TIDMZNWD
RNS Number : 0345L
Zinnwald Lithium PLC
08 September 2021
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
8 September 2021
Zinnwald Lithium plc ("Zinnwald Lithium" or the "Company")
Interim Results
Zinnwald Lithium plc, the German focused lithium development
company, is pleased to announce its Interim Results for the
six-months ended 30 June 2021.
OVERVIEW
-- Positioned to capitalise on unlocking the full potential of
the Zinnwald Lithium Project having acquired remaining 50% of
Deutsche Lithium GmbH
-- Identified and implementing key work streams to advance the Project towards production
o Undertaking test work to ascertain the commercial viability of
producing a wider range of lithium compounds
o Value engineering and optimisation of the flow sheet and
associated infrastructure leading into an updated feasibility
study
o Ongoing permitting work
-- Increased overall resource by over 50% to greater than 1
million tons contained lithium carbonate equivalent ("LCE") having
been granted a new exploration licence
-- Undertaking further work on exploration licence areas to
further evaluate their potential and how they can enhance the
Project
-- Strong market dynamics with lithium carbonate and lithium
hydroxide prices almost doubling from levels seen at the beginning
of the year
-- Continue to maintain disciplined approach to expenditure and
cash management and as such is well funded into 2022, with current
cash of EUR2.3m
CHAIRMAN'S STATEMENT
The first half of 2021 has proved an extremely busy period for
Zinnwald Lithium Plc (the "Company") which, just before the period
end, culminated in the acquisition of the remaining 50% of Deutsche
Lithium GmbH ("Deutsche Lithium") for EUR1.5 million cash and 50
million new ordinary shares. By taking full ownership of Deutsche
Lithium, we are now in a much stronger position to capitalise on
unlocking the full potential of the Zinnwald Lithium Project (the
"Project") for the benefit of our shareholders.
Based in south-eastern Germany, the Project has a number of
attractive attributes, not least its location in the heart of the
European chemical and automotive industries. The European Union has
set itself a target of being carbon neutral by 2050, and battery
storage, where lithium-ion is a leading technology, is a vital
enabling technology for this. The shift towards electric vehicles
("EVs") is gathering momentum and Europe is increasingly seeking to
become an important global centre for EV production. As the
importance of EV manufacturing grows so too does the importance of
a local supply chain. In recognition of this, the EU has designated
lithium a critical raw material and is actively seeking to
encourage local production.
The economics of the Project have previously been demonstrated
and we have identified a number of key work streams which will be
required to advance it towards production. We are completing the
initial phase of the lithium hydroxide ('LioH') test work which is
delivering encouraging initial results showing the potential to
produce a high quality, battery grade LioH alongside the already
proven ability to produce battery grade lithium fluoride and
lithium carbonate. We will update the market further once this work
is completed.
Another important development during the period was the granting
of the Sadisdorf exploration licence. This licence, located
approximately 12 km from the Company's Zinnwald licence area, has
an historic JORC resource which adds materially to our existing
resources and, together with two other exploration licences held by
the Company, has the potential to add significant resource upside
to the Project.
In Ireland, the Company has rationalised its licence holdings
and has retained only the core prospecting licence related to the
brownfield Abbeytown Project. The zinc price has rebounded strongly
during the course of 2021 and the Company's objective with regard
to Abbeytown remains to find a partner or purchaser for the asset.
In Sweden we have relinquished our Brännberg licences as non-core,
its value having previously been written off.
We note with interest the Rule 2.7 announcement on 25 August
2021 by our 35.5% shareholder Bacanora Lithium plc ("Bacanora") and
Ganfeng International Trading (Shanghai) Limited ("Ganfeng")
regarding an Offer for Bacanora by Ganfeng. As noted in this
announcement Bacanora intends to make a distribution in specie of
the shares held by Bacanora in Zinnwald to Bacanora's shareholders
including Ganfeng. Should the conditions for the distribution in
specie be met we look forward to working with our potential new
shareholders going forward.
Financials
The Company continues to maintain its extremely disciplined
approach to expenditure and cash management and as such is well
funded into 2022, with cash of EUR2.3m as at the date of this
report.
Outlook
As the sole owner of one of Europe's more advanced battery-grade
lithium projects, capable of producing a number of downstream
battery grade lithium products, we are delighted to now control
what we consider to be an extremely strategic asset.
Our focus over the next 12 to 18 months will involve undertaking
test work to ascertain the commercial viability of producing a
wider range of lithium compounds as well as value engineering and
optimisation of the flow sheet and associated infrastructure
leading into an updated feasibility study. Work with regard to
permitting is also ongoing.
Further discussions with both off-take and financing partners
will also take place as we seek to advance the Project. I view the
future with a high degree of confidence and would like to thank our
shareholders for their continued support.
With plenty of latent demand for lithium, a highly experienced
team on the ground in Germany and access to a pool of additional
skilled labour we look forward to updating you on our progress.
Jeremy Martin
Non-Executive Chairman
OPERATIONAL REVIEW AND OUTLOOK
Germany
During the first half of 2021, the Company has continued to
progress the Project on both a corporate and operational level.
In line with our previously stated corporate strategy, we
successfully completed the acquisition of a further 50% of Deutsche
Lithium GmbH ("Deutsche Lithium") giving us 100% ownership and full
operational control of the Project. The acquisition cost was EUR8.8
million, with the majority of the purchase consideration structured
as an issue of new ordinary shares in the Company allowing us to
conserve cash resources. New ordinary shares equivalent to 19.6% of
our enlarged share capital were issued as part of the transaction
and were distributed to a number of parties.
At the Project level during the year to date, we have been busy
advancing various workstreams and have completed the initial phase
of the lithium hydroxide ("LiOH") testwork. The initial results
were highly encouraging and showed the potential to produce a high
purity, battery grade product that is low in contaminants. We have
also generated LiOH product samples, which we will be sharing with
potential off-takers to help them evaluate the product. The ability
to produce a high quality, battery-grade LiOH, alongside the
Project's already demonstrated ability to produce battery grade
lithium fluoride and lithium carbonate, further demonstrates the
flexible nature of the Project and its ability to produce high
value products to meet demand from battery makers.
Additionally, during the period, Deutsche Lithium was granted a
five-year Exploration Licence (the "Sadisdorf Licence") covering
approximately 225 hectares ("ha") in the Erzgebirge or Ore
Mountains region of Saxony, Germany. This complements two other
exploration licences already held by Deutsche Lithium: the
Falkenhain licence, covering 295.7 ha and with a term to 31
December 2022; and the Altenberg licence, covering 4,225.3 ha and
with a term to 15 February 2024. The Sadisdorf Licence is circa
12km NNE of Zinnwald's key lithium deposit and forms part of the
same geological unit that hosts the historic Li-Sn-W deposits at
Zinnwald, Falkenhain and Altenberg.
The grant of this licence coupled with the Falkenhain and
Altenburg licences represents exciting expansion potential for
Zinnwald and, based on the historical resource delineated by
previous licence holders, effectively increases our overall
resource to greater than 1 million tons contained lithium carbonate
equivalent ("LCE"), an increase of over 50%. We will be undertaking
further work on all our exploration licence areas to further
evaluate their potential and how they can enhance the Project.
Looking forward, the Company is working to advance the
permitting status of the Project. Deutsche Lithium obtained its
mining licence for Zinnwald in 2017, which is valid until 2047, but
comes with the standard requirements to apply for further permits
for environmental and construction aspects of the Project. Deutsche
Lithium is currently undertaking detailed environmental and
community studies to continue to develop the overall Zinnwald
sustainability framework. Environmental monitoring programmes are
ongoing as well as the permitting process for Zinnwald's mining and
mineral processing plant.
In addition, the Company will begin a process of updating the
feasibility study, value engineering work and finalisation of the
plant locations.
With regard to the exploration licences, the Company has
commenced data analytics and archive work with regard to the
Sadisdorf licence. With regard to the Falkenhain licence, old drill
cores have been prepared for mineral processing test work. Initial
tests have indicated similar characteristics to the bulk samples
from the Zinnwald licence.
Lithium Market
During the first half of 2021 stronger than expected electric
vehicle production and sales volumes and only modest battery raw
material supply response resulted in a tightening lithium market
situation. As a result, both lithium carbonate and lithium
hydroxide prices showed strong recoveries almost doubling from
levels seen at the beginning of the year.
As governments and organisations worldwide drive the rapid
deployment of new clean energy technologies, the role of critical
materials, including metals such as lithium, is becoming more
apparent. The EU estimates 18 times more lithium is required by
2030 to support its climate-neutrality scenarios, while at least 24
new lithium battery Gigafactories are planned in Europe with four
expected to come online in 2021, bringing Europe's production
capacity from its current 30 GWh to 700 GWh by 2028. To keep up
with this demand, the EU is focused on encouraging local
supply.
Ireland and Sweden
At the time of the reverse takeover transaction in October 2020,
the Company placed its Irish and Swedish assets under care and
maintenance while seeking either a partner or purchaser for the
assets. In Sweden, the Company has now relinquished all of its
licences, as these were considered non-core and closed its Filial
entity in Sweden. The value of these licences in the Company's
accounts had previously been fully written off.
At the Abbeytown project in Ireland, the Company's wholly-owned
subsidiary, Erris Zinc Ltd, ("Erris Zinc"), carried out drilling of
one diamond core drill hole on PL 3735 to meet minimum expenditure
requirements for the biannual review of the permit. The hole,
ERAB011, was located 20m to the east of hole ERAB005 drilled in
2018 (4.1m grading 15.63% zinc and lead combined and 90.68g/t
silver). ERAB011, ERAB005 and ERAB008 are located on the same drill
fence 375m south of the southernmost extent of the old workings and
are the furthest south of all the drill holes drilled by Erris.
The aim of drilling the hole was to extend the known
mineralisation in hole ERAB005 to the east and determine how wide
the mineralised corridor may be. The hole angled at -60deg and
drilled to a depth of 211.5m was drilled to target potential
mineralisation in the crinoidal limestone 20m from the intersection
in ERAB005. The hole intersected alteration including calcite veins
and pyrite mineralisation in the Index Bed, Lower Grit and minor
localised chalcopyrite mineralisation in the lower mixed beds with
a maximum value of 0.7m @ 0.348 % Cu. The copper mineralisation was
intersected vertically beneath high-grade lead-zinc mineralisation
in hole ERAB005.
The alteration in the crinoidal limestone and Index Bed is
consistent with proximal alteration to a mineralised structure.
Mineralisation appears to be strongly buffered by the carbonate
lithology such that very low values of base metals can occur in the
carbonates a very short distance from the conduits which can host
high-grade base metals. While the results of this hole (ERAB011)
were disappointing, the high-grade mineralisation in hole ERAB005
remains open to the south and the exploration model is such that
the best targets will be found where the NNE faults intersect with
east-west trending north or south dipping extensional faults.
Exploration targets remain untested such as the strong soil targets
900 m along trend from the drilled mineralisation which are
associated with a large regional normal fault. These targets
warrant further drilling.
In order to minimise ongoing holding costs, Erris Zinc has
rationalised its licence holdings in Ireland, retaining just the
core licence containing the old Abbeytown mine, which was renewed
in August 2019 for a further six years to August 2025. Erris Zinc
has now submitted surrender reports to relinquish the other four
licences in the surrounding area.
Financial review
Notwithstanding that the Company is a UK plc, admitted to
trading on AIM, the Company presents its accounts in its functional
currency of Euros, since the majority of exploration expenditure,
including that of its subsidiary Deutsche Lithium, is denominated
in this currency.
The Group is still at an exploration and development stage and
not yet producing minerals, which would generate commercial income.
The Group is not expected to report overall profits until it is
able to profitably commercialise its Zinnwald Lithium project in
Germany or disposes of its historic exploration project in
Ireland.
On completion of the acquisition of the initial 50% of Deutsche
Lithium in October 2020, this company and asset became the primary
focus of the Zinnwald Group. As the Company did not have control of
Deutsche Lithium at this initial stage, the holding was accounted
for as an investment in a Joint Venture. On 24 June 2021, the
Company completed the acquisition of the remaining 50% of Deutsche
Lithium and from that date now consolidates the full results of
Deutsche Lithium. As part of this step change to full
consolidation, the Company revalued its initial shareholding in
Deutsche Lithium and recognised a gain of EUR1.03m, together with a
Goodwill intangible asset of EUR5.53m.
During the period, the Group made a loss before taxation of
EUR0.94m compared with a loss of EUR0.41m for the period ended 30
June 2020. This is primarily due to a project impairment charge of
EUR1.55m for Abbeytown together with the revaluation gain of
EUR1.03m on the original investment in Deutsche Lithium.
Administrative costs remained substantively unchanged at EUR0.36m,
which primarily relates to the costs related to being a public
listed company, including the costs of non-executive directors,
brokers, nominated adviser and other advisers.
The Total Net Assets of the Group increased to EUR16.77m at 30
June 2021 from EUR3.45m at 30 June 2020, primarily due to the
consolidation of Deutsche Lithium's net assets of EUR8.30m and the
Goodwill intangible asset of EUR5.53m, offset by the full
impairment of the Ireland and Sweden exploration assets.
The closing cash balance for the Group at the period end was
EUR2.91m which is greater than the EUR1.27m at the end of the same
period in the prior year, due primarily to the funds raised at the
time of the initial acquisition of the shareholding in Deutsche
Lithium, offset by ongoing development expenditure and the EUR1.5m
cash payment to acquire the balance of the shares in Deutsche
Lithium. As at the date of this report, the Group's cash balance is
EUR2.3m.
On behalf of the board
Cherif Rifaat
Director and CFO
7 September 2021
Interim Condensed Consolidated Statement
of Comprehensive Income
30 June 30 June
2021 2020
Unaudited Unaudited
Notes EUR EUR
Revenue - -
Cost of sales (13,797) (40,695)
Gross (loss)/profit (13,797) (40,695)
Ireland and Sweden exploration
project impairment 6 (1,549,875) -
Administrative expenses (357,579) (368,074)
Operating loss 4 (1,921,251) (408,769)
Finance income 422 -
Share of results of joint ventures 5 (52,911) -
Revaluation gain on original
joint venture holding 9 1,038,252 -
Loss before taxation (935,488) (408,769)
Tax on (loss)/profit - -
Loss for the financial period (935,488) (408,769)
Other comprehensive income - -
Total comprehensive income for the
period (935,488) (408,769)
Earnings per share from continuing operations
attributable to the owners of the parent company
Basic and diluted (cents per share) 7 (0.44) (1.31)
The income statement has been prepared on the basis that all operations
are continuing operations.
Interim Condensed Consolidated Statement of Financial Position
30 June 2021 30 June 2020 31 December
Unaudited Unaudited 2020
Audited
Notes EUR EUR EUR
Non-current assets
Investments in joint
venture 9 - - 3,852,083
Intangible assets 8 8,303,034 2,140,610 1,546,111
Goodwill 8 5,531,474 - -
Property, plant and
equipment 10 46,974 - 3,662
13,881,482 2,140,610 5,401,856
Current assets
Trade and other receivables 11 122,137 51,330 170,926
Cash and cash equivalents 12 2,908,955 1,271,251 4,846,527
3,031,092 1,322,581 5,017,453
Total assets 16,912,574 3,463,191 10,419,309
Current liabilities
Trade and other payables 13 143,974 12,476 58,833
143,974 12,476 58,833
Net current assets 2,887,118 1,310,105 4,958,620
Total liabilities 143,974 12,476 58,833
Net assets 16,768,600 3,450,715 10,360,476
Equity
Share capital 15 2,867,979 437,480 2,278,155
Share premium 14,112,654 4,431,671 7,362,699
Other reserves 818,654 811,077 814,821
Retained earnings (1,030,687) (2,229,513) (95,199)
Total equity 16,768,600 3,450,715 10,360,476
Interim Condensed Consolidated Statement of Changes in Equity
Share capital Share premium Other reserves Retained Total
earnings
EUR EUR EUR EUR EUR
Balance at 1 January
2021 2,278,155 7,362,699 814,821 (95,199) 10,360,476
Six months ended 30
June 2021:
Loss and total other
comprehensive income
for the period - - - (935,488) (935,488)
Total comprehensive income
for the period - - - (935,488) (935,488)
Issue of share capital 589,824 6,749,955 --7,339,779
Credit to equity for
equity settled
share-based payments --3,833 -3,833
share-based payments
Total transactions
with owners 589,824 6,749,955 3,833 -7,343,612
directly in equity
Balance at 30 June 2021 2,867,979 14,112,654 818,654 (1,030,687) 16,768,600
Share capital Share premium Other reserves Retained Total
earnings
EUR EUR EUR EUR EUR
Balance at 1 January
2020 351,133 4,151,045 811,077 (1,820,744) 3,492,511
Six months ended 30
June 2020:
Loss and total other
comprehensive income
for the period - - - (408,769) (408,769)
Total comprehensive income
for the period - - - (408,769) (408,769)
Issue of share capital 86,347 280,626 --366,973
Balance at 30 June 2020 437,480 4,431,671 811,077 (2,229,513) 3,450,715
Interim Condensed Consolidated Statement
of Cash Flows
30 June 30 June
2021 2020
Unaudited Unaudited
Notes EUR EUR EUR EUR
Cash flows from operating activities
Cash (used in)/generated
from operations 16 (390,310) (363,352)
Net cash (used in)/generated
from operating activities (390,310) (363,352)
Cash flows from investing
activities
Investments in Joint Venture (735,800) -
Exploration expenditure in Ireland
and Sweden (3,764) (138,276)
Purchase of remaining share of
Deutsche Lithium (1,500,000) -
Cash acquired on acquisition
of Deutsche Lithium 486,213 -
Interest received 422 -
Net cash used in investing
activities (1,752,929) (138,276)
Cash flows from financing activities
Proceeds from issue of shares 58,717 366,973
Net cash generated from
financing activities 58,717 366,973
Net decrease in cash and cash
equivalents (2,084,522) (134,655)
Cash and cash equivalents at
beginning of period 4,846,528 1,497,276
Effect of foreign exchange
rates 146,949 (91,370)
Cash and cash equivalents at
end of period 2,908,955 1,271,251
Notes to the Interim Condensed Consolidated Financial Statement
1 Accounting policies
Company information
Zinnwald Lithium Plc (the "Company") is a public limited company
which is admitted to trading on the AIM Market of the London
Stock Exchange and is 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, Deutsche Lithium GmbH in Germany, Deutsche Lithium
Holdings Ltd (formerly Erris Resources (Exploration) Ltd) in
the UK, and Erris Zinc Limited in Ireland.
1.1 Basis of preparation
These unaudited interim condensed consolidated financial statements
have been prepared under the historical cost convention and in
accordance with the AIM Rules for Companies. As permitted, the
Company has chosen not to adopt IAS 34 "Interim Financial Statements"
in preparing this interim financial information. The unaudited
interim condensed financial statements should be read in conjunction
with the annual report and financial statements for the year
ended 31 December 2020, which have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted
by the European Union.
The unaudited interim condensed consolidated financial statements
do not constitute statutory financial statements within the meaning
of the Companies Act 2006. They have been prepared on a going
concern basis in accordance with the recognition and measurement
criteria of UK adopted international accounting standards. Statutory
financial statements for the year ended 31 December 2020 were
approved by the Board of Directors on 25 February 2021 and delivered
to the Registrar of Companies. The report of the auditor on those
financial statements was unqualified.
The same accounting policies, presentation and methods of computation
are followed in these unaudited interim condensed financial statements
as were applied in the preparation of the audited financial statements
for the year ended 31 December 2020.
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 exploration expenditure is denominated
in this currency. Monetary amounts in these financial statements
are rounded to the nearest EUR.
1.2 Basis of consolidation
The consolidated financial statements incorporate those of Zinnwald
Lithium Plc and all of its subsidiaries (ie 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(st) January 2021 to 24(th) 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(th) June 2021, the Company
now consolidates the full results of Deutsche Lithium.
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.
1.3 Going concern
At the time of approving these financial statements, the Directors
have a reasonable expectation that the Company has adequate resources
to continue in operational existence for the foreseeable future.
The Company had a cash balance of EUR2.9m at the period end and
keeps a tight control over all expenditure. Thus, the Directors
continue to adopt the going concern basis of accounting in preparing
the financial statements.
The Directors have reviewed the ongoing situation with COVID-19
and do not consider its effects to have a material impact on
the Group's and Company's going concern.
1.4 Intangible fixed assets other than goodwill
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 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.
1.5 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:
Plant and equipment 25% on cost
Fixtures and fittings 25% on cost
Computers 25% on cost
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.
1.6 Impairment of non-current assets
At each reporting period end date, the Directors review 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 Directors estimate 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.
1.7 Joint Arrangements
Up to 24(th) 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 used 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, was recognised in profit
or loss. The net fair value of the identifiable assets and liabilities
were 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.
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.
Joint venture investment
The Group applied IFRS 11 to all joint arrangements and classified
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
Excluding the newly acquired exploration assets of Deutsche Lithium,
other Group capitalised exploration costs had a carrying value as
at 31 December 2020 of EUR1,546,111. Ordinarily, Management tests
annually whether capitalised exploration costs have a carrying value
in accordance with the accounting policy stated in note 1.4. Due
to the acquisition of the remaining shareholding in Deutsche Lithium
and the Company's now sole focus on the Zinnwald Lithium project,
the Directors elected to undertake a full review of non-core assets
as part of the Interim accounts review. 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 Ireland, five licences were originally granted for six years
in 2013 and in Q3 2019, the Group extended these licences for a
further six years. The exploration work identified excellent mineralisation
in its drill holes and the metallurgical review has shown a good
quality concentrate can be produced. However, in 2021, the Group
elected to relinquish the four non-core licences but undertook the
required further exploration work to maintain the core licence area
(PL 3735) at Abbeytown and expects that this spend meets the requirement
to maintain this licence in good standing through to Q3 2022. Whilst
the current Zinc market is relatively subdued and Zinnwald is no
longer focussed on Ireland, the Company still intends to find a
JV Partner for PL 3735. Accordingly, the Board has concluded that
an impairment charge should be made in the 2021 interim accounts
in regard to capitalised costs from the Irish licences, which has
resulted in an impairment of EUR1,547,986.
In 2021 in Sweden, the Company has been unable to find a joint venture
partner to further develop its licences and has elected to cease
all operations, close its Filial branch and relinquish all licences.
In 2020, the Company fully impaired its Swedish assets and the Board
have recommended a further impairment charge of EUR1,889 for expenditure
made in 2021.
3 Segmental reporting
The Group operates principally in the UK and Germany with largely
dormant subsidiary activities in Ireland and Sweden. Activities
in the UK include the Head Office and 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 will be reported
on a fully consolidated basis.
Ireland Sweden Germany UK Total
2021 2021 2021 2021 2021
EUR EUR EUR EUR EUR
Revenues - - - - -
Cost of sales and administrative
expenses (3,818) (1,513) - (514,642) (519,973)
Gain/loss on foreign exchange 10 1 - 148,586 148,597
Project impairment (1,547,986) (1,889) - - (1,549,875)
Profit/(loss) from operations
per reportable segment (1,551,794) (3,401) - (362,224) (1,921,251)
Reportable segment assets 16,887 2,145 14,395,408 2,498,134 16,912,574
Reportable segment liabilities - - 41,122 102,852 143,974
Ireland Sweden Others UK Total
2020 2020 2020 2020 2020
EUR EUR EUR EUR EUR
Revenues - - - - -
Cost of sales and administrative
expenses (30,981) - (9,714) (276,704) (310,399)
Gain/loss on foreign exchange (3,240) (41) - (88,089) (91,370)
Profit/(loss) from operations
per reportable segment (34,221) (41) (9,714) (364,793) (408,769)
Reportable segment assets 2,007,946 126,675 34,037 1,294,533 3,463,191
Reportable segment liabilities 4,671 - - 7,805 12,476
4 Operating (loss)/profit
2021 2020
EUR EUR
Operating (loss)/profit for the period is stated after
charging:
Exchange gains/losses 148,597 (91,370)
Ireland and Sweden exploration projects
impairment 1,549,875 -
Share-based payments 3,833 -
Operating lease charges 11,891 19,121
Exploration costs expensed 5,331 40,695
5 Share of results in Joint Venture
2021 2020
EUR EUR
Share of Loss in Joint Venture for the period
to 24 June 2021 (52,911) -
6 Impairments
Impairment tests have been carried out where appropriate and the
following impairment losses have been recognised in profit or
loss:
2021 2020
EUR EUR
In respect of:
Intangible assets 1,549,875 -
7 Earnings per share 2021 2020
Number Number
Weighted average number of ordinary shares
for basic earnings per share 213,439,290 31,098,212
Effect of dilutive potential ordinary shares:
- Weighted average number outstanding share
options 2,700,000 3,150,000
Weighted average number of ordinary shares
for diluted earnings per share 216,139,290 34,248,212
Earnings EUR EUR
Continuing operations
Loss for the period from continuing operations (935,488) (408,769)
Earnings for basic and diluted earnings per
share attributable to equity shareholders
of the company (935,488) (408,769)
Earnings per share for continuing operations
Basic and diluted earnings per share (cents)
Basic earnings per share (0.44) (1.31)
Diluted earnings per share (0.44) (1.31)
There is no difference between the basic and diluted earnings
per share for the period ended 30 June 2021 and 2020 as the effect
of the exercise of options would be to decrease the loss per
share.
8 Intangible fixed assets
Germany Ireland & Goodwill Total
Exploration Sweden
and Exploration
Evaluation and
costs Evaluation
costs
EUR EUR EUR EUR
Cost
At 1 January 2021 - 2,138,576 - 2,138,576
Additions on
consolidation 8,303,034 3,764 5,531,474 13,838,272
At 30 June 2021 8,303,034 2,142,340 5,531,474 15,976,848
Amortisation and impairment
At 1 January 2021 -(592,465) -(592,465)
Charge for
the period - (1,549,875) - (1,549,875)
At 30 June 2021 - (2,142,340) - (2,142,340)
Carrying amount
At 30 June 2021 8,303,034 - 5,531,474 13,834,508
Intangible assets comprise capitalised exploration and evaluation
costs (direct costs, licence fees and fixed salary / consultant
costs) for the Zinnwald Lithium Project, Ireland Zinc Project and
the Sweden Gold Projects.
9 Business combination
30 June 31 December
2021 2020
EUR EUR
Investments in joint
ventures - 3,852,083
- 3,852,083
Investments in subsidiaries are recorded at cost, which is the fair
value of the consideration paid.
9.1 Initial Investment in Deutsche Lithium
On 29 October 2020, the Company completed the acquisition of a 50%
shareholding in Deutsche Lithium Gmbh ("Deutsche Lithium") from Bacanora
Lithium Plc ("Bacanora") via a reverse takeover. Bacanora contributed
its share in Deutsche Lithium and EUR1.35m in cash in exchange for
90,619,170 new shares in the Company at a price of 5p per share and
a 2% Net Profits Royalty. The Company thereafter took over the obligations
due under the Deutsche Lithium Joint Venture Agreement and made all
payments due monthly from October 2020 to June 2021.
The Company held one of the two managing director positions and a
50% shareholding in Deutsche Lithium, but only had a casting vote
on purely operational development matters. Therefore, the Directors
concluded that the Company only had significant influence over Deutsche
Lithium and not control.
The Company followed the requirements of IAS 28 in applying the equity
method and increased or decreased the investment by recognising its
share of the profit or loss and other comprehensive income from Deutsche
Lithium.
The table below shows the movements in the equity accounted investment:
Value of 50% share in Deutsche Lithium acquired from
Bacanora on 29 October 2020 EUR 3,685,662
Funds provided under the terms of the Joint Venture
Agreement EUR 165,000
Additional committed funds for further testwork EUR 34,000
Share of Deutsche Lithium Loss for the period November
to December 2020 (EUR 32,579)
--------------
Carrying Value as at 31 December 2020 EUR 3,852,083
Funds provided under the terms of the Joint Venture
Agreement EUR330,000
Additional committed funds for further testwork EUR389,800
Additional review work EUR16,000
Share of Deutsche Lithium Loss for the period January
to June 2021 (EUR52,911)
--------------
Carrying Value as at 24 June 2021 EUR4,534,972
9.2 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.
Control premium (30%) of
Value of second acquisition EUR 8,781,062 Net Value EUR 2,388,525
Fair Value of original
Less: Cash in company (EUR 486,213) investment EUR 5,573,224
Less: Free Carry eliminated (EUR 333,100) Cash EUR 486,213
-----------------
Net Value of second
acquisition EUR 7,961,749 Release of obligation EUR 333,100
-----------------
Value of second Acquisition EUR 8,781,062
Carrying Value at 24 June
2021 EUR 4,534,972
Gain recognised on revaluation EUR 1,038,252
9.3 Accounting for acquisition of remaining 50% of Deutsche Lithium
On 24 June 2021, the Company completed the acquisition of SolarWorld
AG's 50% shareholding in Deutsche Lithium by the payment of EUR1.5m
in cash and the issuance of 49,999,996 new shares in the Company.
These new shares were valued at the closing price on 21 June 2021
of 12.5p, as all legal agreements became legally binding on completion
on the morning of 22 June 2021, conditional solely on admission
of the new shares on 24 June 2021. These 49,999,996 new shares were
valued at 12.5p per share and an exchange rate of EUR1.16497, equating
to a total value of EUR8,781,062 including the cash element.
On 24 June 2021, by virtue of acquiring the remaining 50% of Deutsche
Lithium it did not own, the Company became the owner of 100% of
Deutsche Lithium and the Joint Venture Agreement that covered its
management was automatically terminated. This transaction is categorised
as a 'step acquisition' under IFRS 3 whereby the Company now has
a 100% owned subsidiary. Management has concluded that the acquisition
is one of a business rather than an asset and accordingly, Deutsche
Lithium moves from being equity accounted as a Joint Venture to
being fully consolidated as a subsidiary undertaking.
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 of EUR1.5m EUR 1,500,000
49,999,996 new shares EUR 7,281,062
----------------
Total EUR 8,781,062
Fair value of 50% investment in Deutsche
Lithium as at 24 June 2021 EUR 5,573,224
----------------
Total Consideration EUR 14,354,286
Fair value of net assets acquired in Deutsche
Lithium as at 24 June 2021 (EUR 8,822,812)
----------------
Goodwill EUR 5,531,474
9.4 Commitments under the Deutsche Lithium JV Agreement
The Company signed a Deed of Adherence to abide by the terms of
the Joint Venture Agreement. The only outstanding financial commitment
was the 2nd Amendment entered into by Bacanora in February 2020
by which it committed to fund Deutsche Lithium with EUR1.35m in
monthly instalments over two years. At the date of completion of
the initial acquisition of 50% of Deutsche Lithium by the Company,
the amount outstanding was EUR0.935m, as at 31 December 2020 it
was EUR0.770m and as at 24 June 2021 it was EUR440,000. On completion
of the acquisition of the remaining 50% of Deutsche Lithium, the
Joint Venture Agreement was formally terminated and the Company
shall henceforth fund the operations at Deutsche Lithium as a normal
subsidiary undertaking.
10 Property, plant and equipment
Plant and Land, land Total
machinery, rights
office equipment & buildings
etc
EUR EUR EUR
Cost
At 1 January 2021 14,769 - 14,769
Additions - on acquisition
of subsidiary 33,983 9,817 43,800
At 30 June 2021 48,752 9,817 58,569
Depreciation and impairment
At 1 January 2021 11,107 -11,107
Charge 488 - 488
At 30 June 2021 11,595 - 11,595
Carrying amount
At 30 June 2021 37,157 9,817 46,974
11 Trade and other receivables
30 June 31 December
2021 2020
Amounts falling due within one year: EUR EUR
Other receivables 82,783 133,459
Prepayments and accrued income 39,354 37,467
At 30 June 2021 122,137 170,296
12 Cash and cash equivalents
30 June 31 December
2021 2020
EUR EUR
Cash and cash equivalents 2,422,742 4,846,527
Cash acquired on acquisition of subsidiary 486,213 -
At 30 June 2021 2,908,955 4,846,527
Security held over cash
Under the terms of the Deed of Adherence with Bacanora Lithium
Plc, entered into on 29 October 2020, Bacanora held a secured
charge over a cash amount equal to the amount outstanding under the
Deutsche Lithium JV Agreement. As at 31 December 2020, this secured
amount was EUR770,000. On completion of the acquisition of the
remaining 50% of Deutsche Lithium and the termination of the Joint
Venture Agreement, the Company has commenced the process of
removing this secured charge.
13 Trade and other payables
30 June 31 December
2021 2020
Amounts falling due within one year: EUR EUR
Trade payables 140,845 14,108
Accruals and deferred income 3,129 44,725
At 30 June 2021 143,974 58,833
14 Subsidiaries
Details of the company's subsidiaries at 30 June 2021 are as follows:
% Held
Name of undertaking Registered Nature of business Class of Direct Indirect
office shares held
Deutsche Lithium Holdings
Ltd United Kingdom Holding Ordinary 100.00 -
Erris Zinc Ltd Ireland Exploration Ordinary 100.00 -
Exploration and
Deutsche Lithium GmbH Germany Development Ordinary 100.00 -
The registered office address of Deutsche Lithium Holdings Ltd (formerly
Erris Resources (Exploration) Ltd) is 29-31 Castle Street, High Wycombe,
Bucks, HP13 6RU.
The registered office address of Erris Zinc Ltd is The Bungalow, Newport
Road, Castlebar, Co Mayo, F23 YF24.
The registered office address of Deutsche Holdings GmbH is Am St. Niclas
Schacht 13, Freiberg, Germany, 09599.
15 Share capital
30 June 2021 31 December
2020
Ordinary share capital EUR EUR
Issued and fully paid
255,105,953 ordinary shares of 1p each
(2020: 204,455,957) 2,867,979 2,278,155
2,867,979 2,278,155
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 period:
Ordinary Ordinary
Number EUR
Ordinary shares of 1p each
At 1 January 2021 204,455,957 2,278,155
Issue of fully paid shares (share options
exercised) 650,000 7,339
Issue of fully paid shares (consideration
for shares in subsidiary) 49,999,996 582,485
At 30 June 2021 255,105,953 2,867,979
16 Cash (used in)/generated from group operations
2021 2020
EUR EUR
(Loss)/profit for the period after tax (935,488) (408,769)
Adjustments for:
Investment income (422) -
Depreciation and impairment of property, plant
and equipment 488 -
Ireland and Sweden exploration project impairment 1,549,875 -
Revaluation gain on original joint venture
holding (1,038,252) -
Share of loss of Joint Venture 52,911 -
Equity-settled share-based payment expense 3,833 -
Foreign exchange (146,949) 91,370
Movements in working capital:
Decrease/(Increase) in trade and other receivables 79,674 (16,032)
Increase/(Decrease) in trade and other payables 44,020 (29,921)
Cash (used in)/generated from operations (390,310) (363,352)
17 Events after the reporting date
On 25 August 2021, Bacanora published a Rule 2.7 announcement regarding
the recommended cash offer by Ganfeng International Trading (Shanghai)
Ltd ("Ganfeng") for the entire issued and to be issued share capital
of Bacanora, other than that which Ganfeng already owns (the "Offer").
As part of this Offer, the independent directors of Bacanora intend
to make a distribution in specie of the shares held by Bacanora in
Zinnwald to Bacanora's shareholders, including Ganfeng, subject to
the Offer becoming or being declared unconditional in all respects.
In the event that the Offer and distribution of shares complete,
Bacanora will cease to be a shareholder in Zinnwald and the Relationship
Agreement will automatically terminate.
On 12 August 2021, the Company issued 500,000 new ordinary shares
in accordance with the exercise of Options originally granted at
the time of the Company's original IPO in 2017. As a result of this
share issuance, the Company has 255,603,953 ordinary shares in issue
as at the date of this report.
18 Approval of interim condensed consolidated financial statements
These interim condensed financial statements were approved by
the Board of Directors on 7 September 2021.
*S*
For further information vis it www.zinnwaldlithium.com or
contact:
Anton du Plessis Zinnwald Lithium plc info@zinnwaldlithium.com
Allenby Capital Limited +44 (0) 20 3328
David Hart/Liz Kirchner Nominated Adviser 5656
------------------------- ----------------------------
Turner Pope Investments
(TPI) Ltd +44 (0) 20 3657
James Pope/Andy Thacker Broker 0050
------------------------- ----------------------------
Isabel de Salis/Oonagh St Brides Partners Ltd info@stbridespartners.co.uk
Reidy Financial PR
------------------------- ----------------------------
Notes
Zinnwald Lithium plc (EPIC: ZNWD.L) is an AIM quoted, German
focused lithium development company focussed on becoming an
important supplier to Europe's fast-growing battery sector. The
Company owns 100% of the Zinnwald Lithium Project in Germany, a
late-stage development project with attractive economics and
approved mining licence. The Project is located in the heart of
Europe's chemical and automotive industries and has the potential
to be one of Europe's most advanced battery grade lithium
projects.
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