only high-grade deposits justified new developments, after which more marginal nearby developments became economic.

Oil & gas exploration

It has been harder to get investors excited about oil & gas exploration.

For juniors to boom we really need a positive stockmarket, and ideally a strong farm-out market.

Over recent months we continued to work up additional plays on our Australian 10% Working Interest, on which the partners drilled the Sasanof-1 well in May/June 2022.  The continuing development of nearby infrastructure, together with rising Asian gas demand, may enhance the economics of these plays.

The Sasanof-1 well did not discover hydrocarbons, but showed that high risk 1,000 metre offshore wells can be funded. Clontarf's liquidity and international contacts helped attract funding above the share price. That investoroptimism was hit with the dry well and moderating of Asian LNG prices. But the steady recovery in Asian gas demand, as China emerged from lock-downs and cyclical corrections, and the desire to displace coal, promises future demand growth. Earlier concerns about the Australian Federal Government policy review on fossil fuel exports (which might have imported Environmental Protection Agency approvals for new projects) dissipated as an issue - while the Western Australian State authorities remain supportive.

Clontarf continues to monitor Ghanaian developments to update the acreage to be explored and resuscitate the ratification of its signed Petroleum Agreement on Tano 2A Block. Slowness in ratification of signed contracts had constrained the development of Ghana's oil and gas industry. The Ghanaian government has declared its determination to recover momentum, and will be helped by recovery in the farm-in market as the global supply/demand balance tightens. Ghanaian fiscal terms remain competitive, while West African infrastructure steadily improves.

We remain in contact on other prospective African countries. So far, the main hurdle has been the requested fiscal terms - which reflect the hot market of 2003 through 2014, rather than current investor hostility to petroleum and the retrenchment of some western majors who would otherwise be our go-to partners for such frontier exploration.

The petroleum industry is cyclical, and the extreme under-investment in the sector since 2010 is now creating shortages as demand recovers, especially in Asia. Demand for oil, gas and even coal are now at or near historic records, while investment is mostly limited to developments of existing Blocks in mature basins. That will change.

Financial markets and farm-out interest in petroleum had been depressed since the oil price war starting in 2014 and continuing periodically until 2022. This had constrained our options for early seismic or wells in Ghana and elsewhere. But recent price volatility shows that major new investments are required to service global demand. Clontarf plans to participate in the anticipated coming upturn.

In oil and gas, the tightening hydrocarbons' supply-demand balance promises a revival of exploration and the farm-out market. 

But the immediate focus is on developing clean, high-purity Bolivian Lithium salts, under law, in partnership with the Bolivian authorities and EU partners.

Funding

Clontarf has successfully accessed the financial markets when necessary. Subject to technical verification of its exploration projects, and permitting, Clontarf is confident of adequate funding, whether in London or Australia, for near to medium term ongoing activities.  Our preference, where possible, is to avoid dilution by relying on offtakers or EU institutions for necessary infrastructural support.

David Horgan

Chairman

7 June 2024

CLONTARF ENERGY PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2023

Notes:

1.    ACCOUNTING POLICIES

There were no changes in accounting policies from those used to prepare the Group's Annual Report for financial year ended 31 December 2023. The financial statements have been prepared in accordance with the Companies Act 2006.

2.    LOSS PER SHARE

Basic loss per share is computed by dividing the loss after taxation for the year attributable to ordinary shareholders by the weighted average number of Ordinary Shares in issue and ranking for dividend during the year. Diluted earnings per share is computed by dividing the profit or loss after taxation for the year by the weighted average number of Ordinary Shares in issue, adjusted for the effect of all dilutive potential Ordinary Shares that were outstanding during the year.

3.    GOING CONCERN

The Group incurred a loss for the year of £870,061 (2022: £4,766,646) and had net current liabilities of £1,277,374 (2022: £2,094,612) at the balance sheet date. These conditions, as well as those noted below, represent a material uncertainty that may cast doubt on the Group's ability to continue as a going concern.

Included in current liabilities is an amount of £988,926 (2022: £1,114,861) owed to directors in respect of directors' remuneration due at the balance sheet date. The directors have confirmed that they will not seek settlement of these amounts in cash until after end of 2024.

The Group had a cash balance of £182,516 (2022: £931,902) at the balance sheet date. The directors have prepared cashflow projections for a period of at least 12 months from the date of approval of the financial statements which indicate that the group may require additional finance to fund working capital requirements and develop existing projects. As the Group is not revenue or cash generating it relies on raising capital from the public market. On 18 March 2024 the Company raised £400,000 (before expenses) via a placing and a further £300,000 (before expenses) on 23 May 2024.

As in previous years the Directors have given careful consideration to the appropriateness of the going concern basis in the preparation of the financial statements and believe the going concern basis is appropriate for these financial statements. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

4.    INTANGIBLE ASSETS

Exploration and evaluation assets relate to expenditure incurred in prospecting and exploration for lithium, oil and gas in Bolivia and Ghana. The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation assets and therefore inherent uncertainty in relation to the carrying value of capitalised exploration and evaluation assets.

During 2018 the Group resolved the outstanding issues with the Ghana National Petroleum Company (GNPC) regarding a contract for the development of the Tano 2A Block. The Group has signed a Petroleum Agreement in relation to the block and this agreement awaits ratification by the Ghanian government.

As ratification has not yet been achieved in the current year the directors, as a matter of prudence, opted to write down 20% of the carrying value of the Tano 2A Block historic expenditure.  Accordingly, an impairment charge of £173,609 was recorded in the current year.

On 9 May 2022 the Company acquired a 10 per cent interest in the high-impact multi-TCF (Trillion Cubic Feet) Sasanof exploration prospect (located mainly within Exploration Permit WA-519-P) through the acquisition of a 10 per cent. interest in Western Gas, which wholly owns the prospect.

On 6 June 2022 the Company announced that no commercial hydrocarbons were intersected and the Sasanof-1 Well would be plugged and permanently abandoned. De-mobilisation activities  commenced. Accordingly, the total costs of £4,095,294 incurred on the Sasanof-1 Well were written off in full in the prior year.

The directors believe that there were no facts or circumstances indicating that the carrying value of the remaining intangible assets may exceed their recoverable amount and thus no impairment review was deemed necessary by the directors. The realisation of these intangibles assets is dependent on the successful discovery and development of economic deposit resources and the ability of the Group to raise sufficient finance to develop the projects. It is subject to a number of potential significant risks, as set out below:

·        licence obligations;

·        exchange rate risks;

·        uncertainties over development and operational costs;

·        political and legal risks, including arrangements with governments for licences, profit sharing and taxation;

·        foreign investment risks including increases in taxes, royalties and renegotiation of contracts;

·        title to assets;

·        financial risk management;

·        going concern; and

·        ability to raise finance.

Included in the additions for the year are £Nil (2022: £Nil) of directors' remuneration.

5.    INVESTMENT IN JOINT VENTURE

On 15 February 2023 the Group announced a heads of agreement around the potential formation of a 50:50 Joint Venture with US based, OTC Markets traded, technology company, NEXT-ChemX Corporation ("NCX") covering testing, marketing, and deploying of NCX's proprietary (patent pending) direct lithium ion extraction ("DLE") technology in Bolivia. Formation of the JV was subject to final due diligence and the parties entering into formal documentation.

The terms of the JV are:

§  A 50:50 joint venture company to be formed on completion of due diligence covering the exclusive rights to the marketing, testing and deployment of the NCX DLE technology in Bolivia.

§  Clontarf Energy plc to contribute $500,000 in cash towards the pilot plant construction and testing as an exclusivity fee for the use of the NCX technology.

§   NCX will then issue shares equal to $500,000 at its next financing (CHMX:OTC) to Clontarf Energy plc. 

§   Clontarf Energy plc will issue shares as follows to NCX:

i.     385 million new Ordinary Shares on proceeding with the Pilot Plant;

ii.    250 million new Ordinary Shares after successful pilot processing of Bolivian brines through the NCX pilot plant; and

iii.  250 million new Ordinary Shares after entry into a construction and processing contract between the JV and the Bolivian authorities on processing of Bolivian brines utilising NCX processing technology.

On 5 May 2023 the Company announced that all conditions precedent had been satisfied with respect to the JV with NCX coming into force. In this regard, Clontarf paid NCX US$500,000 and issued 385 million new Ordinary Shares in the capital of Clontarf of which half will be subject to a 12-month lock in requirement.

As at 31 December 2023 no trading activity had commenced in the JV and as such there are no  results or expenses recorded. 

6.    TRADE AND OTHER PAYABLES

It is the Company's normal practice to agree terms of transactions, including payment terms, with suppliers and provided suppliers perform in accordance with the agreed terms, payment is made accordingly. In the absence of agreed terms it is the Company's policy that the majority of payments are made between 30 to 40 days. The carrying amount of trade and other payables approximates to their fair value.

Other payables include amounts due for directors' remuneration of £988,926 (2022: £1,114,861) accrued but not paid at year end.

7.    SHARE CAPITAL

Movements in issued share capital

On 16 January 2023 the Company raised £1,300,000 via a placing of 2,000,000,000 ordinary shares at a price of 0.065p per share. Proceeds raised were used to provide additional working capital and fund development costs. In connection with the Placing, 97,500,000 warrants over 97,500,000 Ordinary Shares were issued to the brokers involved in the Placing. The warrants have a term of one year, and an exercise price of 0.065p.

On 5 May 2023, as part of the Joint Venture with Next-ChemX the Company issued 385,000,000 consideration shares at a price of 0.125 per share to Next-ChemX. Further details are outlined in Note 5.

On 1 June 2023 the Company raised £350,000 via a placing of 437,500,000 ordinary shares at a price of 0.80p per share. Proceeds raised were used to provide additional working capital and fund development costs.

Share Options

A total of 500,500,000 share options were in issue at 31 December 2023 (2022: 40,500,000). These options are exercisable, at prices ranging between 0.10p and 0.725p, up to seven years from the date of granting of the options unless otherwise determined by the Board. Further information relating to Share Options is outlined in Note 8.

8.    SHARE BASED PAYMENTS

The Group issues equity-settled share-based payments to certain directors and individuals who have performed services for the Group. Equity-settled share-based payments are measured at fair value at the date of grant. Shares granted to individuals and directors will vest immediately.

Fair value is measured by the use of a Black-Scholes model.

The Group plan provides for a grant price equal to the average quoted market price of the ordinary shares on the date of grant.

Share Options

On 17 January 2023 a total of 160,000,000 options with an exercise price of 0.0725p were granted with a fair value of £106,632. On 1 August 2023 a total of 300,000,000 options with an exercise price of 0.10p were granted with a fair value of £260,826. These fair values were calculated using the Black-Scholes valuation model. These options are valid for seven years and vested immediately.

The inputs into the Black-Scholes valuation model were as follows:

Granted 17 January 2023

Weighted average share price at date of grant (in pence)                                       0.0725p

Weighted average exercise price (in pence)                                                               0.070p

Expected volatility                                                                                                           144.39%

Expected life                                                                                                                     7 years

Risk free rate                                                                                                                     5%

Expected dividends                                                                                                          none

Granted 1 August 2023

Weighted average share price at date of grant (in pence)                                       0.10p

Weighted average exercise price (in pence)                                                               0.09p

Expected volatility                                                                                                           156.55%

Expected life                                                                                                                     7 years

Risk free rate                                                                                                                     5%

Expected dividends                                                                                                          none

Expected volatility was determined by management based on their cumulative experience of the movement in share prices. The terms of the options granted do not contain any market conditions within the meaning of IFRS 2

The Group capitalised expenses of £Nil (2022: £Nil) and expensed costs of £367,458 (2022: £61,695) relating to equity-settled share-based payment transactions during the year.

Warrants

In connection to the placing on 16 January 2023 the Company issued 97,500,000 warrants over 97,500,000 Ordinary Shares to the brokers involved in the Placing. The warrants have a term of one year, and an exercise price of 0.065p.

9.    OTHER RESERVES

 Share Based Payment Reserve

The share based payment reserve arises on the grant of share options under the share option plan as detailed in Note 8.

10.  RETAINED DEFICIT

Retained Deficit

Retained deficit comprises of losses incurred in the current and prior years.

11.  POST BALANCE SHEET EVENTS

On 18 March 2024 the Company announced that it had raised £400,000 (before expenses) via a placing of 1,142,857,143 new ordinary shares of 0.01p each in the Company at a price of 0.035p per Placing Share.

On 23 May 2024 the Company announced that it had raised £300,000 (before expenses) via a placing of 857,142,857 new ordinary shares of 0.01p each in the Company at a price of 0.035p per Placing Share.

12.  ANNUAL GENERAL MEETING

The Company's Annual General Meeting will be held on Tuesday 9 July 2024 at 12.00pm at Hilton London Paddington, 146 Praed Street, London, W2 1EE, United Kingdom. Further information, including the Notice of Annual General Meeting, will be provided shortly.

13.  GENERAL INFORMATION

The financial information set out above does not constitute the Company's audited financial statements for the year ended 31 December 2023 or the year ended 31 December 2022. The financial information for 2022 is derived from the financial statements for 2022 which have been delivered to Companies House. The auditors had reported on the 2022 statements; their report was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The financial statements for 2023 will be delivered to Companies House.

A copy of the Company's Annual Report and Accounts for 2023 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise, shareholders will be notified that the Annual Report will be available on the website  www.clontarfenergy.com . Copies of the Annual Report will also be available for collection from the Company's registered office, 124 City Road, London EC1V 2NX.