TIDMZNWD
RNS Number : 3399C
Zinnwald Lithium PLC
22 February 2022
Zinnwald Lithium plc / EPIC: ZNWD.L / Market: AIM / Sector:
Mining
22 February 2022
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 2021.
The Company's Annual Report and Financial Statements for the
year ended 31 December 2021 will be posted to shareholders today
and will be available on its website www.zinnwaldlithium.com.
OVERVIEW
Significant advances made towards becoming an important supplier
to Europe's fast-growing lithium sector
-- Gained full control of flagship Zinnwald Lithium Project in
south-eastern Germany via a cash and shares transaction worth
EUR8.8 million
-- Extended resource position in the Saxony region, bringing
total resource inventory at the Zinnwald Project to over one
million tonnes lithium carbonate equivalent ('LCE').
-- Raised approximately EUR7 million in additional equity to
advance the Project in 2022; EUR7.7 million cash position at
today's date.
-- Welcomed new shareholders to the register including several large institutions.
Focusing on ways to improve the Project, including identifying
options for cost reduction, as well as enhancements that reduce the
CO(2) footprint
-- Completed a technical review of the Project during the second half of 2021.
-- Pivoted the Project to focus on battery-grade lithium
hydroxide as a primary product to better align with the market
specifications of core European off-takers.
-- Exploring the possibility of expanding the production capacity of the Project.
Potential to become an important strategic source of a vital
commodity for the transition to a greener economy for both Germany
and Europe
-- Strong market demand for lithium as the growth in EV demand gathers pace.
-- No current domestic European producers of battery-grade
lithium products; need for significant import volumesto meet demand
in Europe.
Several workstreams planned for 2022
-- Completing detailed test work and preliminary engineering
studies related to lithium hydroxide production.
-- Undertaking an in-fill drilling campaign at the Zinnwald
License to assist in detailed mine planning, with the objective of
evaluating the ability to increase mining output.
-- Exploring options to improve project logistics and
sustainability through utilising existing infrastructure
assets.
-- Commencing an exploration drilling campaign at nearby
Falkenhain exploration license targeting lithium, tin, and tungsten
to enhance the Project's scale and economics.
-- Looking to assess the viability of economic recovery of tin
as a by-product and its possible impact on the Project's
economics.
CHAIRMAN'S STATEMENT
The past year has seen a number of key milestones delivered by
Zinnwald Lithium. During the course of 2021, we gained full control
of our flagship Zinnwald Lithium Project (the "Project") in
south-eastern Germany via a cash and shares transaction worth
EUR8.8 million. We also expanded our mineral resource base in the
Saxony region, following the granting of an additional exploration
license at Sadisdorf by the regional mining authority - bringing
our total resource inventory at the Zinnwald Project to over one
million tonnes lithium carbonate equivalent ('LCE'). These
transactions, achieved in 2021, have served to firmly establish
Zinnwald Lithium as major player in the in the European lithium
space. To round the year off, we took advantage of the strong
lithium market and raised approximately EUR7 million in equity -
securing funds to advance the Project.
Having gained 100% ownership of Deutsche Lithium in June 2021,
management completed a thorough technical review of the Project
during the second half of the year. We also analysed market trends
in battery chemistry, through meetings with off-takers and battery
manufacturers, as to preferred lithium product and anticipated
demand. As part of this, we are undertaking additional test work to
determine our ability to produce lithium hydroxide economically and
the results are expected shortly. The conclusion of our technical
review, and the encouraging results from the initial test work, has
resulted in pivoting the Project to focus on battery-grade lithium
hydroxide as its primary end product.
In addition, as part of the ongoing value engineering work,
trade-off studies are underway to determine the optimum mining rate
and process plant capacity. By increasing the targeted annual
production rate, there is the potential to maximise the project
economics and lower the cash cost, which is a key driver for the
Project to be in the lower range of the cost curve. The work also
focuses on other key ways to optimise the Project, including
identifying options for cost reduction, as well as enhancements
that reduce the CO2 footprint and our overall environmental
impact.
In terms of the lithium market, 2021 was a year in which
commodity markets benefitted from the impact of the increasingly
rapid shift to electric vehicles ('EVs') and the implications for
the critical raw materials required to produce lithium-ion
batteries. Since January 2021, the price for lithium hydroxide has
more than doubled and spot prices in China have recently hit levels
of $50,000/tonne. As the growth in EV demand gathers pace, we
believe supply deficits in the lithium market will become
increasingly apparent. On the back of this surge, many market
commentators have raised their long-term lithium price forecasts,
which further supports the potential value of the Project.
Europe, in particular, is forecast to emerge as a key market for
lithium with regional lithium battery production forecast to
increase fifteen-fold by 2030. It is worth noting that, presently,
there are no domestic European producers of battery-grade lithium
products. In addition, even if all the currently contemplated
lithium projects in Europe commence production, there will still be
a need for significant import volumes to meet anticipated demand.
Positioned in the heart of the German automotive sector, the
Zinnwald Lithium Project has the potential to become a highly
important strategic source of a vital commodity for the transition
to a greener economy for both Germany and Europe.
With regard to our non-core assets in Ireland, the Company has
rationalised its license holdings and retained just the core
prospecting license related to the brownfields Abbeytown Project.
The zinc price rebounded strongly during 2021 and the Company's
core objective for Abbeytown remains to find a partner or purchaser
for the asset. In Sweden, we relinquished our Brännberg
licences.
Looking ahead to 2022, the funds raised in December last year
have set us up well to advance the Project. Specific workstreams
planned for 2022 include completing detailed test work and
preliminary engineering studies related to lithium hydroxide
production. We will also be undertaking an in-fill drilling
campaign at Zinnwald, as part of detailed mine planning, all part
of the ongoing value engineering.
It is important to highlight that the Saxony region of Germany,
in which the Project is located, has a long history of mining and
contains legacy mining infrastructure. Work is currently underway
to determine if it is viable to utilise parts of this existing
infrastructure around the Project as part of our planned mining
operations. This, in turn, has the potential to improve the
logistics of the Project and lessen the impact on local communities
and the environment through less movement on local roads.
The Project already benefits from the fact that its anticipated
by-products are all benign in nature, almost all saleable, and the
planned beneficiation process is comparatively energy and water
efficient. Access to existing mining infrastructure, therefore,
could further help improve the sustainability of the Project -
helping us to achieve one of our core objectives, which is to bring
to production a project that meets the highest standards of
environmental and social responsibility.
A further key priority in 2022 is the commencement of an
exploration drilling campaign at our nearby Falkenhain exploration
license. A detailed review of historic drill data completed on the
license prior to German Reunification has proved encouraging with
respect to the potential prospectivity of the license area. The
planned exploration drill campaign - targeting lithium, tin, and
tungsten - will allow us to test the historic work, and assess the
potential of the Falkenhain deposit, ultimately, to determine if
this has the potential to feed the planned plant at the Zinnwald
Project.
Corporate
The Companies shares have performed well over the last 12 months
driven by the increased demand in lithium as the EV and clean
energy transition gains global momentum. We have welcomed many new
shareholders to our register including several large institutions,
through both our fundraising activities, the acquisition of the
remaining 50% of Deutsche Lithium, as well as from Bacanora Lithium
Plc, which spun out its holding in our Company to its own
shareholders shortly before the year end.
Financial Overview
The Company maintains a disciplined approach to expenditure and,
as such, is well funded for 2022 with a EUR7.7 million cash
position at today's date.
Long-term Outlook
Zinnwald has the potential to become a key European lithium
project. We look forward to reporting further progress in the year
ahead as we further develop the Project towards a Bankable
Feasibility Study for Lithium Hydroxide.
In closing, I would like to thank the team for the work they
have put in during the year and all our shareholders for their
support. We look forward to an active year on the Project in
2022.
Jeremy Martin
Non-Executive Chairman
21 February 2022
STRATEGIC REPORT
Extracts from the Company's Strategic Report are set out
below.
Highlights - 12 Months to 31 December 2021
Zinnwald Lithium Project
-- Acquired the remaining 50% of Deutsche Lithium GmbH from
SolarWorld AG to consolidate full ownership of the Zinnwald Lithium
Project. The acquisition cost comprised 50 million new shares
issued at a price of 12.5p and EUR1.5m in cash.
-- Raised circa GBP5.8m primarily from existing shareholders at a price of 15.5p per share.
-- Granted five-year Sadisdorf exploration licence within 12km
of primary Zinnwald mining license.
-- Completed initial phase of Lithium Hydroxide testwork.
-- Completed a phase of value engineering to optimise the plant
capacity and evaluate the production of a more conventional
product, Lithium Hydroxide.
Legacy Assets
-- Ireland - the Company undertook sufficient drilling to renew
its core licence at the Abbeytown Project for a further two years
to 2023, whilst relinquishing all other licenses.
-- Sweden - the Company relinquished all its licenses and closed its operations.
Company Overview - Background and evolution
The Group was originally established in 2012 as a mineral
exploration and development company focused on Zinc licenses in
Ireland and Gold licenses in Sweden. The Company made its IPO on
AIM in December 2017 with Osisko Gold Royalties as its cornerstone
investor and a project level partnership in Sweden with Centerra
Gold. The Company has dropped all licenses in Sweden and closed its
operations. In Ireland, the Company now retains a single license in
Ireland at the brownfield Abbeytown project, which is on care and
maintenance. The Company considers that the increase in the Zinc
price in 2021 may assist in securing a partner to progress this
asset.
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. It also led to the cancellation of the Joint Venture
Agreement with SolarWorld AG and the removal of certain obligations
due to Bacanora in relation to this Agreement.
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, including the
Relationship Agreement that gave Bacanora the right to appoint a
Director to the Company. The sole remaining agreement is the
Royalty Agreement covering 50% of the Project, which remains in
place.
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 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. The Project
benefits from a strategic location in close proximity to the German
automotive and downstream chemical industries. The Project
comprises four key 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, Deutsche
Lithium first announced the results of the NI 43-101 Feasibility
Study for the Project, which included 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.
-- 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 and Altenberg satellite areas
Prior to 2021, Deutsche Lithium held two other exploration
licences; the Falkenhain licence (covering 295.7 ha and with a
five-year term to 31 December 2022); and the Altenberg licence
(covering 4,225.3 ha and with an approximately five-year term to 15
February 2024). The Falkenhain license area had been extensively
explored for tin and tungsten prior to German reunification and
historic data still exists for these drill campaigns. The Company
intends to perform an exploration drill campaign to test the
historical drilling and assess the potential of the Falkenhain
target as a potential satellite lithium resource to feed into the
main Zinnwald Project.
Sadisdorf satellite area
In June 2021, Deutsche Lithium was granted the Sadisdorf
Licence, which covers circa 225 ha in the Erzgebirge or Ore
Mountains region of Saxony, Germany and is valid until 30 June
2026. The license area is located circa 12km NNE of the Company's
Zinnwald license area, and forms part of the same geological unit
that hosts the historic Li-Sn-W deposits at Zinnwald, Falkenhain
and Altenberg. The deposit at Sadisdorf has historically been mined
for tin and copper. 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). Subject to follow up exploration work and verification
of the lithium grades, the Sadisdorf area has the potential to
provide additional plant feed in the future.
Historic Project Plans
Whilst Deutsche Lithium was under the operational direction of
Bacanora, the strategy for the Project was threefold - match the
long mine life of Bacanora's main Sonora Project; produce a niche
complimentary product to Sonora's mainstream lithium products
(lithium carbonate); and most importantly, be financeable from
Bacanora's internal cash flows.
With an abundant supply of fluorspar/hydrofluoric acid available
in the immediate vicinity, Deutsche Lithium chose to focus on LiF
(Lithium Fluoride) which is a high value downstream lithium product
and one of the two key components in the manufacturing process of
LiPF6, which is the most important conducting salt in lithium
electrolytes and serves as the "shuttle" in the lithium battery
electrolyte which "ships" the lithium ion between the cathode and
the anode. Approximately 95 per cent. of all lithium battery
electrolytes use LiPF6, and the percentage used in each cathode is
increasing in some of the newer battery types.
The resultant Deutsche Lithium 2019 Feasibility Study was
predicated on a 30-year mine life production of 5,112 tpa (7,285
tpa LCE) of battery grade LiF. This study showed a pre-tax project
NPV of EUR428 million and an IRR of 27.4%, based on a Capex of
EUR160 million. The study also included the potential to produce up
to 32,000 tpa of potassium sulphate for sale to the European
fertiliser industry. Further, the majority of its mined tailings
would be inert Quartz Sands that may be sold for use as an
aggregate filler to local building companies.
The mining operation was planned as an underground mine
development using a single decline ramp for access to the mine and
for ore transportation from the mine to the surface. The mining
method to be used was room and pillar with subsequent backfill
using self- hardening material. The processing operation was to be
based on a conventional processing flow sheet using established
sulphate route processing technology. The integrated plant was
designed to process approximately 570,000 tonnes of ore per year
(assuming a 30-year mine plan).
Evolution of the Project Plans
During 2021, as part of planning the next phase of development,
the Company completed a holistic technical review to identify ways
to optimise all facets of the project to maximise value and make it
as attractive as possible to potential Industry partners,
off-takers and future finance providers. This review indicated that
the core project could potentially sustain both a higher annual
production level and a more conventional battery-grade lithium end
products (lithium hydroxide and lithium carbonate) that are better
suited to the current market demand.
In terms of the scale of the project, the Company has been
reviewing the potential to operate with a higher annual output, but
with a shorter mine life (still exceeding 20 years) from the
Zinnwald license area. As noted above, the addition of the new
deposits covered by the three new nearby license areas has the
potential to increase Zinnwald's resource base and annual lithium
production.
In prior years, Deutsche Lithium had already established the
possibility of producing battery-grade lithium carbonate directly
from the lithium mica concentrate with only minimal modifications
to the flowsheet. In 2021, Deutsche Lithium undertook further
testwork to determine if battery-grade lithium hydroxide could be
produced. This testwork remains ongoing, but the preliminary
indications appear to endorse that strategy.
The Company also continues to undertake detailed value
engineering in order to optimise the cost profile of the Project.
This work includes a closer examination of the potential for
economic by-products including the tin and high-quality potassium
sulphate, and good quality aggregate products for the construction
industry. A potential to significantly decrease CO2 emission and
operating costs has been recognised if the old mining
infrastructure was utilised and plant locations optimised. This
would also reduce the impact of the project on surrounding
communities.
Company Strategy
Prior to 2020, the Company's strategy was focused on shareholder
value through the process of discovering new mineral deposits and
seeking attractive acquisition opportunities. The Zinnwald Lithium
Project was one such acquisition opportunity and the Board believes
that advancing the Project represents an excellent opportunity to
create value for Shareholders, particularly as the Project is at an
advanced stage when compared with the Company's historic assets.
The Company's 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 Project also fits into the Company's
strategy of focusing on low-risk jurisdictions (Germany) in areas
with proven metallogenic potential, an active mining industry, low
political risk and transparent permitting processes.
The Project is now the Company's core development asset and the
team will focus on further de-risking the project as it is advanced
towards a development decision. Key work areas include:
-- Assess the commercial viability of producing a broader range
of lithium compounds, specifically lithium hydroxide and lithium
carbonate;
-- Expansion of the size of the Project by increasing annual
production potential through increasing the planned mining rate and
potentially bringing other satellite resources into the mining
schedule;
-- Identification of and negotiation with off-take partners
(potentially locally) that could include battery manufacturers,
chemical producers or commodity traders;
-- Identification of and negotiation with potential financing
partners that could include banks and national and trans-national
development organisations;
-- Exploration work to advance the satellite project areas to
increase the potential size of the overall project resource
base;
-- Advance the plant engineering towards AAC Class 3;
-- Minimising the carbon footprint by optimising Lithium plant
location and transportation methods;
-- 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 the general public and
the NGOs in the permitting processes and has committed to
proactively engage with all the stakeholders in its projects.
Operational review & outlook
Germany
During 2021, the Group has continued to progress the Project on
both a corporate and operational level.
At a Corporate level, in line with our previously stated
strategy, we successfully completed the acquisition of the
remaining 50% of Deutsche Lithium giving us 100% ownership and full
operational control of the Project. The acquisition cost was EUR8.8
million, with most 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 being primarily the
creditors of SolarWorld AG.
At the Project level during the year, 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 year, 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
Altenberg 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 into 2022 and beyond, as noted above, the
Group's plans for the Project are to seek ways to expand the size
of the Project, increase annual lithium production, explore the
potential for additional and higher value co-products, and to
produce a more conventional lithium end-product for future
off-takers. Consequently, the Group raised circa GBP5.8m in
December 2021 to finance the start of this work. Some of the key
workstreams for 2022 include the following:
-- 15,000m of planned exploration drilling across Falkenhain and
in-filling drilling at Zinnwald. At Falkenhain, a detailed review
has been performed on historic drill data. Initial tests have
indicated similar characteristics to the bulk samples from the
Zinnwald licence. The planned drilling work at Zinnwald will help
to refine the early years mine plan for an expanded mining
operation on the Zinnwald license.
-- The Group has started the process of updating the feasibility
study to be based on the production of Lithium Hydroxide. This will
also include value engineering work, finalisation of the plant
locations, review of the potential to produce a tin by-product,
refinement of the plans for co-product production, and the
potential for sale of its quartz sand by-products.
-- The Group 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
undertaking 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.
-- The Company has commenced data analytics and archive work
with regard to the Sadisdorf licence.
Lithium Market
2021 saw a transformation in general market sentiment towards
Lithium, as consumption grew strongly whilst pricing, especially in
the spot market saw spectacular growth. These were driven by a
number of macro-economic factors, some of which may be temporary,
but several are likely to be longer term and support the progress
of the Lithium industry away from being a niche volatile
market.
In terms of consumption, estimates from the Australian
Department of Industry put global demand for lithium carbonate
equivalent (LCE) at 486,000 tonnes in 2021, up almost 60% from
2020's 305,000 tonnes. They forecast this to increase a further 50%
to 724,000 tonnes by 2023. For the longer term, Canaccord, an
investment bank, forecast a longer-term demand of circa 1.2 million
tonnes by 2025 and 2.5 million tonnes by 2030, a CAGR of 20%. This
was in large part due to increased demand for Electric Vehicles
(EVs), that saw YOY growth in 2021 of 103% to 6.1m units, driven by
China (+149% growth to 3.1m units) and Europe (+57% to 2.1m units).
Canaccord forecast global sales to increase to 16.8m units by 2025
and 46m units by 2030 (representing an estimated EV penetration
rate of 24% and 46%, respectively).
Lithium prices in the spot market in 2021 saw spodumene pricing
up 532%, lithium carbonate 431% and lithium hydroxide 340% higher.
However, it should be noted that the spot market is a smaller part
of the industry, estimated to represent less than 30% of the total
lithium market. Some of this price increase can be put down to a
couple of inherently short-term factors, such as:
-- "Hangover" from the Lithium price crash of 2018-19. The
period 2017 to 2019 saw a number of large-scale projects,
especially spodumene, coming online to flood a market, that at the
time, enjoyed only modest EV growth. This caused a collapse in the
lithium price, which in turn caused project deferrals or
cancellations. This was further exacerbated by delays and
restrictions caused by COVID-19 and left a mining industry unable
to supply the post-lockdown surge in pent-up demand.
-- Contract vs Spot market. The Global auto industry has
increasingly prioritised securing contract supply prices, for which
details are generally not reported to the market, which in turn
reduced available supply for the spot market.
-- Trader speculation. There is an inherent incentive for miners
and traders to defer supply in the hope of even high prices, which
in turn exaggerates short term price movement.
In the short term there may well be a price correction as
suppliers have already started to take advantage of the incentive
pricing, with new or restarted production in 2022, such as
Greenbushes and Pilbara in Western Australia (spodumene) and the
South American brine producers, Albemarle and SQM. In terms of
supply, the Australian Department of Industry estimates global
supply at 485,000 tonnes LCE in 2021 (up only 2%) and forecasts an
increase to 615,000 tonnes in 2022 and 821,000 tonnes in 2023.
However, the Australian Department of Industry also notes that
currently supply from mine and brine operations is falling short in
terms of matching demand growth, so whilst project development is
underway, it will take time to fill the supply gap.
Globally, the longer-term outlook for lithium does appear
promising which will hopefully see demand growth outpace production
and a long term sustained higher price for producers. 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
European automotive industry also appears to be focusing its
battery chemistry technology towards nickel-based chemistries
(which require lithium hydroxide) as these typically offer better
cold weather performance as well as superior energy density.
In Europe, the European Commission released a proposal for
stronger emissions standards on vehicles which would require
average emissions of new cars to come down by 55% on 2021 levels by
2030 and 100% by 2035. These targets mean security of supply for
battery grade chemicals may become a big issue for customers, with
a shortfall in battery grade products projected towards the end of
the outlook period. 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.
Volkswagen alone has committed to build six 40GWh battery factories
in Europe by 2030 (equates to 350kt of LCE demand). To keep up with
this demand, the EU is focused on encouraging local supply.
In terms of the nature of the industry, the first half of 2021
saw the start of sector consolidation between lithium companies
(Galaxy & Orocobre, IGO & Tianqi). The second half of the
year saw more aggressive M&A, especially by the Chinese
companies Ganfeng and CATL, who spent more than $2bn on five
projects. Canaccord estimates that a total of US$7bn was spent on
M&A during 2021 up from US$400m in 2020.
The larger more diversified miners have also started to take an
interest in the industry as it matures. Rio Tinto's head of
economics, Vivek Tulpule, said that by 2030 EV manufacturers would
need about three million tonnes of lithium, compared with the
roughly 350,000 tonnes they consume today. They estimated that
existing operations and projects combined, will contribute one
million tonnes of lithium and filling the supply gap would require
over 60 Jadar projects (58kt per annum), even before the Jadar
project was cancelled by the Serbian government.
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2021
31-Dec 31-Dec
2021 2020
Continuing operations Notes EUR EUR
Cost of sales (46,096) (56,540)
Exploration projects impairment (1,583,566) (592,465)
Administrative expenses (1,076,438) (690,356)
Other operating income 779 -
RTO costs - (839,940)
Share based payments charge 25 (7,779) (3,725)
Operating loss 5 (2,713,100) (2,183,026)
Revaluation gain on joint venture 7 1,038,252 -
Share of loss of joint venture 10 (52,911) (32,579)
Finance income 9 455 367
Loss before taxation (1,727,304) (2,215,238)
Tax on loss 12 - -
Loss for the financial year 30 (1,727,304) (2,215,238)
Other comprehensive income 181 19
Total comprehensive loss for the year (1,727,123) (2,215,219)
Earnings per share from continuing
operations attributable to the owners
of the parent company 13
Basic (cents per share) (1) (4)
Diluted (cents per share) (1) (4)
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 2021
31-Dec-21 31-Dec-20
Notes EUR EUR
Non-current assets
Intangible assets 14 16,165,085 1,546,111
Property, plant and equipment 15 48,621 3,662
Investments using equity method 16 - 3,852,083
16,213,706 5,401,856
Current assets
Trade and other receivables 21 121,845 170,926
Cash and cash equivalents 20 8,291,991 4,846,527
8,413,836 5,017,453
Total assets 24,627,542 10,419,309
Current liabilities
Current tax liabilities 23,802 -
Trade and other payables 22 614,858 58,833
638,660 58,833
Net current assets 7,775,176 4,958,620
Total liabilities 638,660 58,833
Total assets less current liabilities 23,988,882 10,360,476
Deferred tax liability 23 (1,382,868) -
Net assets 22,606,014 10,360,476
Equity
Share capital 27 3,316,249 2,278,155
Share premium 28 20,289,487 7,362,699
Other reserves 29 822,781 814,821
Retained earnings 31 (1,822,503) (95,199)
Total equity 22,606,014 10,360,476
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2021
Share Share premium Other Retained
capital account reserves earnings Total
Notes EUR EUR EUR EUR EUR
Balance at 1 January
2020 351,133 4,151,045 811,077 (1,820,744) 3,492,511
Year ended 31 December
2020:
Loss for the year - - - (2,215,238) (2,215,238)
Other comprehensive income:
Currency translation
difference - - 19 - 19
Total comprehensive income
for the year - - 19 (2,215,238) (2,215,219)
Conversion of share premium
to retained profits - (4,431,671) - 4,431,671 -
Issue of share capital 27 1,927,022 7,643,325 - - 9,570,347
Dividend in specie - - - (490,888) (490,888)
Credit to equity for
equity settled share-based
payments 26 - - 3,725 - 3,725
Total transactions with
owners recognised directly
in equity 1,927,022 3,211,654 3,725 3,940,783 9,083,184
Balance at 31 December
2020 and 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 27 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 26 - - 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 3,316,249 20,289,487 822,781 (1,822,503) 22,606,014
GROUP STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2021
Year ended Year ended
31 December 31 December
2021 2020
Notes EUR EUR EUR EUR
Cash flows from operating
activities
Cash used in operations 34 (495,174) (1,711,087)
Net cash outflow from
operating activities (495,174) (1,711,087)
Cash flows from investing
activities
Investment in Deutsche
Lithium as Joint Venture (735,800) (199,000)
Purchase of remaining
50% of Deutsche Lithium (1,500,000) -
Cash acquired on purchase
of Deutsche Lithium 486,213 -
Exploration expenditure
in Germany (948,157) -
Exploration expenditure
in Ireland and Sweden (37,455) (227,130)
Purchase of property,
plant and equipment (8,437) (3,885)
Proceeds on disposal of
property, plant and equipment - 5,300
Interest received 455 367
Net cash used in investing
activities (2,743,181) (424,348)
Cash flows from financing
activities
Proceeds from issue of
shares 6,927,255 5,884,685
Share issue costs (243,436) -
Equity subscription in
Erris Gold Resources - (400,000)
Net cash generated from
financing activities 6,683,819 5,484,685
Net increase in cash and
cash equivalents 3,445,464 3,349,250
Cash and cash equivalents
at beginning of year 4,846,527 1,497,277
Cash and cash equivalents
at end of year 8,291,991 4,846,527
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2021
1 Accounting policies
Company information
Zinnwald Lithium Plc ("the Company") is a public limited company
which is listed on the AIM Market of the London Stock Exchange
domiciled and incorporated in England and Wales. The registered
office address is 29-31 Castle Street, High Wycombe,
Buckinghamshire, United Kingdom, HP13 6RU.
The Company name was changed from Erris Resources Plc to
Zinnwald Lithium Plc by a special resolution approved by
shareholders at the General Meeting held on 26 October 2020.
The group consists of Zinnwald Lithium Plc and its subsidiaries
as detailed in Note 17.
1.1 Basis of preparation
These financial statements have been prepared in accordance with
UK-adopted International Accounting Standards and IFRIC
interpretations and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS (except as otherwise
stated).
The financial statements are prepared in euros, which is the
functional currency of the Company and the Group's presentation
currency, since the majority of its expenditure, including funding
provided to Deutsche Lithium, is denominated in this currency.
Monetary amounts in these financial statements are rounded to the
nearest EUR.
The EUR to GBP exchange rate used for translation as at 31
December 2021 was 1.18981.
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.
1.2 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.
Zinnwald Lithium Plc was incorporated on 21 June 2017. On 1
December 2017, Zinnwald Lithium Plc acquired the entire issued
share capital of Erris Resources (Exploration) Ltd by way of a
share for share exchange. This transaction was treated as a group
reconstruction and accounted for using the reverse merger
accounting method.
All financial statements are made up to 31 December 2021. 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.
1.3 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 Company had a cash balance of EUR8.3m at
the year end and keeps a tight control over all expenditure. Thus,
the going concern basis of accounting in preparing the Financial
Statements continues to be adopted.
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 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.
1.5 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:
Leasehold land and buildings
Plant and equipment 25% on cost
Fixtures and fittings 25% on cost
Computers 25% on cost
Motor vehicles
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 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.
1.7 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.
1.8 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
at call with banks.
1.9 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.
1.10 Equity instruments
Equity instruments issued by the group are recorded at the
proceeds received, net of direct issue costs.
1.11 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.
1.12 Retirement benefits
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due.
1.13 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.
1.14 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.
1.15 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.
1.16 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.
1.17 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.
1.18 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').
1.19 New standards, amendments and interpretations not yet adopted
There were no new standards or amendments to standards adopted
by the group and company during the year which had a material
impact on the financial statements.
At the date of approval of these financial statements, the
following standards and amendments were in issue but not yet
effective, and have not been early adopted:
-- IFRS 3 amendments - Business Combinations (effective 1 January 2022)
-- IAS 16 amendments - Property, Plant and Equipment* (effective 1 January 2022)
-- IAS 37 amendments - Provisions, Contingent Liabilities and
Contingent Assets* (effective 1 January 2022),
-- IAS 1 amendments - Presentation of Financial Statements:
Classification of Liabilities as Current or Non-Current*
-- IAS 1 amendments - Presentation of Financial Statements:
Disclosure of Accounting Policies*, and
-- IAS 8 amendments - Changes in Accounting Estimates and
Errors: Definition of Accounting Estimates*
-- Annual Improvements to IFRS Standards 2018-2020 Cycle* (effective 1 January 2022).
*subject to UK endorsement
There are no other IFRSs or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
the group or company.
2 Judgements and key sources of estimation uncertainty
In the application of the accounting policies, the directors are
required to make judgements, estimates and assumptions about the
carrying amount of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised where the revision
affects only that period, or in the period of the revision and
future periods where the revision affects both current and future
periods.
Critical judgements
The following judgements and estimates have had the most
significant effect on amounts recognised in the financial
statements.
Share-based payments
Estimating fair value for share based payment transactions
requires determination of the most appropriate valuation model,
which depends on the terms and conditions of the grant. This
estimate also requires determination of the most appropriate inputs
to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and
making assumptions about them. For the measurement of the fair
value of equity settled transactions with employees at the grant
date, the Group and Company use the Black Scholes model.
Joint venture investment
The Group applies 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
Excluding the newly acquired exploration assets of Deutsche
Lithium, other Group capitalised exploration costs had a carrying
value as at 31 December 2021 of EUR186,995 (2020: EUR1,546,111).
Ordinarily, Management tests annually whether capitalised
exploration costs have a carrying value in accordance with the
accounting policy stated in note 1.6. 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 EUR1,581,677 (2020: EUR477,595).
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 (2020: EUR114,870).
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 GBPs and to match as
promptly as possible its Euro expenditures on its commitments in
Germany.
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.
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.
Aside from its commitments under the Deutsche Lithium Joint
Venture, the Group has no other material fixed cost overheads other
than Director costs
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 Germany UK Total
2021 2021 2021 2021
EUR EUR EUR EUR
Cost of sales and administrative
expenses (6,270) (151,979) (1,206,383) (1,364,632)
Share based payments charge - - (7,779) (7,779)
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)
Profit/(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
Non-Core
Assets Germany UK Total
2020 2020 2020 2020
EUR EUR EUR EUR
Cost of sales and administrative
expenses (64,358) - (1,451,017) (1,515,375)
Share based payments charge - - (3,725) (3,725)
Project Impairment (592,465) - - (592,465)
Gain/loss on foreign exchange (3,503) - (67,958) (71,461)
Other operating income - - 367 367
Share of loss from joint
venture - (32,579) - (32,579)
Profit/(loss) from operations
per reportable segment (660,326) (32,579) (1,522,333) (2,215,238)
Reportable segment assets 1,565,029 - 8,854,280 10,419,309
Reportable segment liabilities - - 58,833 58,833
Non-Core Assets includes Ireland, Scandinavia, Finland and
Scotland. Ireland is the only one with material balances within
this category and makes up a majority of the balances.
5 Operating loss
Group
2021 2020
EUR EUR
Operating loss for the year
is stated after charging/(crediting):
Exchange (gains)/losses (242,098) 71,461
Depreciation of owned property,
plant and equipment 7,077 244
Profit on disposal of property,
plant and equipment - (5,300)
Amortisation of intangible
assets 829 -
Ireland and Sweden exploration
projects impairment 1,583,566 592,465
RTO costs - 839,940
Share-based payments 7,779 3,725
Operating lease charges 39,098 40,942
Exploration costs expensed 143,735 64,358
6 Auditor's remuneration
2021 2020
Fees payable to the company's
auditor and associates: EUR EUR
For audit services
Audit of group, parent company
and subsidiary undertakings 41,952 31,164
For other services
Taxation compliance services 3,500 3,799
Reporting accountant work for
the Admission Document - 61,205
3,500 65,004
7 Other gains and losses
2021 2020
EUR EUR
Gain on re-measurement of initial
50% interest in Deutsche Lithium 1,038,252 -
8 Employees
The average monthly number
of persons (including directors)
employed by the group and company
during the year was:
Group
2021 2020
Number Number
Directors 5 5
Employees 6 3
11 8
Their aggregate remuneration
comprised:
Group
2021 2020
EUR EUR
Wages and salaries 870,447 416,827
Social security costs 111,925 40,941
Pension costs 38,005 12,399
1,114,135 470,167
Aggregate remuneration expenses of the group include EUR225,499
(2020: EUR150,583) of costs capitalised and included within non-current
assets of the group.
Aggregate remuneration expenses of the company include EURnil
(2020: EUR3,397) of costs capitalised and included within non-current
assets of the group.
Directors' remuneration is disclosed
in note 33.
9 Finance income
Group
2021 2020
EUR EUR
Interest income
Interest on bank deposits 455 367
10 Share of results in Joint Venture
Group
2021 2020
EUR EUR
Share of Loss in Joint Venture (52,911) (32,579)
(52,911) (32,579)
11 Impairments
Impairment tests have been carried out where appropriate
and the following impairment losses have been recognised
in profit or loss:
2021 2020
Notes EUR EUR
In respect of:
Intangible assets 14 1,583,566 592,465
Recognised in:
Administrative expenses 1,583,566 592,465
The impairment losses in respect of financial
assets are recognised in other gains and losses
in the income statement.
12 Taxation
The actual charge for the year can be reconciled to
the expected credit for the year based on the profit
or loss and the standard rate of tax as follows:
Group
2021 2020
EUR EUR
Loss before taxation (1,727,304) (2,215,238)
Expected tax credit based
on the standard rate
of corporation tax in
the UK of 19.00% (2020:
19.00%) (328,188) (420,895)
Disallowable expenses 11,531 166,486
Non-taxable gains (197,268)
Unutilised tax losses
carried forward 513,925 254,409
Taxation charge for the
year - -
Losses available to carry forward amount to EUR3,730,000
(2020: EUR2,316,000). 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 2021 2020
Number Number
Weighted average number
of ordinary shares for
basic earnings per share 232,669,857 63,203,583
Effect of dilutive potential
ordinary shares:
Weighted average number
of outstanding share
options 2,265,890 3,183,333
Weighted average number
of ordinary shares for
diluted earnings per
share 234,935,747 66,386,916
Earnings EUR EUR
Continuing operations
Loss for the period from
continuing operations (1,727,304) (2,215,238)
Earnings for basic and
diluted earnings per
share attributable to
equity shareholders of
the company (1,727,304) (2,215,238)
Earnings per share for
continuing operations
Basic and diluted earnings
per share - -
Basic earnings per share (1) (4)
Diluted earnings per
share (1) (4)
There is no difference between the basic and diluted earnings
per share for the period ended 31 December 2021 or 2020 as the
effect of the exercise of options would be anti-dilutive.
14 Intangible fixed assets
Germany Ireland Sweden
Exploration Exploration Exploration
and Evaluation and Evaluation and Evaluation
Goodwill costs costs costs Total
EUR EUR EUR EUR EUR
Cost
At 1 January 2020 1,895,332 107,002 2,002,334
Additions - group
funded 128,374 7,868 136,242
At 31 December 2020 - - 2,023,706 114,870 2,138,576
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 (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 1,889 985,611
At 31 December 2021 - 16,165,914 2,059,272 116,759 18,341,945
Amortisation and impairment
At 1 January 2021 - - 477,595 114,870 592,465
Amortisation charged
for the year - 829 - - 829
Project impairment - - 1,581,677 1,889 1,583,566
At 31 December 2021 - 829 2,059,272 116,759 2,176,860
Carrying amount
At 31 December 2021 - 16,165,085 - - 16,165,085
At 31 December 2020 - - 1,546,111 - 1,546,111
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 and Sweden Gold Projects.
Property, plant and
15 equipment
Leasehold Fixtures, Motor Total
land and fittings vehicles
buildings and equipment
EUR EUR EUR EUR
Cost
At 1 January 2021 - 14,769 - 14,769
Additions - on acquisition
of subsidiary 9,817 1,175 32,427 43,419
Additions - group - 8,437 - 8,437
Exchange adjustments - 261 - 261
At 31 December 2021 9,817 24,381 32,427 66,886
Depreciation and impairment
At 1 January 2021 - 11,107 - 11,107
Depreciation - 1,956 5,122 7,078
Exchange adjustments - 80 - 80
At 31 December 2021 - 13,063 5,122 18,265
Carrying amount
At 31 December 2021 9,817 11,499 27,305 48,621
At 31 December 2020 - 3,662 - 3,662
16 Fixed asset investments
Group
Notes 2021 2020
EUR EUR
Investments in subsidiaries 17 - -
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.
Movements in non-current investments
Shares in
group undertakings
and participating
interests
EUR
Cost
At 1 January 2021 3,852,083
Additions 735,800
Share of loss (52,911)
Reclassified on consolidation
of Deutsche Lithium (4,534,972)
At 31 December 2021 -
Carrying amount
At 31 December 2021 -
At 31 December 2020 3,852,083
Movements in non-current investments
16.1 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:
EUR
Value of 50% share in Deutsche Lithium acquired
from Bacanora on 29 October 2020 3,685,662
Funds provided under the terms of the Joint Venture
Agreement 165,000
Additional committed funds for further testwork 34,000
Share of Deutsche Lithium Loss for the period November
to December 2020 (32,579)
Carrying Value as at 31 December 2020 3,852,083
Funds provided under the terms of the Joint Venture
Agreement 330,000
Additional committed funds for further testwork 389,800
Additional review work 16,000
Share of Deutsche Lithium Loss for the period January
to June 2021 (52,911)
Carrying Value as at 24 June 2021 4,534,972
16.2 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 (486,213) investment EUR 5,573,224
Less: Free Carry eliminated (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
16.3 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.
16.4 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.
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 EUR
Cash of EUR1.5m 1,500,000
49,999,996 new shares 7,281,062
Total 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 - allocated to Deutsche Lithium
intangible exploration assets 5,531,474
17 Subsidiaries
Details of the company's subsidiaries as at 31 December 2021 are
as follows:
% Held
Name of undertaking Registered Nature of Class of shares Direct Indirect
office business held
Deutsche Lithium United Kingdom Exploration Ordinary 100 -
Holdings Ltd
Erris Zinc Limited Ireland Exploration Ordinary 100 -
Deutsche Lithium
GmbH Germany Exploration Ordinary - 100
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 St
Niclas Schacht 13, 09599, Freiberg, Germany.
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
2021 2020
EUR EUR
Financial assets at amortised
cost
Trade and other receivables 121,845 170,926
Cash and bank balances 8,291,991 4,846,527
8,413,836 5,017,453
Financial liabilities at amortised
cost
Trade and other payables 614,859 58,833
614,859 58,833
20 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. On completion of the acquisition of
the remaining 50% of Deutsche Lithium in June 2021, the JV
Agreement was cancelled and the charge over the company's bank
account removed. There are no other securities remaining over any
Group assets.
21 Trade and other receivables
Group
2021 2020
Amounts falling due within one
year: EUR EUR
Amounts owed by group undertakings - -
Other receivables 83,982 133,459
Prepayments and accrued income 37,863 37,467
121,845 170,926
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
2021 2020
Euros 63,591 19,672
British Pounds 58,254 151,254
121,845 170,926
22 Trade and other payables
Group
2021 2020
EUR EUR
Trade payables 313,391 14,108
Other taxation and social security 23,802 -
Other payables 13,509 -
Accruals and deferred income 287,958 44,725
638,660 58,833
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
2021 2020
Euros 330,443 914
British Pounds 308,217 57,919
638,660 58,833
23 Deferred taxation
The following are the major deferred tax liabilities and assets
recognised by the group and company, and movements thereon:
Liabilities Liabilities
2021 2020
Group EUR EUR
Deutsche Lithium intangible assets
- fair value adjustment 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.
24 Retirement benefit schemes
2021 2020
Defined contribution schemes EUR EUR
Charge to profit or loss in respect
of defined contribution schemes 38,005 12,099
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.
25 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.
25.1 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 Year ended 31 December
2021 2020
Average Exercise Options Number Average Options
Price in Exercise Number
GBP per Share Price in
GBP per
Share
At beginning of the
period GBP0.091 3,350,000 0.094 3,550,000
Granted - - - -
Lapsed GBP0.100 (300,000) 0.085 (400,000)
Exercised GBP0.088 (1,150,000)
At end of period GBP0.092 1,900,000 0.094 3,150,000
Exercisable at the
period end 1,900,000 3,150,000
Weighted average remaining
exercise period, years 1.27 2.96
Exercise
Option Classification Issue Date No of Options Price Expiry Date
01-Mar-14 300,000 GBP0.080 20/12/2022
01-Feb-17 300,000 GBP0.100 20/12/2022
21-Dec-17 1,100,000 GBP0.100 20/12/2022
29-Oct-20 200,000 GBP0.050 28/10/2025
1,900,000 GBP0.092
25.2 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.
The next awards of RSUs will be made in January 2023 relating to
the second performance period from 1 January 2022 to 31 December
2022.
25.3 - 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.
26 Share-based payment transactions
Group Company
2021 2020 2021 2020
EUR EUR EUR EUR
Expenses recognised in the year
Options issued under the Share Option
Plan (2017) 7,779 3,725 7,779 3,725
Awards made under the new RSU and PSU scheme will be expensed
over the relevant vesting periods for each scheme. The first RSU
awards were made in January 2022 and will expensed over 2022 and
2023. The first PSU awards will be made in January 2024 and will
expensed over 2024 and 2025.
27 Share capital
Group and company
2021 2020
Ordinary share capital EUR EUR
Issued and fully paid
293,395,464 ordinary shares of 1p each 3,316,249 2,278,155
3,316,249 2,278,155
The Group's share capital is issued in GBP GBP but is
converted into the functional currency of the Group (Euros)
at the date of issue of the shares.
Reconciliation of movements during the
year:
Ordinary Ordinary
Number EUR
Ordinary shares of 1p each
At 1 January 2021 204,455,957 2,278,155
Issue of fully paid shares (cash subscription) 38,939,511 455,609
Issue of fully paid shares (consideration
for shares in DL) 49,999,996 582,485
At 31 December 2021 293,395,464 3,316,249
28 Share premium account
Group
2021 2020
EUR EUR
At beginning of year 7,362,699 4,151,045
Issue of new shares 13,114,010 7,643,325
Exercise of share options 103,806
Share issue expenses (291,028) -
Cancellation of share
premium - (4,431,671)
At end of period 20,289,487 7,362,699
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.
29 Other reserves
Merger Share based Translation
reserve payment reserve reserve Total
Group EUR EUR EUR EUR
At 1 January 2020 688,732 122,345 - 811,077
Additions - 3,725 19 3,744
At 31 December
2020 688,732 126,070 19 814,821
Additions - 7,779 181 7,960
At 31 December
2021 688,732 133,849 200 822,781
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.
30 Financial commitments, guarantees and contingent liabilities
Bacanora Royalty Agreement
The Company and Bacanora entered into on completion of the
Acquisition a royalty agreement which provides, that the Company
agrees to pay Bacanora a royalty of 2 per cent. of the net profit
received by the Company pursuant to its 50 per cent. shareholding
in Deutsche Lithium and earned in relation to the sale of lithium
products or minerals by Deutsche Lithium's projects on the Zinnwald
and Falkenhain licence areas. The royalty fee shall be paid in
Euros and paid by Deutsche Lithium half yearly. The agreement is
for an initial term of 40 years and shall automatically extend for
additional 20-year terms until mining and processing operations
cease at Deutsche Lithium's projects at the Zinnwald and Falkenhain
licence areas. The Company has undertaken to Bacanora to abide by
certain obligations in relation to Deutsche Lithium's projects at
the Zinnwald and Falkenhain licence areas such as complying with
applicable laws and ensure that these projects are operated in
accordance with the underlying licences and concessions granted to
Deutsche Lithium. The Company shall have the right, but not the
obligation, to extinguish at any time its right to pay a royalty
fee to Bacanora prior to the expiry of the term by paying a one-off
payment of EUR2,000,000. Whilst the Directors acknowledge this
contingent liability, at this stage, it is not considered that the
outcome can be considered probable or reasonably estimable and
hence no provision has been made in the financial statements.
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.
ERL entered into Osisko Royalty Agreement 2 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 Swedish properties (originally including
Käringberget, Klippen, Nottjärn and Vaikijaur but, as at the date
of this document, only Brännberg) licensed by ERL. The royalty also
extends to any other mining rights ERL acquires or holds (or from
time to time comes to acquire or hold) in Sweden and so applies to
all exploration permits currently held in Sweden by ERL. 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$250,000 to Erris Resources UK. The royalty is
perpetual and as such the agreement (and obligation on ERL 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. The Directors also note that the Company
surrendered all licenses in Sweden in 2021 and have no plans to
acquire any further licenses in Sweden.
Neither of the Osisko royalties apply to the Zinnwald Lithium
project.
Grundtrask Acquisition Agreement
On 13 October 2016, the Company entered into an asset purchase
agreement with Beowulf Mining Sweden AB ("Beowulf") pursuant to
which the Company purchased exploration rights for the areas known
as Grundsträsk nr 6 and Grundträsk nr 7 (together with all
information relating thereto) from Beowulf. The consideration of
US$200,000 will become payable subject to the Company announcing
JORC indicated resource of 100,000 troy ounces of gold, together
with a further amount of $2 per troy ounce on the announcement of
indicated resource subject to a JORC indicated resource of at least
1 million troy ounces. Pursuant to this agreement, the Company is
obliged to grant to Beowulf a royalty under which it is paid 1 per
cent. of the net smelting revenue generated by the Company on any
gold produced from the property. This royalty shall continue
indefinitely unless the Company "buys out" the royalty by payment
of US$2,000,000 to Beowulf. 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
Company surrendered all license areas in Sweden during 2021,
including Grundstra sk nr 6 and Grundtra sk nr 7, and accordingly
the Company considers its obligations under this Royalty to have
expired.
31 Retained earnings
Group
2021 2020
EUR EUR
At the beginning of
the year (95,199) (1,820,744)
Conversion of share
premium - 4,431,671
Loss for the year (1,727,304) (2,215,238)
Dividends in specie - (490,888)
At the end of the
year (1,822,503) (95,199)
32 Events after the reporting date
The assessment of the COVID-19 situation continues to evolve, as
the changes to the COVID-19 virus and lock-down impacts continue.
The success of the long-term vaccination programme has improved
matters in the UK and Europe. This will continue to have some
implications for the operations of the Group in the future, for
example through restricting travel movements internationally and
domestically and therefore delaying development activities. Due to
the nature of present activities, the impact has been minimal to
date. Management will continue to assess the impact of COVID-19 on
the Group and Company, however, it is not possible to quantify the
impact, if any, at this stage.
On 17 January 2022, the Company announced the grant of 1,909,530
Restricted Stock Units (RSUs) and 4,000,000 Options. The RSUs were
issued to Executive Management under the RSU Scheme approved by
shareholders in October 2020 and related to the first performance
period from 1st October 2020 to 31st December 2021. The Options
were primarily issued to Employees and Consultants under the terms
of the Option Scheme approved by shareholders in 2017.
33 Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
Share Option Share Option
Remuneration Pension Charge Remuneration Pension Charge
EUR EUR EUR EUR EUR EUR
Jeremy Martin 58,289 - 3,889 36,664 - 1,863
Anton du
Plessis 375,454 26,128 - 118,453 6,588 -
Cherif Rifaat 116,578 11,877 - 78,969 5,511 -
Graham Brown 34,974 - 3,890 28,767 - 1,862
Jeremy Taylor-Firth - - - 20,306 - -
Peter Secker - - - - - -
585,295 38,005 7,779 283,159 12,099 3,725
Transactions with related parties
During the year the group entered into the following
transactions with related parties:
Consultancy and expenses
2021 2020
EUR EUR
Group
Erris Gold Resources 14,289 -
Key management personnel - 50,648
Company
Key management personnel - 15,585
Aggregate consultancy and expenses include EURnil (2020:
EUR26,123) of costs capitalised and included within non-current
assets. There were no amounts outstanding at the year end.
Henry Maxey, a substantial shareholder in the Company, entered
into an agreement with the Company (the "Commitment Agreement") to
subscribe for New Ordinary Shares in the December 2021 Placing for
up to a value of GBP4.0 million. The Board considered that the
Commitment Agreement was an important factor in the Placing
proceeding and, as part thereof, therefore issued 258,064 New
Ordinary Shares to Mr Maxey, equivalent to approximately GBP40,000
at the Placing Price.
34 Cash (used in)/generated from group operations
2021 2020
EUR EUR
Loss for the year after tax (1,727,304) (2,215,238)
Adjustments for:
Investment income (455) (367)
Gain on disposal of property, plant
and equipment - (5,300)
Impairment of intangible assets in
Ireland and Sweden 1,583,566 592,465
Depreciation and impairment of property,
plant and equipment 7,906 243
Gain on remeasurement of initial interest
in Joint Venture (1,038,252)
Share of loss of Joint Venture 52,911 32,579
Equity-settled share-based payment
expense 7,779 3,725
Movements in working capital:
Decrease/(increase) in trade and other
receivables 79,969 (135,629)
Increase in trade and other payables 538,706 16,435
Cash used in operations (495,174) (1,711,087)
*ENDS*
For further information visit www.zinnwaldlithium.com or
contact:
Anton du Plessis Zinnwald Lithium plc info@zinnwaldlithium.com
Allenby Capital Limited
David Hart/Liz Kirchner Nominated Adviser +44 (0) 20 3328 5656
Michael Seabrook Oberon Capital Ltd
Robert Hayward Broker +44 (0) 20 3179 5300
Isabel de Salis/Catherine St Brides Partners Ltd info@stbridespartners.co.uk
Leftley Financial PR
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(END) Dow Jones Newswires
February 22, 2022 02:00 ET (07:00 GMT)
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