TIDMZNWD

RNS Number : 4188Q

Zinnwald Lithium PLC

26 February 2021

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

26 February 2021

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 2020.

The Company's Annual Report and Financial Statements for the year ended 31 December 2020 will be posted to shareholders today and will be available on its website www.zinnwaldlithium.com.

OVERVIEW

Advancing new strategy focused on becoming an important supplier to Europe's fast-growing lithium sector

-- Completed acquisition of a 50% interest in Deutsche Lithium, which is developing the high value Zinnwald Lithium Project in Germany, from Bacanora Lithium Plc via an RTO in October 2020

   --    Welcomed Bacanora Lithium Plc as a new major shareholder with a 44% stake 

-- Restructured board to reflect the ongoing requirements of the Project including appointment of Bacanora CEO, Peter Secker, who has a deep understanding of the Project, as a Non-Executive Director

-- Spun out the Loch Tay Gold Project to existing shareholders and changed name from Erris Resources Plc to Zinnwald Lithium Plc

-- Placed Irish and Swedish assets under care and maintenance while seeking either a partner or purchaser for the assets

Late-stage Zinnwald Lithium Project represents a compelling opportunity for investors to gain exposure to the European lithium market

-- Attractive economics: c. EUR428 million pre-tax NPV (discounted at 8%); 27.4% Internal Rate of Return; EUR58.5 million average life of mine annual EBITDA (September 2020 Feasibility Study)

   --    Located in the heart of Europe's chemical and automotive industries 
   --    One of Europe's more advanced battery-grade lithium projects 
   --    Key work streams planned and underway to advance the Project to production 

-- Disciplined approach to expenditure and well-funded for 2021 with a EUR4.8 million cash position at today's date

Strong market dynamics given increased investment in clean electricity, which extends to the automotive industry

   --    Lithium-ion battery most likely to lead the transition 
   --    Europe has set a target of becoming carbon neutral by 2050 
   --    European Commission prioritised the securing of critical metals in September 2020 

CHAIRMAN'S STATEMENT

Despite the unprecedented challenges posed by the ongoing Covid-19 pandemic, 2020 has been a year of significant activity for Zinnwald Lithium Plc (the 'Company'). The assessment of the COVID-19 situation will need continued attention and will evolve over time. Undoubtedly, this will have some implications for the operations of the Group in the future, for example through restricting travel movements internationally and domestically and therefore delaying exploration activities. Due to the nature of present activities, the impact has been minimal. A core part of our articulated strategy has always been the identification and acquisition of a suitable asset meeting our criteria of being sufficiently advanced and located in a suitable, low-risk jurisdiction. We fulfilled this objective through the acquisition of a 50% interest in Deutsche Lithium, which is developing the Zinnwald Lithium Project in Germany. This transaction has transformed the Company and has resulted in a revised strategy focused on becoming an important supplier to Europe's fast-growing lithium sector.

The transaction was completed at the end of October 2020 and was achieved through a Reverse Takeover ('RTO') of Bacanora Lithium Plc's interest in Deutsche Lithium. Simultaneously, the Loch Tay Gold Project was spun out to existing shareholders and the Company's name was changed from Erris Resources Plc to Zinnwald Lithium Plc, reflecting the new focus. We also welcomed Bacanora Lithium Plc as a new major shareholder with a 44% stake.

Central to the Company, as it is now constituted, is the development of the Zinnwald Lithium Project (the 'Project') in south eastern Germany. With attractive economics, this late-stage lithium project located in the heart of Europe's chemical and automotive industries is one of Europe's more advanced battery-grade lithium projects. It therefore represents a compelling opportunity for investors to gain exposure to the European lithium market, which is growing rapidly thanks to long term structural drivers.

You will no doubt already have a clear understanding of the rapid change in emphasis underway within the energy sector, as countries and governments worldwide have taken on the challenge to switch from a reliance on fossil fuels to sustainable energy systems as part of the drive to combat climate change. Underpinning this shift to a decarbonised future is the delivery of clean electricity, which extends to the automotive industry as individuals try to reduce their own carbon footprints; this has resulted in the rapid rise in number of electric vehicles ('EVs') and research in/implementation of new battery technologies.

There are numerous smart technologies being developed in the automotive space. However, the lithium-ion battery is currently the most suitable energy storage device and therefore the most likely to lead the transition given it fulfils many criteria that meet consumer demands, such as high power and high-energy density, long life, low cost and excellent safety, with minimal negative environmental impact.

Europe has embarked on the same energy transition as the rest of the world and has set a target of becoming carbon neutral by 2050. However, a shortage of elements needed to make these batteries and other renewable energy equipment could threaten this target. As a result, in September 2020, the European Commission announced that it was prioritising the securing of critical metals through exploration, investment, and improved recycling. Its report stated:

"For electric vehicle batteries and energy storage, the EU would need up to 18 times more lithium and five times more cobalt in 2030, and almost 60 times more lithium and 15 times more cobalt in 2050, compared to the current supply to the whole EU economy. If not addressed, this increase in demand may lead to supply issues."

Accordingly, having spent many months searching for the right project, we were delighted to be given the opportunity to play a role in the EV revolution through developing the Zinnwald Lithium Project. This project ticked many boxes for us:

-- Compelling market: lithium is an important component of battery chemistry and demand for batteries is anticipated to grow due to factors including a transition to EVs.

-- Flexible strategy: opportunity to produce several high-value, battery-grade lithium products including LiF, Li2CO3 and LiOH*H2O.

-- Strategic location: situated in Germany, which is host to both a major automotive industry and several major chemical producers.

-- World class attributes: a September 2020 Feasibility Study on the Project estimated a pre-tax, NPV of approximately EUR428 million (discounted at 8%); an Internal Rate of Return of 27.4%; and an average life of mine annual EBITDA of EUR58.5 million.

-- Robust mine plan: a 30-year Feasibility Study mine plan equating to the extraction of less than 50% of the currently identified resource and mining licence in place.

-- Available expertise: technical expertise in Germany at the project level consisting of world-leading scientists, engineers and geologists.

Our aim now is to advance the Project to production. Accordingly, key work streams have been planned for 2021 to position Zinnwald Lithium to make the transition from developer to producer. These include engaging with potential off-take partners; advancing discussions with potential financing partners; performing the necessary testwork to assess the commercial viability of producing a broader range of lithium compounds; undertaking front-end engineering design work; finalising the selection of the optimal chemical processing site location and completing the final steps in the permitting process for the construction and operation of the mine. We have already made steps towards achieving several of these targets.

With regard to the other assets that remain within the Zinnwald Lithium Plc group of companies (the "Group"), in Ireland, the Company maintains ve prospecting licences ('PLs') over the 100%-owned Abbeytown Project, including the historic Abbeytown mine, in County Sligo and renewed those PLs in August 2019 for a further six years to August 2025. The Abbeytown Project is an attractive asset but given the revised focus of the Group on the Zinnwald Lithium Project and also challenging market conditions in the zinc sector at the time, no work was carried out on the project during 2020. While we continue to regard Abbeytown as a sound, viable project, the focus in the near term is to seek either a partner or purchaser for the asset.

In Sweden, the Company maintains the Brännberg gold project, which consists of three core exploration permits in the Skellefte Mining District. Gold mineralisation has been confirmed by drilling which returned positive results. Mineralisation is open at depth and extends from surface with best results including 17.2m @ 1.93g/t Au and 0.26% Cu from 160.90m-178.10m in drill hole BB004. These Swedish assets are available for acquisition or joint venture.

Board and Corporate

As part of the Acquisition of Zinnwald, the Board was restructured to reflect the ongoing requirements of the Project. Jeremy Taylor-Firth stepped down as a Director and the Board would like to thank him for all his assistance over recent years, as well as his fundraising expertise during the original IPO and, after he stepped down, as part of the Zinnwald related fundraise. Peter Secker was appointed a Director as a representative for our new largest shareholder, Bacanora Lithium and brings with him invaluable experience and expertise in the lithium sector as we continue to develop the Zinnwald Project towards construction. Jeremy Martin returned to his previous role of Non-Executive Chairman as Anton du Plessis retuned to the role of Executive Director and CEO.

Financial Overview

The Company maintains a disciplined approach to expenditure and, as such, is well funded for 2021 with a EUR4.8 million cash position at today's date.

Outlook

Thanks to low capital costs, attractive economics and access to strategic markets, Zinnwald has the potential to become a key European lithium project. With Bacanora Lithium becoming a major shareholder following the RTO, the addition of its CEO, Peter Secker, who has a deep understanding of the Project, to the Board as a Non-Executive Director, and with a healthy balance sheet having raised over GBP3 million from new and existing investors, the Company is well placed to realise this potential.

In closing, I would like to thank our shareholders for their support and wish you all a very happy, sustainable and prosperous 2021.

Jeremy Martin

Non-Executive Chairman

25 February 2021

STRATEGIC REPORT

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

Company Overview - the Zinnwald Lithium Project

The Company now has a 50 per cent. interest in, and joint operational control of, Deutsche Lithium, the principal asset of which is the Zinnwald Lithium Project covering 256.5 ha and with a 30-year mining licence to 31 December 2047. The Project is located in southeast Germany, some 35 km from Dresden and adjacent to the border of the Czech Republic.

The Zinnwald Lithium Project is located in a granite hosted Sn/W/Li belt that has been mined historically for tin, tungsten, and lithium at different times over the past 300 years. With an abundant supply of fluorspar/hydrofluoric acid available in the immediate vicinity, Deutsche Lithium has chosen to focus on LiF (Lithium Fluoride) which is used in the lithium-ion battery supply chain. LiF 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 strategic location of the Project allows access to the German automotive and downstream chemical industries.

While the NI 43-101 Feasibility Study for the Project is based solely on the production of LiF, Deutsche Lithium has established the possibility of also producing battery-grade lithium carbonate directly from the lithium mica concentrate with only minimal modifications to the chemical plant circuits. Deutsche Lithium is also undertaking testwork to determine if the same applies to possible lithium hydroxide production.

In May 2019, Deutsche Lithium first announced the results of the NI 43-101 Feasibility Study for the Project, which confirmed the positive economics and favourable operating costs for the production of 5,112 tpa (7,285 tpa LCE) of battery grade lithium fluoride (LiF). With a long-life project of 30 years, the Feasibility Study estimated a pre-tax project NPV of EUR428 million (8 per cent. discount rate); an IRR of 27.4 per cent.; and favourable LOM operating costs resulting in a 46 per cent. EBITDA operating profit margin. The NPV is not a valuation for the purposes of Rule 29 of the Takeover Code and should not be relied upon as such.

The 30-year Feasibility Study mine plan equates to the extraction of less than 50 per cent. of the currently identified resource.

-- 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)

In addition to the mining licence in relation to the Project, Deutsche Lithium holds 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). These exploration licences for lithium deposits may have the potential to significantly increase Zinnwald's resource base and Project life.

The mining operation for the Project is 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 mine technology will be a commonly used load-haul-dump room and pillar technology with subsequent backfill using self- hardening material. The processing operation will be based on a conventional processing flow sheet using established sulphate route processing technology. The proposed integrated plant is designed to process approximately 570,000 tonnes of ore per year (assuming a 30-year mine plan, which equates to approximately 50 per cent. of the total resource identified to date). However, in order to make the Project more viable and to reduce the payback time for the investment, the average mined tonnage of the first five years of production is 522,000 tonnes at a grade of 3,400 ppm Li. The Project has a capital cost estimate of approximately EUR160 million which includes mining, processing plant, infrastructure, tailings management and general administration costs and government grants as well as the requisite contingencies.

At the present time a risk assessment has been undertaken to identify risks that would inhibit the development of the mine. Any technical risks due to historic mine workings and water drainage pathways should be avoided by detailed technical planning. Further, public acceptance of the planned mine seems to be sufficient and risks are being evaluated.

It is anticipated that in addition to returns generated by the sale of LiF, the Project also has the potential to produce up to 32,000 tpa of potassium sulphate ('SOP', 'K2SO4') for sale to the European fertiliser industry. Further, it is expected that a significant portion of the mined tailings may be sold for use as an aggregate filler to local building companies.

The other 50% owner of Deutsche Lithium is SolarWorld AG, a company which has been in administration since 1 August 2017. The Company has a deed of adherence to the Deutsche Lithium JV Agreement with SolarWorld AG which forms the basis on which the parties work together in relation to the Project. The experience of Bacanora Lithium Plc in its dealings with the administrator of SolarWorld AG is that operational matters in relation to Deutsche Lithium and the Zinnwald Lithium Project have been unaffected by the status of SolarWorld AG being in administration.

The Deutsche Lithium JV Agreement sets out the rights and obligations of Deutsche Lithium's shareholders. It restricts shareholders in relation to (i) establishing a competing business whilst they remain a shareholder of Deutsche Lithium and 12 months thereafter; (ii) transferring their shares; and/or (iii) granting encumbrances over their shares. The shareholders also agree to abide by deadlock provisions in the instances of any disputes as to how Deutsche Lithium is operated and managed. Each shareholder has the right to appoint an appointee to the management board and advisory board of Deutsche Lithium.

Under the terms of the second supplement agreement to the Deutsche Lithium JV Agreement, the Company is obliged to provide further additional funding to Deutsche Lithium to February 2022. At the end of 2020, the amount outstanding under that commitment was EUR770,000. In addition, the Company has undertaken to provide further funding of EUR650,000 to Deutsche Lithium in conjunction with the preparation of a lithium hydroxide (LiOH) NI 43-101 compliant technical report and additional detailed capital expenditure design work.

Each shareholder in the Deutsche Lithium joint venture has pre-emption rights and rights of first refusal in relation to any proposed transfer or disposal of the other shareholder's share in Deutsche Lithium. As a result, SolarWorld AG cannot transfer its share in Deutsche Lithium without first offering these to the Company (and vice versa). In the event that the Company subsequently acquires the remaining shares in Deutsche Lithium from SolarWorld AG, then the Deutsche Lithium JV Agreement will terminate.

Company Strategy

The Zinnwald Lithium Project now forms the core of the Company and is the primary focus of the Board and its strategy. The Company, working with the management team at Deutsche Lithium, will seek to advance the Zinnwald Lithium Project in a number of areas, including:

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

-- Identification of and negotiation with potential financing partners that could include banks, national and trans-national development organisations;

-- Expansion of the scope of the NI 43-101 Feasibility Study to assess the commercial viability of producing a broader range of lithium compounds, specifically lithium carbonate and lithium hydroxide;

   --    Front end engineering design work; 
   --    Finalisation of the selection of the optimal chemical processing site location; and 

-- Completion of the final steps in the permitting process for the construction and operation of the mine.

Part of this strategy with regard to the Zinnwald Lithium Project will be to gain operational control of Deutsche Lithium. The Company's board and management team is engaging with the administrator of SolarWorld AG to advance these discussions.

The Board has put the Abbeytown Project on care and maintenance due to the current challenging zinc and lead market conditions. Planned spending on the Abbeytown Project by the Group in 2021 is expected to total EUR30,000, all of which will be focussed on maintaining the core licence PL 3735. The Group will also be looking for partners to advance or acquire this project. The Company will also only spend the minimum required to maintain its licences at the Brännberg Gold Project, whilst it looks for funding partners or an acquiror.

Operational review & outlook

Germany

During 2020, Deutsche Lithium has continued to progress the project on both a corporate and operational level.

On a corporate level, in February 2020, Bacanora Lithium Plc and the administrator for SolarWorld AG (the "Administrator") agreed to a second amendment to the Deutsche Lithium JV Agreement that removed the right of the Administrator to buy back Bacanora Lithium Plc's stake for EUR1 in return for Bacanora Lithium Plc committing to fund Deutsche Lithium for a further two years in the amount of EUR1.35 million on a non-dilutionary basis. Deutsche Lithium continues to have discussions with potential funding partners in relation to future construction funding needs.

On an operational level, Deutsche Lithium has been working on advancing the permitting status of the Zinnwald Lithium Project. Deutsche Lithium obtained its mining licence for Zinnwald in 2017, which is valid until 2047, but comes with the standard requirements to apply for further permits for environmental and construction aspects of the Project. Deutsche Lithium is currently undertaking detailed environmental and community studies to continue to develop the overall Zinnwald sustainability framework. Environmental monitoring programmes are ongoing as well as the permitting process for Zinnwald's mining and mineral processing plant. Deutsche Lithium has also continued to evaluate the potential of the exploration licences held over the adjacent areas in Falkenhain and Altenberg.

In relation to the technical aspects already identified in the Feasibility Study, Deutsche Lithium has continued to refine and develop its operational plan. Deutsche Lithium is currently undertaking testwork to evaluate the addition of lithium hydroxide to its suite of potential end-products, which will require further optimisation of the processing plant flow sheet design. Deutsche Lithium has been working with engineering groups to finalise the capital costs for the processing plant. It is optimising the scope for the supply contracts for critical long-term contracts of both a capital and operating cost nature. Deutsche Lithium has undertaken further testwork for the usage of both the mining tailings and also the potential chemical co-products. Deutsche Lithium is also developing the required logistics framework to develop the Project as a whole.

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 31 DECEMBER 2020

 
                                                                       31 December   31 December 
                                                                              2020          2019 
Continuing operations                                        Notes             EUR           EUR 
 
Revenue                                                        4                 -        17,527 
Cost of sales                                                             (56,540)       (104,102) 
 
 
 
Gross loss                                                                (56,540)        (86,575) 
 
Exploration projects impairment                                          (592,465)             - 
Administrative expenses                                                  (690,357)       (475,592) 
RTO costs                                                                (839,940)             - 
Share based payments charge                                    26          (3,725)             - 
 
 
 
Operating loss                                                 6       (2,183,027)       (562,167) 
 
Share of results of joint ventures                             10         (32,579)             - 
Finance income                                                 9               367             - 
 
 
 
Loss before taxation                                                   (2,215,239)       (562,167) 
 
Tax on loss                                                    12                -        30,648 
 
 
 
Loss for the financial year                                    32      (2,215,238)       (531,519) 
 
Other comprehensive income                                                       -             - 
 
 
 
Total comprehensive loss for the 
 year                                                                  (2,215,239)       (531,519) 
 
 
 
Earnings per share from continuing 
 operations attributable to 
 the owners of the parent company                              13 
Basic (cents per share)                                                     (3.51)          (1.81) 
Diluted (cents per share)                                                   (3.51)          (1.81) 
 
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 2020

 
                                                  31 December   31 December 
                                                         2020          2019 
                                Notes                     EUR           EUR 
 
Non-current assets 
Intangible assets                14                 1,546,111     2,002,334 
Property, plant and equipment    15                     3,662             - 
Investments using equity 
 method                          16                 3,852,083             - 
 
 
 
                                                    5,401,856     2,002,334 
 
 
 
Current assets 
Trade and other receivables      21                   170,926        36,030 
Cash and cash equivalents                           4,846,527     1,497,277 
 
 
 
                                                    5,017,453     1,533,307 
 
 
 
Total assets                                       10,419,309     3,535,641 
 
 
 
Current liabilities 
 
Trade and other payables         22                    58,833        43,130 
 
 
 
                                                       58,833        43,130 
 
 
 
Net current assets                                  4,958,620     1,490,177 
 
 
 
Total liabilities                                      58,833        43,130 
 
 
 
Net assets                                         10,360,476     3,492,511 
 
 
 
Equity 
Share capital                    27                 2,278,155       351,133 
Share premium                    29                 7,362,699     4,151,045 
Other reserves                   30                   814,821       811,077 
Retained earnings                32     (95,200)                  (1,820,744) 
 
 
 
Total equity                                       10,360,476     3,492,511 
 
 
 
 
 

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 31 DECEMBER 2020

 
                            Share capital   Share premium   Other reserves      Retained         Total 
                                                  account                       earnings 
                     Notes            EUR             EUR              EUR           EUR           EUR 
 
Balance at 1 
 January 
 2019                             351,133       4,151,045          827,376   (1,305,524)     4,024,030 
 
 
 
Year ended 31 December 
2019: 
Loss and total 
 comprehensive 
 income for the 
 year                                   -               -                -     (531,519)       (531,519) 
 
 
 
Total comprehensive income 
 for the year                           -               -                -     (531,519)       (531,519) 
 
 
 
Transfer of lapsed 
 share 
 options                                -               -         (16,299)        16,299             - 
 
 
 
Total transactions 
 with 
 owners recognised 
 directly 
 in equity                              -               -           16,299        16,299             - 
 
 
 
Balance at 31 December 
 2019 
 and 1 January 2019               351,133       4,151,045          811,077   (1,820,744)     3,492,511 
 
 
 
Year ended 31 December 
2020: 
Loss for the year                       -               -                -   (2,215,239)     (2,215,239) 
Other comprehensive 
income: 
Currency 
 translation 
 differences                            -               -               19             -            19 
 
 
 
Total comprehensive income 
 for the year                           -               -               19   (2,215,239)     (2,215,220) 
 
 
 
Conversion of share 
 premium 
 to retained profits                    -     (4,431,671)                -     4,431,671             - 
Issue of share 
 capital              27        1,927,022       7,643,326                -             -     9,570,348 
Dividends 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       3,211,655            3,725     3,940,783     9,083,185 
 
 
 
Balance at 31 December 
 2020                           2,278,155       7,362,700          814,821      (95,200)    10,360,476 
 
 
 
 

GROUP STATEMENT OF CASH FLOWS

FOR THE YEARED 31 DECEMBER 2020

 
                                                      Year ended               Year ended 
                                                     31 December              31 December 
                                                            2020                     2019 
                                  Notes        EUR           EUR        EUR           EUR 
 
Cash flows from operating activities 
 
Cash used in operations            35                (1,711,087)                  (607,875) 
 
 
 
Net cash outflow from operating 
 activities                                          (1,711,087)                  (607,875) 
 
Cash flows from investing 
 activities 
Investment in Joint Ventures             (199,000)                        - 
Exploration expenditure                  (227,130)                (257,214) 
Purchase of property, plant and 
 equipment                                 (3,885)                        - 
Proceeds on disposal of 
 property, plant and equipment               5,300                        - 
Exploration expenditure utilising 
 funds from Strategic Alliance 
 Agreement                                       -                (222,154) 
Interest received                              367                        - 
 
 
 
Net cash used in investing 
 activities                                            (424,348)                  (479,368) 
 
Cash flows from financing activities 
Proceeds from issue of shares            5,884,685                        - 
Funds received from Strategic 
 Alliance Agreements                             -                  217,627 
Equity subscription in Erris 
 Gold Resources                          (400,000)                        - 
 
 
 
Net cash generated from 
 financing activities                                  5,484,685                  217,627 
 
 
 
Net increase/(decrease) in cash 
 and cash equivalents                                  3,349,250                  (869,616) 
 
Cash and cash equivalents at 
 beginning of year                                     1,497,277                2,366,893 
 
 
 
Cash and cash equivalents at 
 end of year                                           4,846,527                1,497,277 
 
 
 
 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARED 31 DECEMBER 2020

   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 15.

   1.1          Basis of preparation 

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted for use in the European Union 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 consolidated financial statements have been prepared under the historical cost convention. 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).

The Board has concluded that whilst it has significant influence over Deutsche Lithium (50% shareholding, 1 of the 2 co-managing directors and a casting vote on operational matters), it does not have control over the company and consequently the investment is accounted for using equity accounting rather than consolidated.

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 2020. 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 EUR4.85m at the year end and keeps a tight control over all expenditure. In relation to Deutsche Lithium, the total outstanding commitments entered into by the Company amounts to EUR1.386m at the end of 2020. 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          Revenue 

Revenue is recognised at the fair value of the consideration received or receivable for services provided over time in the normal course of business and is shown net of VAT and other sales related taxes.

Recognised in revenue are charges that were invoiced to the group's former joint venture partner, Centerra Gold. These were based upon costs together with management fees incurred in connection with exploration programmes carried out under joint venture arrangements and in which the group acts as principal. Revenue from providing services is recognised in the accounting period in which the services are rendered.

   1.5          Intangible fixed assets other than goodwill 

Capitalised Exploration and Evaluation costs

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

   1.6          Property, plant and equipment 

Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

   Plant and equipment           25% on cost 
   Fixtures and fittings             25% on cost 
   Computers                            25% on cost 

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

   1.7          Non-current investments 

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

   1.8          Impairment of non-current assets 

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

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

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

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

   1.9          Cash and cash equivalents 

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

   1.10        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.

   1.11        Equity instruments 

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

   1.12        Taxation 

Income tax represents the sum of current and deferred tax.

Current tax

The tax currently payable is based on taxable profit or loss for the period. Taxable profit or loss differs from net profit or loss as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group's and company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

   1.13        Employee benefits 

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

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

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

   1.14        Retirement benefits 

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

   1.15        Equity 

Share capital

Ordinary shares are classified as equity.

Share premium

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

Merger reserve

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

Share-based payment reserve

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

   1.16        Share-based payments 

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

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

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

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

   1.17        Foreign exchange 

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

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

   1.18        Exceptional items 

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

   1.19        Joint Arrangements 

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

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

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

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

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

   1.20        Segmental reporting 

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

   1.21        New standards, amendments and interpretations not yet adopted 

The following standards and amendments were adopted by the group and company during the year, none of none of which had a material impact:

   --      IFRS 16 - Leases 

-- Amendments to IFRS 2 - Classification and Measurement of Share-based Payment Transactions; and

   --      Annual improvements to IFRS Standards 2015-2017 Cycle 

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*, 

-- IAS 1 amendments - Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current*,

   --      IAS 1 & IAS 8 amendments - Definition of Material; and 
   --      Amendments to References to the Conceptual Framework in IFRS Standards. 

*subject to EU 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 holds 50% of the voting rights of its joint arrangement with SolarWorld AG. The Group has determined 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 is structured through a limited liability entity, Deutsche Lithium GmbH, and provides 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 has been classified as a joint venture.

The investment is 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.

Impairment of Capitalised Exploration Costs

Group capitalised exploration costs had a carrying value as at 31 December 2020 of EUR1,546,111 (2019: EUR2,002,334). Management tests annually whether capitalised exploration costs have a carrying value in accordance with the accounting policy stated in note 1.5. Each exploration project is subject to an annual review either by a consultant or senior company geologist 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, the licenses were originally granted for 6 years in 2013 and in Q3 2019, Zinnwald extended them for a further 6 years. The exploration work has identified excellent mineralisation in its drill holes and the metallurgical review has shown a good quality concentrate can be produced. The current Zinc market is at a low point and Zinnwald is no longer focussed on Ireland, but the Company still intends to find a JV Partner for at least the core license. The Board's current intention is that it will only undertake further exploration work on the core license (PL 3735) in 2021. Accordingly, the Board has concluded that an impairment charge should be made in the 2020 accounts in regard to capitalized costs from the non-core licenses, which has resulted in an impairment of EUR477,595.

In Sweden, the Brännberg project now comprises only 3 licenses (Brännberg 1 and 5 and Grundtrask 7) Brännberg 1 was renewed in October 2019 and is valid from 28/10/2019 until 28/10/2022. Brännberg 5 was renewed in May 2020 and is valid from 30/05/2020 until 30/05/2021. Grundtrask 7 was renewed in August 2018 and is valid from 05/08/2018 until 05/08/2021. The exploration work funded by Centerra showed good gold mineralisation, but not to the minimum (1m Oz) size required by a company as large as Centerra. The results may be of greater interest to a mid-tier Gold producer that has a lower resource size requirement. The Board's current intention is to try and find a JV partner for the Brännberg Project in Q1 2021 but, if unsuccessful, will allow all 3 licenses to lapse in 2021. Accordingly, the Board have recommended a full impairment of the carrying value of EUR114,870 in 2020.

   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              Revenue 

An analysis of the Group's revenue is as follows:

 
                                               Group 
 
                                         2020    2019 
                                          EUR     EUR 
 Revenue analysed by class of business 
 Management fees                            -  17,527 
 
 
 
                                         2020    2019 
                                          EUR     EUR 
 Other significant revenue 
 Interest income                          367       - 
 
 
 
 

All the management fees are received from Centerra Gold under the terms of the Strategic Alliance Agreement, which was terminated in December 2019. There were no unsatisfied performance obligations at 31 December 2020 (2019 : none).

   5              Segmental reporting 

The Group operates principally in the UK, Ireland, Scotland, and Scandinavia, with operations managed on a project-by-project basis within each geographical area. Activities in the UK include the Head Office corporate and administrative costs and the 50% investment in Deutsche Lithium in Germany, whilst the activities in Ireland and Scandinavia relate to exploration and evaluation work. The reports used by the Board and management are based on these geographical segments.

 
                                      Ireland   Scandinavia     Others            UK         Total 
                                         2020          2020       2020          2020          2020 
                                          EUR           EUR        EUR           EUR           EUR 
 
 Revenues                                   -             -          -             -             - 
 Cost of sales and administrative 
  expenses                           (43,667)       (1,523)   (19,168)   (1,454,743)     (1,519,101) 
 Share based payments charge                -             -          -             -             - 
 Project Impairment                 (477,595)     (114,870)          -             -       (592,465) 
 Gain/loss on foreign exchange        (3,241)         (262)          -      (67,958)        (71,461) 
 
 
 
 Profit/(loss) from operations 
  per reportable segment            (524,503)     (116,655)   (19,168)   (1,522,701)     (2,183,027) 
 
 
 
 Reportable segment assets          1,564,848           181          -     8,854,280    10,419,309 
 Reportable segment liabilities             -             -          -        58,833        58,833 
 
                                      Ireland   Scandinavia     Others            UK         Total 
                                         2019          2019       2019          2019          2019 
                                          EUR           EUR        EUR           EUR           EUR 
 
 Revenues                                   -        17,527          -             -        17,527 
 Cost of sales and administrative 
  expenses                           (63,326)             -   (19,698)     (616,940)       (699,964) 
 Share based payments charge                -             -          -             -             - 
 Project Impairment                         -             -          -             -             - 
 Gain/loss on foreign exchange         11,527         3,043          -       105,700       120,270 
 
 
 
 Profit/(loss) from operations 
  per reportable segment             (51,799)        20,570   (19,698)     (511,240)       (562,167) 
 
 
 
 Reportable segment assets          1,912,320       128,077          -     1,495,244     3,535,641 
 Reportable segment liabilities             -             -          -        73,778        73,778 
 
 
   6              Operating loss 
 
                                                                              Group 
                                                                        2020       2019 
                                                                         EUR        EUR 
 Operating loss for the year is stated after charging/(crediting): 
 
 Exchange losses/(gains)                                              71,461    (120,270) 
 Profit on disposal of property, plant and equipment                 (5,300)          - 
 Exploration projects impairment                                     592,465          - 
 RTO costs                                                           839,940          - 
 Share-based payments                                                  3,725          - 
 Operating lease charges                                              40,942     36,598 
 Exploration costs expensed                                           64,358     83,024 
 
 
 
   7              Auditor's remuneration 
 
                                                            2020    2019 
 Fees payable to the company's auditor and associates:       EUR     EUR 
 
 For audit services 
 Audit of group, parent company and subsidiary 
  undertakings                                            31,164  27,913 
 
 
 
 For other services 
 Taxation compliance services                              3,799   5,292 
 Reporting accountant work for the Admission 
  Document                                                61,205       - 
 
 
 
                                                          65,004   5,292 
 
 
 
 
   8              Employees 

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

 
                 Group       Company 
               2020    2019     2020    2019 
             Number  Number   Number  Number 
 
 Directors        5       5        5       5 
 Employees        3       3        -       - 
 
 
 
                  8       8        5       5 
 
 
 
 
 
 
 Their aggregate remuneration comprised: 
                                             Group           Company 
                                              2020     2019     2020     2019 
                                               EUR      EUR      EUR      EUR 
 
 Wages and salaries                        416,827  403,081  283,159  322,173 
 Social security costs                      40,941   45,907   27,723   37,007 
 Pension costs                              12,399    6,023   12,099    5,635 
 
 
 
                                           470,167  455,011  322,981  364,815 
 
 
 
 
 

Aggregate remuneration expenses of the group include EUR150,583 (2019: EUR41,781) of costs capitalised and included within non-current assets of the group. In 2020, EURnil (2019: EUR89,808) aggregate remuneration expenses of the group have been reimbursed by joint venture partners.

Aggregate remuneration expenses of the company include EUR3,397 (2019: EUR41,393) of costs capitalised and included within non-current assets of the group.

Directors remuneration is disclosed in note 34.

   9              Finance income 
 
                                   Group 
                             2020   2019 
                              EUR    EUR 
 Interest income 
 Interest on bank deposits    367      - 
 
 
 
 
   10           Share of results in Joint Venture 
 
                                              Group 
                                       2020    2019 
                                        EUR     EUR 
 
 Share of Loss in Joint Venture    (32,579)       - 
 
 
 
                                   (32,579)       - 
 
 
 
   11           Impairments 

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

 
 
                                    2020  2019 
                          Notes      EUR   EUR 
In respect of: 
Intangible assets          14    592,465     - 
 
 
 
Recognised in: 
Administrative expenses          592,465     - 
 
 
 
 
 

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

   12           Taxation 
 
                                                                             2020        2019 
                                                                              EUR         EUR 
 Current tax 
 Adjustments in respect of prior periods                                        -      (30,648) 
 
 
 
 The actual charge/(credit) 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 
                                                                             2020        2019 
                                                                              EUR         EUR 
 
 Loss before taxation                                                 (2,215,238)     (562,167) 
 
 
 
 Expected tax credit based on the standard rate 
  of corporation tax in the UK of 19.00% (2019: 
  19.00%)                                                               (420,895)     (106,812) 
 Unutilised tax losses carried forward                                    254,409     106,812 
 Disallowable expenses                                                    166,486             - 
 Adjustments in respect of prior years                                          -      (30,648) 
 
 
 
 Taxation charge/(credit) for the year                                          -      (30,648) 
 
 
 
 Losses available to carry forward amount to EUR2,315,896 (2019: 
  EUR1,434,000). 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 
 
                                                                         2020        2019 
                                                                       Number      Number 
Weighted average number of ordinary shares 
 for basic earnings per share                                      63,203,583  31,069,430 
 
Effect of dilutive potential ordinary shares: 
- Weighted average number of outstanding share 
 options                                                            3,183,333   3,416,667 
 
 
 
Weighted average number of ordinary shares 
 for diluted earnings per share                                    66,386,916  34,486,097 
 
 
 
Earnings                                                                  EUR         EUR 
Continuing operations 
Loss for the period from continuing operations                    (2,215,238)   (562,167) 
 
 
 
Earnings for basic and diluted earnings per 
 share attributable to equity shareholders 
 of the company                                                   (2,215,238)   (562,167) 
 
 
 
Earnings per share for continuing operations 
Basic and diluted earnings per share                                        -           - 
 
Basic earnings per share                                               (3.50)      (1.81) 
 
 
 
Diluted earnings per share                                             (3.50)      (1.81) 
 
 
 
There is no difference between the basic and diluted earnings 
 per share for the period ended 31 December 2020 or 2019 as the 
 effect of the exercise of options would be anti-dilutive. 
 
 
   14           Intangible fixed assets 
 
 
Group                                 Ireland           Sweden      Total 
                                  Exploration      Exploration 
                               and Evaluation   and Evaluation 
                                        costs            costs 
                              EUR              EUR              EUR 
Cost 
At 1 January 2019                   1,645,118          100,000  1,745,118 
Additions - group funded              250,214            7,002    257,216 
 
 
 
At 31 December 2019                 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 
 
 
 
Amortisation and impairment 
At 1 January 2020                           -                -          - 
Project impairment                    477,595          114,870    592,465 
 
 
 
At 31 December 2020                   477,595          114,870    592,465 
 
 
 
Carrying amount 
At 31 December 2020                 1,546,111                -  1,546,111 
 
 
 
At 31 December 2019                 1,895,332          107,002  2,002,334 
 
 
 
 

Intangible assets comprise capitalised exploration and evaluation costs (direct costs, licence fees and fixed salary / consultant costs) of the Ireland Zinc Projects and the Sweden Gold Projects (excluding the amounts recovered from Centerra Gold as per note 21).

More information on impairment movements in the year is given in note 11.

 
Company                                          Ireland           Sweden      Total 
                                             Exploration      Exploration 
                                          and Evaluation   and Evaluation 
                                                   costs            costs 
                                               EUR              EUR           EUR 
Cost 
A 1 January 2019                                  92,985                -     92,985 
Additions - group funded                          23,902           17,491     41,393 
 
 
 
At 31 December 2019                              116,887           17,491    134,378 
Transfers to subsidiaries                      (116,887)         (17,491)  (134,378) 
 
 
 
At 31 December 2020                                    -                -          - 
 
 
 
Amortisation and impairment 
At 1 January 2020 and 31 December 2020                 -                -          - 
 
 
 
 
   14           Intangible fixed assets 
 
 
Carrying amount 
At 31 December 2020         -       -        - 
 
 
 
At 31 December 2019   116,887  17,491  134,378 
 
 
 
 
   15           Property, plant and equipment 
 
 
 Group                               Plant and       Fixtures  Computers   Total 
                                     equipment   and fittings 
                                           EUR            EUR        EUR     EUR 
 Cost 
 At 1 January 2020                       2,605          3,307      4,951  10,863 
 Additions                                   -              -      3,906   3,906 
 
 
 
 At 31 December 2020                     2,605          3,307      8,857  14,769 
 
 
 
 Depreciation and impairment 
 At 1 January 2020                       2,605          3,307      4,951  10,863 
 Depreciation                                -              -        244     244 
 
 
 
 At 31 December 2020                     2,605          3,307      5,195  11,107 
 
 
 
 Carrying amount 
 At 31 December 2020                         -              -      3,662   3,662 
 
 
 
 Company                                                               Computers 
                                                                             EUR 
 Cost 
 At 1 January 2020                                                             - 
 Additions                                                                 3,906 
 
 
 
 At 31 December 2020                                                       3,906 
 
 
 
 Depreciation and impairment 
 At 1 January 2020                                                             - 
 Depreciation charged in the year                                            244 
 
 
 
 At 31 December 2020                                                         244 
 
 
 
 Carrying amount 
 At 31 December 2020                                                       3,662 
 
 
 
 
   16           Fixed asset investments 
 
                                                                        Group          Company 
                                                                         2020  2019       2020     2019 
                                                           Notes          EUR   EUR        EUR      EUR 
 
 Investments in subsidiaries                                17              -     -    169,090  169,090 
 Investments in joint ventures                                      3,852,083     -  3,852,083        - 
 
 
 
                                                                    3,852,083     -  4,021,173  169,090 
 
 
 
 Investments in subsidiaries are recorded at cost, which is the 
  fair value of the consideration paid. 
 
 
 
Movements in non-current investments 
Group                                                                              Shares in 
                                                                          group undertakings 
                                                                           and participating 
                                                                                   interests 
                                                                                           EUR 
Cost 
At 1 January 2020                                                                          - 
Additions                                                                          3,884,662 
Share of loss                                                                       (32,579) 
 
 
 
At 31 December 2020                                                                3,852,083 
 
 
 
Carrying amount 
At 31 December 2020                                                                3,852,083 
 
 
 
At 31 December 2019                                                                        - 
 
 
 
Movements in non-current investments 
Company                                            Shares in    Other investments      Total 
                                          group undertakings 
                                                 EUR                  EUR              EUR 
Cost 
At 1 January 2020 and 31 December 2020               169,090                    -    169,090 
Additions                                                  -            3,852,083  3,852,083 
 
 
 
At 31 December 2020                                  169,090            3,852,083  4,021,173 
 
 
 
Carrying amount 
At 31 December 2020                                  169,090            3,852,083  4,021,173 
 
 
 
At 31 December 2019                                  169,090                    -    169,090 
 
 
 
 

16.1 Investment in Deutsche Lithium

On 29 October 2020, the Company completed the acquisition of Bacanora Lithium Plc's ("Bacanora") 50% shareholding in Deutsche Lithium Gmbh ("DL"). Bacanora contributed its share in DL 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 Joint Venture Agreement and has made all payments due on a monthly basis since October 2020.

The Table below shows the split of shares received by Bacanora in return for its 50% shares in DL and the cash contributed by Bacanora as part of the RTO process:

 
 Bacanora - Split of shareholding                         % of Total   No of Shares 
 Shares received for 50% shareholding 
  in DL                                   EUR 3,685,662   73.2%            66,325,267 
 Shares received for cash contribution 
  to Zinnwald Group                       EUR 1,350,000   26.8%            24,293,902 
 Total                                    EUR 5,035,662                    90,619,170 
 

The Company holds one of the 2 Managing Director positions and a 50% shareholding in DL, but only has a casting vote on purely operational development matters. Therefore, management have concluded that the Company has significant influence over DL and not control.

Management reviewed the opening balance sheet as part of the acquisition process and are comfortable with the completeness and accuracy of the balance sheet. DL's accounting policies are in line with the Company's policies and no adjustments have been made.

The Company follows the requirements of IAS 28 in applying the equity method and increase or decrease the investment by recognising its share of the profit or loss and other comprehensive income from DL. The Company will ensure DL's accounting policies are in line with its own and where material differences occur, make appropriate adjustments. The Company management will review the investment for indicators of impairment at least at each reporting date.

The Table below shows the movements during the year and the balances at year end:

 
 Value of 50% share in DL acquired from 
  Bacanora on 29 October 2020                EUR 3,685,662 
 Funds provided under the terms of the 
  Joint Venture Agreement                      EUR 165,000 
 Additional committed funds for further 
  testwork                                      EUR 34,000 
 Share of DL Loss for the period November 
  to December 2020                            (EUR 32,579) 
                                            -------------- 
 Carrying Value as at 31 December 2020       EUR 3,852,083 
 
   16.2   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 DL with EUR1.35m in monthly instalments over 2 years. At the date of completion of the Acquisition by the Company, the amount outstanding was EUR0.935m and at 31 December 2020 it was EUR0.770m.

Zinnwald also agreed with the Administrator to pay an additional non-dilutionary amount of EUR0.65m for additional testwork over 2021. As at 31 December 2020 the amount outstanding was EUR0.616m.

    17          Subsidiaries 

Details of the company's subsidiaries as at 31 December 2020 are as follows:

 
                                                                                    % Held 
 
 Name of undertaking             Registered       Nature of business   Class        Direct  Indirect 
                                  office                                of shares 
                                                                        held 
 
 Erris Resources (Exploration) 
  Ltd                            United Kingdom   Exploration          Ordinary     100.00         - 
 Erris Zinc Limited              Ireland          Exploration          Ordinary     100.00         - 
 
 

On 1 December 2017, Zinnwald Lithium Plc acquired the entire issued share capital of Erris Resources (Exploration) Ltd ("ERL") 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, Erris Resources 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 12 December 2018, Erris Resources (Exploration) Ltd acquired the entire issued share capital of Tulivuori Exploration OY shortly after incorporation. Tulivuori Exploration OY is a company registered in Finland and was renamed Erris Finland. In January 2020, the directors of Zinnwald decided to cease exploration in Finland and started the process of winding up this company. The process was completed in November 2020.

On 10 August 2020, the Company incorporated a wholly owned subsidiary, Erris Gold Resources Ltd and transferred all capitalised expenses, contracts and permits for the Loch Tay Project and Norway projects to that company. On 29 October 2020, the shares in Erris Gold Resources Ltd were distributed to the Company's shareholders via a dividend in specie. Accordingly, Erris Gold Resources Ltd does not form part of the consolidation at the year end.

   18           Trade and other receivables - credit risk 

Fair value of trade and other receivables

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

No significant balances are impaired at the reporting end date.

   19           Financial instruments 
 
                                             Group           Company 
                                           2020       2019       2020       2019 
                                            EUR        EUR        EUR        EUR 
 Financial assets at amortised 
  cost 
 Trade and other receivables            133,459     14,340  1,904,269  1,436,239 
 Cash and bank balances               4,846,527  1,497,277  4,842,854  1,453,687 
 
 
 
                                      4,979,986  1,511,617  6,747,123  2,889,926 
 
 
 
 Financial liabilities at amortised 
  cost 
 Trade and other payables                58,833     43,130     53,022     38,404 
 
 
 
                                         58,833     43,130     53,022     38,404 
 
 
 
   20           Security held over cash 

Under the terms of the Deed of Adherence with Bacanora Lithium Plc, entered into on 29 October 2020, Bacanora holds a secured charge over a cash amount equal to the amount outstanding under the Deutsche Lithium JV Agreement. As at 31 December 2020, this secured amount was EUR770,000, which forms a part of the total cash balance of the Group of EUR4,846,527.

   21           Trade and other receivables 
 
                                           Group        Company 
                                         2020    2019       2020       2019 
 Amounts falling due within               EUR     EUR        EUR        EUR 
  one year: 
 
 Amounts owed by group undertakings         -       -  1,792,292  1,430,110 
 Other receivables                    133,459  14,340    111,977      6,129 
 Prepayments and accrued income        37,467  21,690     37,467     21,690 
 
 
 
                                      170,926  36,030  1,941,736  1,457,929 
 
 
 

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

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

 
 
                        Group        Company 
                      2020    2019       2020       2019 
 Euros              19,672   6,903          -          - 
 British Pounds    151,254  29,127  1,941,736  1,457,929 
 
 
 
                   170,926  36,030  1,941,736  1,457,929 
 
 
 
 
   22           Trade and other payables 
 
                                     Group       Company 
                                   2020    2019     2020    2019 
                                    EUR     EUR      EUR     EUR 
 
 Trade payables                  14,108   2,666   12,767   2,666 
 Accruals and deferred income    44,725  40,464   40,255  35,738 
 
 
 
                                 58,833  43,130   53,022  38,404 
 
 
 
 

All Trade payables have been settled since the year end. As with previous periods, the majority of the accruals relate to audit and accounting fees relating to the period.

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

 
                       Group       Company 
                     2020    2019     2020    2019 
 Euros                914     200      914       - 
 British Pounds    57,919  42,930   52,108  38,404 
 
 
 
                   58,833  43,130   53,022  38,404 
 
 
 
   23           Amounts owed to Strategic Alliance partner 
 
                                    Group          Company 
                                  2020    2019       2020      2019 
                                   EUR     EUR        EUR       EUR 
 
  Amounts owing to Centerra 
   Gold Inc                          -       -          -         - 
 
 
 
 

On 1 January 2016, the company entered into a strategic alliance with Centerra Gold to explore for gold in Sweden and subsequently expanded into Finland in 2019. Under the terms of this agreement, Centerra had the right to make an election ("Election") in respect of any or all of the designated project areas ("DPA" or "DPAs") in the AOI and on any rights subsequently acquired by Zinnwald during the first two years after initial grant of the permit. Over the course of the agreement, Centerra funded generative exploration on more than 30 exploration permits and drilling on three DPAs at Brännberg, Klippen and Karingberget. During this time, the total expenditure on Centerra Gold projects was approximately US$3.4M on which Erris earned consultancy fees of 10% for managing this exploration work. In the year to 31 December 2018, Centerra made the decision not to proceed further with any of the three DPAs. In the year to 31 December 2019, Centerra continued with its generative exploration in Sweden and Finland. In December 2019, Centerra decided to terminate this Strategic Alliance and both parties agreed that no amounts remain outstanding by either side. All rights and information relating to this exploration work remains the property of Erris.

During the period, Centerra has spent a total of EURnil (2019: EUR222,155), comprising reimbursed costs of EURnil (2019: EUR204,628) and paid management fees of EURnil (2019: EUR17,527).

A summary of the funding received from and costs incurred on behalf of Centerra is analysed as follows:

 
 Year ended 31 December           Funding   Exploration        Management       Net 
  2020                      from Centerra   expenditure   and consultancy 
                                                                     fees 
 
                                      EUR           EUR               EUR       EUR 
 Generative Sweden                      -             -                 -         - 
 Generative Finland                     -             -                 -         - 
 
 
 
                                        -             -                 -         - 
 
 
 
 Year ended 31 December           Funding   Exploration        Management       Net 
  2019                      from Centerra   expenditure   and consultancy 
                                                                     fees 
 
                                      EUR           EUR               EUR       EUR 
 Generative Sweden                 42,245        40,813             2,728     (1,296) 
 Generative Finland               175,382       163,081            14,799     (2,498) 
 
 
 
                                  217,627       203,894            17,527     (3,794) 
 
 
 
 
   24           Retirement benefit schemes 
 
                                                     2020   2019 
 Defined contribution schemes                         EUR    EUR 
 
 Charge to profit or loss in respect of defined 
  contribution schemes                             12,099  6,268 
 
 
 
 
 

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 Options 
                   25.1    Company Incentive schemes 

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 at the date of its original IPO in December 2017 and will continue to issue options to certain Directors and key personnel. As part of the RTO process in October 2020, the Company's shareholders approved two additional new incentive schemes for certain executives. The key terms of each of these schemes are as follows

Share Option Plan (2017)

   --      Options vest 1/3 on date of issuance, 1/3 after 6 months and 1/3 after 12 months; 
   --      Options remain valid for five years; and 
   --      No subsequent performance criteria after issuance. 

Short-Term Restricted Stock Unit ("RSU") Scheme:

-- Awards granted under the RSU Scheme will be subject to annual performance criteria set by the Remuneration Committee each financial year, relating to each eligible employee's performance against personal, financial, strategic and 'Environmental, Social, and Corporate Governance' ("ESG") metrics.

-- Any awards will be based on a percentage of base salary as recommended by the Remuneration Committee at the start of each performance period, being 60% for the initial period. The number of RSUs issued will be based on the share price of the Company on expiry of the RSU Initial Performance Period. Any RSUs issued will be subject to a further 2-year vesting period.

-- Each eligible person will be set a (i) minimum performance threshold which must be satisfied in order to trigger any issuance of RSUs to them ("Threshold"). In addition, a base target ("Target") and maximum amount ("Maximum") will also be set.

-- The first performance period will run with an effective date from 1 October 2020 until 31 December 2021, with subsequent performance periods running annually from 1 January 2022 onwards.

Long-Term Performance Share Unit ("PSU") Scheme:

-- Awards granted under the PSU Scheme will be subject to three-year performance criteria set by the Remuneration Committee each financial year, relating to objective corporate metrics as follows:

   --      'Relative Total Shareholder Return ("RTSR")' against the peer group; and 

-- a significant corporate strategic goal set by the Company. During the PSU initial performance period, this goal shall be the Company gaining control of 100 per cent. of Deutsche Lithium.

-- he Company will calculate any awards under the PSU Scheme based on a percentage of base salary as recommended by the Remuneration Committee at the start of each performance period and the share price at the start of the period. For the initial performance period this shall be 100% and the RTO Price of 5p per share. Any PSUs issued will be subject to a further 2-year vesting period.

-- Performance criteria shall be assessed 50:50 between these two corporate metrics. The assessment relating to RTSR shall be calculated as Maximum being in the top quartile, Target being in the top half and Threshold being in the third quartile. The assessment relating to the corporate goal shall generally be binary Yes or No, but with the Board or Remuneration Committee having sole discretion to assess partial achievement.

-- The first performance period will be with an effective date from 1 October 2020 to 31 December 2023 with subsequent three-year performance periods starting from 1 January 2022.

   25.2    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 
                                       2020                                 2019 
                         Average Exercise                    Average Exercise 
                             Price in GBP                            Price in 
                                per Share   Options Number      GBP per Share   Options Number 
 
 At beginning 
  of the period                   GBP0.09        3,150,000           GBP0.094        3,550,000 
 Granted                          GBP0.05          200,000                  -                - 
 Lapsed                                 -                -           GBP0.085        (400,000) 
 
 At end of period                GBP0.091        3,350,000           GBP0.094        3,150,000 
 
 Exercisable at 
  the period end                                 3,350,000                           3,150,000 
 
 Weighted average 
  remaining exercise 
  period, years                                       1.96                                2.96 
 
 
 Option Classification 
                                         Exercise       Expiry 
            Issue Date   No of Options      Price         Date 
             01-Mar-14         950,000    GBP0.08   20/12/2022 
             18-May-15         300,000    GBP0.10   20/12/2022 
             01-Feb-17         800,000    GBP0.10   20/12/2022 
             21-Dec-17       1,100,000    GBP0.10   20/12/2022 
             29-Oct-20         200,000    GBP0.05   28/10/2025 
 
                             3,350,000   GBP0.913 
 
   25.3    RSU Scheme (2020) 

The first awards of RSUs under the new scheme are expected to be issued in Q1 2022, based on the initial performance period from 1 October 2020 to 31 December 2021

25.4 - PSU Scheme (2020)

The first awards of PSUs under the new scheme are expected to be issued in Q1 2024, based on the initial performance period from 1 October 2020 to 31 December 2023.

   26           Share-based payment transactions 
 
                                Group        Company 
                                 2020  2019     2020  2019 
                                  EUR   EUR      EUR   EUR 
 Expenses recognised in the year 
 Arising from Options issued 
  under the Share Option Plan 
  (2017)                        3,725     -    3,725     - 
 
 

Awards made under the new RSU and PSU scheme will be expensed over the relevant vesting periods for each scheme. The first awards are only expected in 2022 and expenses will commence thereafter.

   27           Share capital 
 
                                           Group and company 
                                                        2020     2019 
 Ordinary share capital                                  EUR      EUR 
 Issued and fully paid 
 204,455,957 ordinary shares of 1p each            2,278,155  351,133 
 
 
 
                                                   2,278,155  351,133 
 
 
 

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 2020                                 31,069,430    351,133 
Issue of fully paid shares (cash subscription)   107,061,260  1,189,890 
Issue of fully paid shares (consideration 
 for shares in DL)                                66,325,267    737,132 
 
 
 
At 31 December 2020                              204,455,957  2,278,155 
 
 
 
   28           Disposals 

On 31 October 2020 the group disposed of its 100% holding in Tulivuori Exploration OY. Included in these financial statements are profits of EUR158 arising from the company's interests in Tulivuori Exploration OY up to the date of its disposal.

   29           Share Premium 
 
                                  Share Premium Account 
 Group                                              EUR 
 At 1 January 2019                            4,151,045 
 Additions                                            - 
 
 At 31 December 2019                          4,151,045 
 
 Additions                                            - 
 Issue of shares May 2020                       280,626 
 Cancellation of share premium              (4,431,671) 
 Issue of shares October 2020                 7,362,699 
 
 At 31 December 2020                          7,362,699 
 

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.

   30           Other reserves 
 
                                   Merger reserve  Share based  Translation     Total 
                                                       payment      reserve 
                                                       reserve 
Group                                         EUR          EUR          EUR       EUR 
 
At 1 January 2019                         688,732      138,644            -   827,376 
Transfer of lapsed share options                -     (16,299)            -  (16,299) 
 
 
 
At 31 December 2019                       688,732      122,345            -   811,077 
 
Additions                                       -        3,725           19     3,744 
 
 
 
At 31 December 2020                       688,732      126,070           19   814,821 
 
 
 
 

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.

   31           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, conditional on, inter alia, completion of the Acquisition, 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.

Osisko Royalty Agreements

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 ERL. 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.

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.

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.

In addition, the Company was obliged to abide by the terms of the "2003 Data Access Agreement" which was entered into between Beowulf, the Scanex Group ("Scanex") and Mirab Mineral Resources AB ("Mirab") on 14 November 2003 for a period of 15 years. Pursuant to the terms of this agreement, Scanex and Mirab provided Beowulf with data relating to past mining exploration in return for the granting by Beowulf of a royalty to Scanex and Mirab for 1 per cent. of the net smelting revenue generated by Beowulf in relation to the area known as Grundträsk. Since the 15 years of this agreement has now expired, the Company considers that its requirement to honour this royalty has also expired.

Neither of the Beowulf, Scanex or Mirab royalties apply to the Zinnwald Lithium project.

   32           Retained earnings 
 
                                               Group                      Company 
                                            2020          2019          2020          2019 
                                             EUR           EUR           EUR           EUR 
 
 At the beginning of the 
  year                               (1,820,744)   (1,305,524)   (1,447,843)   (1,026,564) 
 Conversion of share premium           4,431,671             -     4,431,671             - 
 Loss for the year                   (2,215,238)     (531,519)   (1,503,479)     (437,578) 
 Dividends in specie                   (490,888)             -     (490,888)             - 
 Share based payment transactions 
  (net)                                        -        16,299             -        16,299 
 
 
 
 At the end of the year                 (95,199)   (1,820,744)       989,461   (1,447,843) 
 
   33           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 still makes it difficult to predict the ultimate impact at this stage. 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.

   34           Related party transactions 

Remuneration of key management personnel

The remuneration of key management personnel is as follows.

 
                                   2020                          2019 
                                       Share Option                  Share Option 
                        Remuneration         Charge   Remuneration         Charge 
                                 EUR            EUR            EUR            EUR 
 
 Anton du Plessis            118,453          1,863        152,688              - 
 Cherif Rifaat                78,969          1,862         68,710              - 
 Jeremy Martin                36,664              -         41,226              - 
 Graham Brown                 28,767              -         27,484              - 
 Jeremy Taylor-Firth          20,306              -         27,484              - 
 Andrew Partington                 -              -          4,581              - 
 Peter Secker                      -              -              -              - 
 
                             283,159          3,725        322,173              - 
 

Transactions with related parties

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

 
                              Consultancy and expenses     Management fees 
                                     2020          2019     2020       2019 
                                      EUR           EUR      EUR        EUR 
 Group 
 Strategic Alliance 
  partner                               -             -        -     17,256 
 Key management personnel          50,648        71,690        -          - 
 
 Company 
 Key management personnel          15,585        40,289        -          - 
 

Aggregate consultancy and expenses include EUR26,123 (2019: EUR4,640) of costs capitalised and included within non-current assets and EURnil (2019: EUR24,435) of costs reimbursed by joint venture partners. There were no amounts outstanding at the year end.

Strategic Alliance arrangements with Centerra Gold are disclosed in note 11. During the period, Centerra reimbursed costs of EURnil (2019: EUR222,155) and paid management fees of EURnil (2019: EUR17,527). As at 31 December 2020 and 2019, there were no outstanding debtor or creditor balances with Centerra Gold as the joint venture relationship has terminated.

   35           Cash (used in)/generated from group operations 
 
                                                             2020        2019 
                                                              EUR         EUR 
 
 Loss for the year after tax                          (2,215,239)     (531,519) 
 
 Adjustments for: 
 Taxation charged/(credited)                                    -      (30,648) 
 Investment income                                          (367)           - 
 Gain on disposal of property, plant and equipment        (5,300)           - 
 Impairment of intangible assets                          592,465           - 
 Depreciation and impairment of property, plant 
  and equipment                                               243           - 
 Share of loss of Joint Venture                            32,579           - 
 Equity-settled share-based payment expense                 3,725           - 
 
 Movements in working capital: 
 (Increase)/decrease in trade and other receivables     (135,628)      24,035 
 Increase/(decrease) in trade and other payables           16,435      (69,743) 
 
 
 
 Cash used in operations                              (1,711,087)     (607,875) 
 
 
 
   36           Cash (used in) / generated from operations - company 
 
                                                          2020        2019 
                                                           EUR         EUR 
 
 Loss for the year after tax                       (1,503,090)     (437,578) 
 
 Adjustments for: 
 Investment income                                       (367)           - 
 Depreciation and impairment of property, plant 
  and equipment                                            243           - 
 Share of loss of Joint Venture                         32,579           - 
 Equity-settled share-based payment expense              3,333           - 
 
 Movements in working capital: 
 (Increase) in trade and other receivables           (507,134)     (163,611) 
 Increase/(decrease) in trade and other payables        81,436      (13,044) 
 
 
 
 Cash used in operations                           (1,893,000)     (614,233) 
 
 
 
 

*ENDS*

For further information go to www.zinnwaldlithium.com or contact:

 
 Anton du Plessis           Zinnwald Lithium plc             info@zinnwaldlithium.com 
                            Allenby Capital (Nominated 
 David Hart/Liz Kirchner     Adviser)                        +44 (0) 20 3328 5656 
                           -------------------------------  ------------------------- 
                            Turner Pope Investments 
 Zoe Alexander/Andy          (TPI) Ltd 
  Thacker                    (Broker)                        +44 (0) 20 3657 0050 
                           -------------------------------  ------------------------- 
 Isabel de Salis/Beth       St Brides Partners (Financial 
  Melluish                   PR)                             +44 (0) 20 7236 1177 
                           -------------------------------  ------------------------- 
 

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February 26, 2021 02:00 ET (07:00 GMT)

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