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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