Final Results
Zinnwald Lithium plc / EPIC: ZNWD.L / Market: AIM / Sector: Mining
22 February 2022
Zinnwald Lithium plc ("Zinnwald Lithium" or the "Company")
Final Results
Zinnwald Lithium plc, the German focused lithium development company, is pleased to announce its final audited results for the year ended 31 December 2021.
The Company's Annual Report and Financial Statements for the year ended 31 December 2021 will be posted to shareholders today and will be available on its website www.zinnwaldlithium.com.
OVERVIEW
Significant advances made towards becoming an important supplier to Europe's fast-growing lithium sector
· Gained full control of flagship Zinnwald Lithium Project in south-eastern Germany via a cash and shares transaction worth €8.8 million
· Extended resource position in the Saxony region, bringing total resource inventory at the Zinnwald Project to over one million tonnes lithium carbonate equivalent ('LCE').
· Raised approximately €7 million in additional equity to advance the Project in 2022; €7.7 million cash position at today's date.
· Welcomed new shareholders to the register including several large institutions.
Focusing on ways to improve the Project, including identifying options for cost reduction, as well as enhancements that reduce the CO2 footprint
· Completed a technical review of the Project during the second half of 2021.
· Pivoted the Project to focus on battery-grade lithium hydroxide as a primary product to better align with the market specifications of core European off-takers.
· Exploring the possibility of expanding the production capacity of the Project.
Potential to become an important strategic source of a vital commodity for the transition to a greener economy for both Germany and Europe
· Strong market demand for lithium as the growth in EV demand gathers pace.
· No current domestic European producers of battery-grade lithium products; need for significant import volumesto meet demand in Europe.
Several workstreams planned for 2022
· Completing detailed test work and preliminary engineering studies related to lithium hydroxide production.
· Undertaking an in-fill drilling campaign at the Zinnwald License to assist in detailed mine planning, with the objective of evaluating the ability to increase mining output.
· Exploring options to improve project logistics and sustainability through utilising existing infrastructure assets.
· Commencing an exploration drilling campaign at nearby Falkenhain exploration license targeting lithium, tin, and tungsten to enhance the Project's scale and economics.
· Looking to assess the viability of economic recovery of tin as a by-product and its possible impact on the Project's economics.
CHAIRMAN'S STATEMENT
The past year has seen a number of key milestones delivered by Zinnwald Lithium. During the course of 2021, we gained full control of our flagship Zinnwald Lithium Project (the "Project") in south-eastern Germany via a cash and shares transaction worth €8.8 million. We also expanded our mineral resource base in the Saxony region, following the granting of an additional exploration license at Sadisdorf by the regional mining authority - bringing our total resource inventory at the Zinnwald Project to over one million tonnes lithium carbonate equivalent ('LCE'). These transactions, achieved in 2021, have served to firmly establish Zinnwald Lithium as major player in the in the European lithium space. To round the year off, we took advantage of the strong lithium market and raised approximately €7 million in equity - securing funds to advance the Project.
Having gained 100% ownership of Deutsche Lithium in June 2021, management completed a thorough technical review of the Project during the second half of the year. We also analysed market trends in battery chemistry, through meetings with off-takers and battery manufacturers, as to preferred lithium product and anticipated demand. As part of this, we are undertaking additional test work to determine our ability to produce lithium hydroxide economically and the results are expected shortly. The conclusion of our technical review, and the encouraging results from the initial test work, has resulted in pivoting the Project to focus on battery-grade lithium hydroxide as its primary end product.
In addition, as part of the ongoing value engineering work, trade-off studies are underway to determine the optimum mining rate and process plant capacity. By increasing the targeted annual production rate, there is the potential to maximise the project economics and lower the cash cost, which is a key driver for the Project to be in the lower range of the cost curve. The work also focuses on other key ways to optimise the Project, including identifying options for cost reduction, as well as enhancements that reduce the CO2 footprint and our overall environmental impact.
In terms of the lithium market, 2021 was a year in which commodity markets benefitted from the impact of the increasingly rapid shift to electric vehicles ('EVs') and the implications for the critical raw materials required to produce lithium-ion batteries. Since January 2021, the price for lithium hydroxide has more than doubled and spot prices in China have recently hit levels of ~$50,000/tonne. As the growth in EV demand gathers pace, we believe supply deficits in the lithium market will become increasingly apparent. On the back of this surge, many market commentators have raised their long-term lithium price forecasts, which further supports the potential value of the Project.
Europe, in particular, is forecast to emerge as a key market for lithium with regional lithium battery production forecast to increase fifteen-fold by 2030. It is worth noting that, presently, there are no domestic European producers of battery-grade lithium products. In addition, even if all the currently contemplated lithium projects in Europe commence production, there will still be a need for significant import volumes to meet anticipated demand. Positioned in the heart of the German automotive sector, the Zinnwald Lithium Project has the potential to become a highly important strategic source of a vital commodity for the transition to a greener economy for both Germany and Europe.
With regard to our non-core assets in Ireland, the Company has rationalised its license holdings and retained just the core prospecting license related to the brownfields Abbeytown Project. The zinc price rebounded strongly during 2021 and the Company's core objective for Abbeytown remains to find a partner or purchaser for the asset. In Sweden, we relinquished our Brännberg licences.
Looking ahead to 2022, the funds raised in December last year have set us up well to advance the Project. Specific workstreams planned for 2022 include completing detailed test work and preliminary engineering studies related to lithium hydroxide production. We will also be undertaking an in-fill drilling campaign at Zinnwald, as part of detailed mine planning, all part of the ongoing value engineering.
It is important to highlight that the Saxony region of Germany, in which the Project is located, has a long history of mining and contains legacy mining infrastructure. Work is currently underway to determine if it is viable to utilise parts of this existing infrastructure around the Project as part of our planned mining operations. This, in turn, has the potential to improve the logistics of the Project and lessen the impact on local communities and the environment through less movement on local roads.
The Project already benefits from the fact that its anticipated by-products are all benign in nature, almost all saleable, and the planned beneficiation process is comparatively energy and water efficient. Access to existing mining infrastructure, therefore, could further help improve the sustainability of the Project - helping us to achieve one of our core objectives, which is to bring to production a project that meets the highest standards of environmental and social responsibility.
A further key priority in 2022 is the commencement of an exploration drilling campaign at our nearby Falkenhain exploration license. A detailed review of historic drill data completed on the license prior to German Reunification has proved encouraging with respect to the potential prospectivity of the license area. The planned exploration drill campaign - targeting lithium, tin, and tungsten - will allow us to test the historic work, and assess the potential of the Falkenhain deposit, ultimately, to determine if this has the potential to feed the planned plant at the Zinnwald Project.
Corporate
The Companies shares have performed well over the last 12 months driven by the increased demand in lithium as the EV and clean energy transition gains global momentum. We have welcomed many new shareholders to our register including several large institutions, through both our fundraising activities, the acquisition of the remaining 50% of Deutsche Lithium, as well as from Bacanora Lithium Plc, which spun out its holding in our Company to its own shareholders shortly before the year end.
Financial Overview
The Company maintains a disciplined approach to expenditure and, as such, is well funded for 2022 with a €7.7 million cash position at today's date.
Long-term Outlook
Zinnwald has the potential to become a key European lithium project. We look forward to reporting further progress in the year ahead as we further develop the Project towards a Bankable Feasibility Study for Lithium Hydroxide.
In closing, I would like to thank the team for the work they have put in during the year and all our shareholders for their support. We look forward to an active year on the Project in 2022.
Jeremy Martin
Non-Executive Chairman
21 February 2022
STRATEGIC REPORT
Extracts from the Company's Strategic Report are set out below.
Highlights - 12 Months to 31 December 2021
Zinnwald Lithium Project
· Acquired the remaining 50% of Deutsche Lithium GmbH from SolarWorld AG to consolidate full ownership of the Zinnwald Lithium Project. The acquisition cost comprised 50 million new shares issued at a price of 12.5p and €1.5m in cash.
· Raised circa £5.8m primarily from existing shareholders at a price of 15.5p per share.
· Granted five-year Sadisdorf exploration licence within 12km of primary Zinnwald mining license.
· Completed initial phase of Lithium Hydroxide testwork.
· Completed a phase of value engineering to optimise the plant capacity and evaluate the production of a more conventional product, Lithium Hydroxide.
Legacy Assets
· Ireland - the Company undertook sufficient drilling to renew its core licence at the Abbeytown Project for a further two years to 2023, whilst relinquishing all other licenses.
· Sweden - the Company relinquished all its licenses and closed its operations.
Company Overview - Background and evolution
The Group was originally established in 2012 as a mineral exploration and development company focused on Zinc licenses in Ireland and Gold licenses in Sweden. The Company made its IPO on AIM in December 2017 with Osisko Gold Royalties as its cornerstone investor and a project level partnership in Sweden with Centerra Gold. The Company has dropped all licenses in Sweden and closed its operations. In Ireland, the Company now retains a single license in Ireland at the brownfield Abbeytown project, which is on care and maintenance. The Company considers that the increase in the Zinc price in 2021 may assist in securing a partner to progress this asset.
In October 2020, the Company completed its transformation into a lithium-focused development company with the acquisition (via a reverse-takeover) of Bacanora Lithium Plc's 50% ownership and joint operational control of, Deutsche Lithium GmbH, whose principal asset is the Zinnwald Lithium Project.
In June 2021, the Company completed the acquisition of the remaining 50% of Deutsche Lithium from SolarWorld AG, a company which had been in administration since 1 August 2017. This gave the Company full ownership and full operational control of Deutsche Lithium. It also led to the cancellation of the Joint Venture Agreement with SolarWorld AG and the removal of certain obligations due to Bacanora in relation to this Agreement.
In December 2021, Bacanora distributed its entire holding of 30.9% of the Company's shares to its own shareholders as part of the terms of its takeover by Ganfeng Lithium Ltd. This expunged most of the agreements between the Company and Bacanora that had been put in place at the time of the RTO, including the Relationship Agreement that gave Bacanora the right to appoint a Director to the Company. The sole remaining agreement is the Royalty Agreement covering 50% of the Project, which remains in place.
Zinnwald Lithium Project
The Zinnwald Lithium project (the "Project") is located in southeast Germany, some 35 km from Dresden and adjacent to the border of the Czech Republic. The Project is in a granite hosted Sn/W/Li belt that has been mined historically for tin, tungsten, and lithium at different times over the past 400 years. The Project benefits from a strategic location in close proximity to the German automotive and downstream chemical industries. The Project comprises four key areas, as follows:
The advanced Zinnwald core project area
The Zinnwald core project area covers 256.5 ha and already has a 30-year mining licence to 31 December 2047. In May 2019, Deutsche Lithium first announced the results of the NI 43-101 Feasibility Study for the Project, which included an identified resource at this license area as follows:
· Measured plus Indicated Mineral Resource estimate containing 35.51 Mt at a grade of 3,519 ppm containing 124,974 t Li at cut-off grade of 2,500 ppm Li.
· Represents approximately 665,000 tonnes of lithium carbonate equivalent ('LCE'), comprising approximately 357,500 tonnes of LCE in Measured Resources and approximately 307,500 tonnes of LCE in Indicated Resources.
· Estimated Inferred Mineral Resources of 4.87 Mt at a grade of 3,549 ppm containing 17,266 t Li metal (approximately 92,000 tonnes LCE).
Falkenhain and Altenberg satellite areas
Prior to 2021, Deutsche Lithium held two other exploration licences; the Falkenhain licence (covering 295.7 ha and with a five-year term to 31 December 2022); and the Altenberg licence (covering 4,225.3 ha and with an approximately five-year term to 15 February 2024). The Falkenhain license area had been extensively explored for tin and tungsten prior to German reunification and historic data still exists for these drill campaigns. The Company intends to perform an exploration drill campaign to test the historical drilling and assess the potential of the Falkenhain target as a potential satellite lithium resource to feed into the main Zinnwald Project.
Sadisdorf satellite area
In June 2021, Deutsche Lithium was granted the Sadisdorf Licence, which covers circa 225 ha in the Erzgebirge or Ore Mountains region of Saxony, Germany and is valid until 30 June 2026. The license area is located circa 12km NNE of the Company's Zinnwald license area, and forms part of the same geological unit that hosts the historic Li-Sn-W deposits at Zinnwald, Falkenhain and Altenberg. The deposit at Sadisdorf has historically been mined for tin and copper. Historical exploration work at the Sadisdorf Licence by previous licence holders resulted in a December 2017 historic JORC compliant inferred mineral resource of 25 million tons with an average grade of 0.45% Li2O (average 2,053 ppm lithium head grade). Subject to follow up exploration work and verification of the lithium grades, the Sadisdorf area has the potential to provide additional plant feed in the future.
Historic Project Plans
Whilst Deutsche Lithium was under the operational direction of Bacanora, the strategy for the Project was threefold - match the long mine life of Bacanora's main Sonora Project; produce a niche complimentary product to Sonora's mainstream lithium products (lithium carbonate); and most importantly, be financeable from Bacanora's internal cash flows.
With an abundant supply of fluorspar/hydrofluoric acid available in the immediate vicinity, Deutsche Lithium chose to focus on LiF (Lithium Fluoride) which is a high value downstream lithium product and one of the two key components in the manufacturing process of LiPF6, which is the most important conducting salt in lithium electrolytes and serves as the "shuttle" in the lithium battery electrolyte which "ships" the lithium ion between the cathode and the anode. Approximately 95 per cent. of all lithium battery electrolytes use LiPF6, and the percentage used in each cathode is increasing in some of the newer battery types.
The resultant Deutsche Lithium 2019 Feasibility Study was predicated on a 30-year mine life production of 5,112 tpa (~7,285 tpa LCE) of battery grade LiF. This study showed a pre-tax project NPV of €428 million and an IRR of 27.4%, based on a Capex of €160 million. The study also included the potential to produce up to 32,000 tpa of potassium sulphate for sale to the European fertiliser industry. Further, the majority of its mined tailings would be inert Quartz Sands that may be sold for use as an aggregate filler to local building companies.
The mining operation was planned as an underground mine development using a single decline ramp for access to the mine and for ore transportation from the mine to the surface. The mining method to be used was room and pillar with subsequent backfill using self- hardening material. The processing operation was to be based on a conventional processing flow sheet using established sulphate route processing technology. The integrated plant was designed to process approximately 570,000 tonnes of ore per year (assuming a 30-year mine plan).
Evolution of the Project Plans
During 2021, as part of planning the next phase of development, the Company completed a holistic technical review to identify ways to optimise all facets of the project to maximise value and make it as attractive as possible to potential Industry partners, off-takers and future finance providers. This review indicated that the core project could potentially sustain both a higher annual production level and a more conventional battery-grade lithium end products (lithium hydroxide and lithium carbonate) that are better suited to the current market demand.
In terms of the scale of the project, the Company has been reviewing the potential to operate with a higher annual output, but with a shorter mine life (still exceeding 20 years) from the Zinnwald license area. As noted above, the addition of the new deposits covered by the three new nearby license areas has the potential to increase Zinnwald's resource base and annual lithium production.
In prior years, Deutsche Lithium had already established the possibility of producing battery-grade lithium carbonate directly from the lithium mica concentrate with only minimal modifications to the flowsheet. In 2021, Deutsche Lithium undertook further testwork to determine if battery-grade lithium hydroxide could be produced. This testwork remains ongoing, but the preliminary indications appear to endorse that strategy.
The Company also continues to undertake detailed value engineering in order to optimise the cost profile of the Project. This work includes a closer examination of the potential for economic by-products including the tin and high-quality potassium sulphate, and good quality aggregate products for the construction industry. A potential to significantly decrease CO2 emission and operating costs has been recognised if the old mining infrastructure was utilised and plant locations optimised. This would also reduce the impact of the project on surrounding communities.
Company Strategy
Prior to 2020, the Company's strategy was focused on shareholder value through the process of discovering new mineral deposits and seeking attractive acquisition opportunities. The Zinnwald Lithium Project was one such acquisition opportunity and the Board believes that advancing the Project represents an excellent opportunity to create value for Shareholders, particularly as the Project is at an advanced stage when compared with the Company's historic assets. The Company's strategy continues to be underpinned by a technically led team with extensive experience in bringing projects from the feasibility stage through to mine production, as well as the capital markets experience to source the funding required for these types of mining projects. The Project also fits into the Company's strategy of focusing on low-risk jurisdictions (Germany) in areas with proven metallogenic potential, an active mining industry, low political risk and transparent permitting processes.
The Project is now the Company's core development asset and the team will focus on further de-risking the project as it is advanced towards a development decision. Key work areas include:
· Assess the commercial viability of producing a broader range of lithium compounds, specifically lithium hydroxide and lithium carbonate;
· Expansion of the size of the Project by increasing annual production potential through increasing the planned mining rate and potentially bringing other satellite resources into the mining schedule;
· Identification of and negotiation with off-take partners (potentially locally) that could include battery manufacturers, chemical producers or commodity traders;
· Identification of and negotiation with potential financing partners that could include banks and national and trans-national development organisations;
· Exploration work to advance the satellite project areas to increase the potential size of the overall project resource base;
· Advance the plant engineering towards AAC Class 3;
· Minimising the carbon footprint by optimising Lithium plant location and transportation methods;
· Finalisation of the selection of the optimal chemical processing site location;
· Negotiation with the holders (principally the German state) of existing mining infrastructure in the vicinity of the Project that has the potential to enhance the project economics;
· Advancing the permitting process for the construction and operation of the mine; and•
· Ensuring the social license to operate by extensive public participation.
The Company recognises the importance of the general public and the NGOs in the permitting processes and has committed to proactively engage with all the stakeholders in its projects.
Operational review & outlook
Germany
During 2021, the Group has continued to progress the Project on both a corporate and operational level.
At a Corporate level, in line with our previously stated strategy, we successfully completed the acquisition of the remaining 50% of Deutsche Lithium giving us 100% ownership and full operational control of the Project. The acquisition cost was €8.8 million, with most of the purchase consideration structured as an issue of new ordinary shares in the Company allowing us to conserve cash resources. New ordinary shares equivalent to 19.6% of our enlarged share capital were issued as part of the transaction and were distributed to a number of parties being primarily the creditors of SolarWorld AG.
At the Project level during the year, we have been busy advancing various workstreams and have completed the initial phase of the lithium hydroxide ("LiOH") testwork. The initial results were highly encouraging and showed the potential to produce a high purity, battery grade product that is low in contaminants. We have also generated LiOH product samples, which we will be sharing with potential off-takers to help them evaluate the product. The ability to produce a high quality, battery-grade LiOH, alongside the Project's already demonstrated ability to produce battery grade lithium fluoride and lithium carbonate, further demonstrates the flexible nature of the Project and its ability to produce high value products to meet demand from battery makers.
Additionally, during the year, Deutsche Lithium was granted a five-year exploration licence (the "Sadisdorf Licence") covering approximately 225 hectares ("ha") in the Erzgebirge or Ore Mountains region of Saxony, Germany. This complements two other exploration licences already held by Deutsche Lithium: the Falkenhain licence, covering 295.7 ha and with a term to 31 December 2022; and the Altenberg licence, covering 4,225.3 ha and with a term to 15 February 2024. The Sadisdorf Licence is circa 12km NNE of Zinnwald's key lithium deposit and forms part of the same geological unit that hosts the historic Li-Sn-W deposits at Zinnwald, Falkenhain and Altenberg.
The grant of this licence coupled with the Falkenhain and Altenberg licences represents exciting expansion potential for Zinnwald and, based on the historical resource delineated by previous licence holders, effectively increases our overall resource to greater than 1 million tons contained lithium carbonate equivalent ("LCE"), an increase of over 50%. We will be undertaking further work on all our exploration licence areas to further evaluate their potential and how they can enhance the Project.
Looking forward into 2022 and beyond, as noted above, the Group's plans for the Project are to seek ways to expand the size of the Project, increase annual lithium production, explore the potential for additional and higher value co-products, and to produce a more conventional lithium end-product for future off-takers. Consequently, the Group raised circa £5.8m in December 2021 to finance the start of this work. Some of the key workstreams for 2022 include the following:
· 15,000m of planned exploration drilling across Falkenhain and in-filling drilling at Zinnwald. At Falkenhain, a detailed review has been performed on historic drill data. Initial tests have indicated similar characteristics to the bulk samples from the Zinnwald licence. The planned drilling work at Zinnwald will help to refine the early years mine plan for an expanded mining operation on the Zinnwald license.
· The Group has started the process of updating the feasibility study to be based on the production of Lithium Hydroxide. This will also include value engineering work, finalisation of the plant locations, review of the potential to produce a tin by-product, refinement of the plans for co-product production, and the potential for sale of its quartz sand by-products.
· The Group is working to advance the permitting status of the Project. Deutsche Lithium obtained its mining licence for Zinnwald in 2017, which is valid until 2047, but comes with the standard requirements to apply for further permits for environmental and construction aspects of the Project. Deutsche Lithium is undertaking environmental and community studies to continue to develop the overall Zinnwald sustainability framework. Environmental monitoring programmes are ongoing as well as the permitting process for Zinnwald's mining and mineral processing plant.
· The Company has commenced data analytics and archive work with regard to the Sadisdorf licence.
Lithium Market
2021 saw a transformation in general market sentiment towards Lithium, as consumption grew strongly whilst pricing, especially in the spot market saw spectacular growth. These were driven by a number of macro-economic factors, some of which may be temporary, but several are likely to be longer term and support the progress of the Lithium industry away from being a niche volatile market.
In terms of consumption, estimates from the Australian Department of Industry put global demand for lithium carbonate equivalent (LCE) at 486,000 tonnes in 2021, up almost 60% from 2020's 305,000 tonnes. They forecast this to increase a further 50% to 724,000 tonnes by 2023. For the longer term, Canaccord, an investment bank, forecast a longer-term demand of circa 1.2 million tonnes by 2025 and 2.5 million tonnes by 2030, a CAGR of 20%. This was in large part due to increased demand for Electric Vehicles (EVs), that saw YOY growth in 2021 of 103% to 6.1m units, driven by China (+149% growth to 3.1m units) and Europe (+57% to 2.1m units). Canaccord forecast global sales to increase to 16.8m units by 2025 and 46m units by 2030 (representing an estimated EV penetration rate of 24% and 46%, respectively).
Lithium prices in the spot market in 2021 saw spodumene pricing up 532%, lithium carbonate 431% and lithium hydroxide 340% higher. However, it should be noted that the spot market is a smaller part of the industry, estimated to represent less than 30% of the total lithium market. Some of this price increase can be put down to a couple of inherently short-term factors, such as:
· "Hangover" from the Lithium price crash of 2018-19. The period 2017 to 2019 saw a number of large-scale projects, especially spodumene, coming online to flood a market, that at the time, enjoyed only modest EV growth. This caused a collapse in the lithium price, which in turn caused project deferrals or cancellations. This was further exacerbated by delays and restrictions caused by COVID-19 and left a mining industry unable to supply the post-lockdown surge in pent-up demand.
· Contract vs Spot market. The Global auto industry has increasingly prioritised securing contract supply prices, for which details are generally not reported to the market, which in turn reduced available supply for the spot market.
· Trader speculation. There is an inherent incentive for miners and traders to defer supply in the hope of even high prices, which in turn exaggerates short term price movement.
In the short term there may well be a price correction as suppliers have already started to take advantage of the incentive pricing, with new or restarted production in 2022, such as Greenbushes and Pilbara in Western Australia (spodumene) and the South American brine producers, Albemarle and SQM. In terms of supply, the Australian Department of Industry estimates global supply at 485,000 tonnes LCE in 2021 (up only 2%) and forecasts an increase to 615,000 tonnes in 2022 and 821,000 tonnes in 2023. However, the Australian Department of Industry also notes that currently supply from mine and brine operations is falling short in terms of matching demand growth, so whilst project development is underway, it will take time to fill the supply gap.
Globally, the longer-term outlook for lithium does appear promising which will hopefully see demand growth outpace production and a long term sustained higher price for producers. As governments and organisations worldwide drive the rapid deployment of new clean energy technologies, the role of critical materials, including metals such as lithium, is becoming more apparent. The European automotive industry also appears to be focusing its battery chemistry technology towards nickel-based chemistries (which require lithium hydroxide) as these typically offer better cold weather performance as well as superior energy density.
In Europe, the European Commission released a proposal for stronger emissions standards on vehicles which would require average emissions of new cars to come down by 55% on 2021 levels by 2030 and 100% by 2035. These targets mean security of supply for battery grade chemicals may become a big issue for customers, with a shortfall in battery grade products projected towards the end of the outlook period. The EU estimates 18 times more lithium is required by 2030 to support its climate-neutrality scenarios, while at least 24 new lithium battery Gigafactories are planned in Europe with four expected to come online in 2021, bringing Europe's production capacity from its current 30 GWh to 700 GWh by 2028. Volkswagen alone has committed to build six 40GWh battery factories in Europe by 2030 (equates to ~350kt of LCE demand). To keep up with this demand, the EU is focused on encouraging local supply.
In terms of the nature of the industry, the first half of 2021 saw the start of sector consolidation between lithium companies (Galaxy & Orocobre, IGO & Tianqi). The second half of the year saw more aggressive M&A, especially by the Chinese companies Ganfeng and CATL, who spent more than $2bn on five projects. Canaccord estimates that a total of US$7bn was spent on M&A during 2021 up from US$400m in 2020.
The larger more diversified miners have also started to take an interest in the industry as it matures. Rio Tinto's head of economics, Vivek Tulpule, said that by 2030 EV manufacturers would need about three million tonnes of lithium, compared with the roughly 350,000 tonnes they consume today. They estimated that existing operations and projects combined, will contribute one million tonnes of lithium and filling the supply gap would require over 60 Jadar projects (58kt per annum), even before the Jadar project was cancelled by the Serbian government.
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
31-Dec |
31-Dec |
|
|
|
2021 |
2020 |
|
Continuing operations |
Notes |
€ |
€ |
|
Cost of sales |
|
(46,096) |
(56,540) |
|
|
|
|
|
|
Exploration projects impairment |
|
(1,583,566) |
(592,465) |
|
Administrative expenses |
|
(1,076,438) |
(690,356) |
|
Other operating income |
|
779 |
- |
|
RTO costs |
|
- |
(839,940) |
|
Share based payments charge |
25 |
(7,779) |
(3,725) |
|
|
|
|
|
|
Operating loss |
5 |
(2,713,100) |
(2,183,026) |
|
|
|
|
|
|
Revaluation gain on joint venture |
7 |
1,038,252 |
- |
|
Share of loss of joint venture |
10 |
(52,911) |
(32,579) |
|
Finance income |
9 |
455 |
367 |
|
|
|
|
|
|
Loss before taxation |
|
(1,727,304) |
(2,215,238) |
|
|
|
|
|
|
Tax on loss |
12 |
- |
- |
|
|
|
|
|
|
Loss for the financial year |
30 |
(1,727,304) |
(2,215,238) |
|
|
|
|
|
|
Other comprehensive income |
|
181 |
19 |
|
|
|
|
|
|
Total comprehensive loss for the year |
|
(1,727,123) |
(2,215,219) |
|
|
|
|
|
|
Earnings per share from continuing operations attributable to the owners of the parent company |
13 |
|
|
|
Basic (cents per share) |
|
(1) |
(4) |
|
Diluted (cents per share) |
|
(1) |
(4) |
Total loss and comprehensive loss for the year is attributable to the owners of the parent company.
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
|
|
|
31-Dec-21 |
31-Dec-20 |
|
|
Notes |
€ |
€ |
|
Non-current assets |
|
|
|
|
Intangible assets |
14 |
16,165,085 |
1,546,111 |
|
Property, plant and equipment |
15 |
48,621 |
3,662 |
|
Investments using equity method |
16 |
- |
3,852,083 |
|
|
|
|
|
|
|
|
16,213,706 |
5,401,856 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Trade and other receivables |
21 |
121,845 |
170,926 |
|
Cash and cash equivalents |
20 |
8,291,991 |
4,846,527 |
|
|
|
|
|
|
|
|
8,413,836 |
5,017,453 |
|
|
|
|
|
|
Total assets |
|
24,627,542 |
10,419,309 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Current tax liabilities |
|
23,802 |
- |
|
Trade and other payables |
22 |
614,858 |
58,833 |
|
|
|
|
|
|
|
|
638,660 |
58,833 |
|
|
|
|
|
|
Net current assets |
|
7,775,176 |
4,958,620 |
|
|
|
|
|
|
Total liabilities |
|
638,660 |
58,833 |
|
Total assets less current liabilities |
|
23,988,882 |
10,360,476 |
|
|
|
|
|
|
Deferred tax liability |
23 |
(1,382,868) |
- |
|
|
|
|
|
|
Net assets |
|
22,606,014 |
10,360,476 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
27 |
3,316,249 |
2,278,155 |
|
Share premium |
28 |
20,289,487 |
7,362,699 |
|
Other reserves |
29 |
822,781 |
814,821 |
|
Retained earnings |
31 |
(1,822,503) |
(95,199) |
|
|
|
|
|
|
Total equity |
|
22,606,014 |
10,360,476 |
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
Share capital |
Share premium account |
Other reserves |
Retained earnings |
Total |
|
|
Notes |
€ |
€ |
€ |
€ |
€ |
|
|
|
|
|
|
|
|
|
Balance at 1 January 2020 |
|
351,133 |
4,151,045 |
811,077 |
(1,820,744) |
3,492,511 |
|
|
|
|
|
|
|
|
|
Year ended 31 December 2020: |
|
|
|
|
|
|
|
Loss for the year |
|
- |
- |
- |
(2,215,238) |
(2,215,238) |
|
Other comprehensive income: |
|
|
|
|
|
|
|
Currency translation difference |
|
- |
- |
19 |
- |
19 |
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
- |
- |
19 |
(2,215,238) |
(2,215,219) |
|
|
|
|
|
|
|
|
|
Conversion of share premium to retained profits |
|
- |
(4,431,671) |
- |
4,431,671 |
- |
|
Issue of share capital |
27 |
1,927,022 |
7,643,325 |
- |
- |
9,570,347 |
|
Dividend in specie |
|
- |
- |
- |
(490,888) |
(490,888) |
|
Credit to equity for equity settled share-based payments |
26 |
- |
- |
3,725 |
- |
3,725 |
|
|
|
|
|
|
|
|
|
Total transactions with owners recognised directly in equity |
|
1,927,022 |
3,211,654 |
3,725 |
3,940,783 |
9,083,184 |
|
|
|
|
|
|
|
|
|
Balance at 31 December 2020 and 1 January 2021 |
|
2,278,155 |
7,362,699 |
814,821 |
(95,199) |
10,360,476 |
|
|
|
|
|
|
|
|
|
Year ended 31 December 2021: |
|
|
|
|
|
|
|
Loss for the year |
|
- |
- |
- |
(1,727,304) |
(1,727,304) |
|
Other comprehensive income: |
|
|
|
|
|
|
|
Currency translation differences |
|
- |
- |
181 |
- |
181 |
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
- |
- |
181 |
(1,727,304) |
(1,727,123) |
|
|
|
|
|
|
|
|
|
Issue of share capital |
27 |
1,038,094 |
13,217,816 |
- |
- |
14,255,910 |
|
Share issue costs |
|
- |
(291,028) |
- |
- |
(291,028) |
|
Credit to equity for equity settled share-based payments |
26 |
- |
- |
7,779 |
- |
7,779 |
|
|
|
|
|
|
|
|
|
Total transactions with owners recognised directly in equity |
|
1,038,094 |
12,926,788 |
7,779 |
- |
13,972,661 |
|
|
|
|
|
|
|
|
|
Balance at 31 December 2021 |
|
3,316,249 |
20,289,487 |
822,781 |
(1,822,503) |
22,606,014 |
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
|
|
|
|
Year ended 31 December 2021 |
|
Year ended 31 December 2020 |
|
|
Notes |
€ |
€ |
€ |
€ |
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in operations |
34 |
|
(495,174) |
|
(1,711,087) |
|
|
|
|
|
|
|
|
Net cash outflow from operating activities |
|
|
(495,174) |
|
(1,711,087) |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Investment in Deutsche Lithium as Joint Venture |
|
(735,800) |
|
(199,000) |
|
|
Purchase of remaining 50% of Deutsche Lithium |
|
(1,500,000) |
|
- |
|
|
Cash acquired on purchase of Deutsche Lithium |
|
486,213 |
|
- |
|
|
Exploration expenditure in Germany |
|
(948,157) |
|
- |
|
|
Exploration expenditure in Ireland and Sweden |
|
(37,455) |
|
(227,130) |
|
|
Purchase of property, plant and equipment |
|
(8,437) |
|
(3,885) |
|
|
Proceeds on disposal of property, plant and equipment |
|
- |
|
5,300 |
|
|
Interest received |
|
455 |
|
367 |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(2,743,181) |
|
(424,348) |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Proceeds from issue of shares |
|
6,927,255 |
|
5,884,685 |
|
|
Share issue costs |
|
(243,436) |
|
- |
|
|
Equity subscription in Erris Gold Resources |
|
- |
|
(400,000) |
|
|
|
|
|
|
|
|
|
Net cash generated from financing activities |
|
|
6,683,819 |
|
5,484,685 |
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
3,445,464 |
|
3,349,250 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
4,846,527 |
|
1,497,277 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
|
8,291,991 |
|
4,846,527 |
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
1 Accounting policies
Company information
Zinnwald Lithium Plc ("the Company") is a public limited company which is listed on the AIM Market of the London Stock Exchange domiciled and incorporated in England and Wales. The registered office address is 29-31 Castle Street, High Wycombe, Buckinghamshire, United Kingdom, HP13 6RU.
The Company name was changed from Erris Resources Plc to Zinnwald Lithium Plc by a special resolution approved by shareholders at the General Meeting held on 26 October 2020.
The group consists of Zinnwald Lithium Plc and its subsidiaries as detailed in Note 17.
1.1 Basis of preparation
These financial statements have been prepared in accordance with UK-adopted International Accounting Standards and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS (except as otherwise stated).
The financial statements are prepared in euros, which is the functional currency of the Company and the Group's presentation currency, since the majority of its expenditure, including funding provided to Deutsche Lithium, is denominated in this currency. Monetary amounts in these financial statements are rounded to the nearest €.
The € to GBP exchange rate used for translation as at 31 December 2021 was 1.18981.
The consolidated financial statements have been prepared under the historical cost convention, unless stated otherwise within the accounting policies. The principal accounting policies adopted are set out below.
1.2 Basis of consolidation
The consolidated financial statements incorporate those of Zinnwald Lithium Plc and all of its subsidiaries (i.e., entities that the group controls when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity).
In regard to its shareholding in Deutsche Lithium, for the period from 1 January 2021 to 24 June 2021, the Board concluded that whilst it had significant influence over Deutsche Lithium (50% shareholding, 1 of the 2 co-managing directors and a casting vote on operational matters), it did not have control over that company and consequently the investment was accounted for using equity accounting rather than consolidated. On conclusion of the acquisition of the remaining 50% of Deutsche Lithium on 24 June 2021, the Company now consolidates the full results of Deutsche Lithium. Business combinations are accounted for using the acquisition method. Identifiable assets acquired and liabilities assumed are measured at their fair values at the acquisition date.
Zinnwald Lithium Plc was incorporated on 21 June 2017. On 1 December 2017, Zinnwald Lithium Plc acquired the entire issued share capital of Erris Resources (Exploration) Ltd by way of a share for share exchange. This transaction was treated as a group reconstruction and accounted for using the reverse merger accounting method.
All financial statements are made up to 31 December 2021. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date on which control ceases.
1.3 Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the group and company have adequate resources to continue in operational existence for the foreseeable future. The Company had a cash balance of €8.3m at the year end and keeps a tight control over all expenditure. Thus, the going concern basis of accounting in preparing the Financial Statements continues to be adopted.
The Directors have reviewed the ongoing situation with COVID-19 and do not consider its effects to have a material impact on the Group's and Company's going concern.
1.4 Intangible assets
Capitalised Exploration and Evaluation costs
Capitalised Exploration and Evaluation Costs consist of direct costs, licence payments and fixed salary/consultant costs, capitalised in accordance with IFRS 6 "Exploration for and Evaluation of Mineral Resources". The Group and Company recognises expenditure in Exploration and Evaluation assets when it determines that those assets will be successful in finding specific mineral assets. Exploration and Evaluation assets are initially measured at cost. Exploration and Evaluation Costs are assessed for impairment when facts and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount. Any impairment is recognised directly in profit or loss.
1.5 Property, plant and equipment
Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Leasehold land and buildings
Plant and equipment 25% on cost
Fixtures and fittings 25% on cost
Computers 25% on cost
Motor vehicles
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset and is recognised in the income statement.
1.6 Non-current investments
In the parent company financial statements, investments in subsidiaries and joint ventures are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
1.7 Impairment of non-current assets
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets not yet ready to use and not yet subject to amortisation are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
1.8 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks.
1.9 Financial assets
Financial assets are recognised in the group's and company's statement of financial position when the group and company become party to the contractual provisions of the instrument.
Financial assets are classified into specified categories at initial recognition and subsequently measured at amortised cost, fair value through other comprehensive income, or fair value through profit or loss. The classification of financial assets at initial recognition that are debt instruments depends on the financial assets cash flow characteristics and the business model for managing them.
Financial assets are initially measured at fair value plus transaction costs. In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are "solely payments of principal and interest SPPI" on the principal amount outstanding.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest rate method and are subject to impairment. The group's and company's financial assets at amortised cost comprise trade and other receivables and cash and cash equivalents.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
Financial liabilities
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.
Derecognition of financial liabilities
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
1.10 Equity instruments
Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs.
1.11 Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.
Termination benefits are recognised immediately as an expense when the group and company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.12 Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.13 Equity
Share capital
Ordinary shares are classified as equity.
Share premium
Share premium represents the excess of the issue price over the par value on shares issued. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Merger reserve
A merger reserve was created on purchase of the entire share capital of Erris Resources (Exploration) Ltd which was completed by way of a share for share exchange and which has been treated as a group reconstruction and accounted for using the reverse merger accounting method.
Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of equity-settled share-based payment transactions.
1.14 Share-based payments
Equity-settled share-based payments with employees and others providing services are measured at the fair value of the equity instruments at the grant date. Fair value is measured by use of an appropriate pricing model. Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services, except where the fair value cannot be estimated reliably, in which case they are valued at the fair value of the equity instrument granted.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment. The share-based payment expense is not adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.
1.15 Foreign exchange
Foreign currency transactions are translated into the functional currency using the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in administrative expenses in the income statement for the period.
The financial statements are presented in the functional currency of Euros, since the majority of exploration expenditure is denominated in this currency.
1.16 Exceptional items
Items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the group. They are items that are material, either because of their size or nature, or that are non-recurring.
1.17 Joint Arrangements
Up to 24 June 2021, the Group's core activities in relation to the Zinnwald Lithium project were conducted through joint arrangements in which two or more parties have joint control. A joint arrangement is classified as either a joint operation or a joint venture, depending on the rights and obligations of the parties to the arrangement.
Joint operations arise when the Group has a direct ownership interest in jointly controlled assets and obligations for liabilities. The Group does not currently hold this type of arrangement.
Joint ventures arise when the Group has rights to the net assets of the arrangement. For these arrangements, the Group uses equity accounting and recognises initial and subsequent investments at cost, adjusting for the Group's share of the joint venture's income or loss, dividends received and other comprehensive income thereafter. When the Group's share of losses in a joint venture equals or exceeds its interest in a joint venture it does not recognise further losses. The transactions between the Group and the joint venture are assessed for recognition in accordance with IFRS.
No gain on acquisition, comprising the excess of the Group's share of the net fair value of the investee's identifiable assets and liabilities over the cost of investment, has been recognised in profit or loss. The net fair value of the identifiable assets and liabilities have been adjusted to equal cost.
Joint ventures are tested for impairment whenever objective evidence indicates that the carrying amount of the investment may not be recoverable under the equity method of accounting. The impairment amount is measured as the difference between the carrying amount of the investment and the higher of its fair value less costs of disposal and its value in use. Impairment losses are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised.
1.18 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer, who is considered to be the group's chief operating decision-maker ('CODM').
1.19 New standards, amendments and interpretations not yet adopted
There were no new standards or amendments to standards adopted by the group and company during the year which had a material impact on the financial statements.
At the date of approval of these financial statements, the following standards and amendments were in issue but not yet effective, and have not been early adopted:
· IFRS 3 amendments - Business Combinations (effective 1 January 2022)
· IAS 16 amendments - Property, Plant and Equipment* (effective 1 January 2022)
· IAS 37 amendments - Provisions, Contingent Liabilities and Contingent Assets* (effective 1 January 2022),
· IAS 1 amendments - Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current*
· IAS 1 amendments - Presentation of Financial Statements: Disclosure of Accounting Policies*, and
· IAS 8 amendments - Changes in Accounting Estimates and Errors: Definition of Accounting Estimates*
· Annual Improvements to IFRS Standards 2018-2020 Cycle* (effective 1 January 2022).
*subject to UK endorsement
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the group or company.
2 Judgements and key sources of estimation uncertainty
In the application of the accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Critical judgements
The following judgements and estimates have had the most significant effect on amounts recognised in the financial statements.
Share-based payments
Estimating fair value for share based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them. For the measurement of the fair value of equity settled transactions with employees at the grant date, the Group and Company use the Black Scholes model.
Joint venture investment
The Group applies IFRS 11 to all joint arrangements and classifies them as either joint operations or joint ventures, depending on the contractual rights and obligations of each investor. The Group held 50% of the voting rights of its joint arrangement with SolarWorld AG. The Group determined itself to have joint control over this arrangement as under the contractual agreements, unanimous consent is required from all parties to the agreements for certain key strategic, operating, investing and financing policies. The Group's joint arrangement was structured through a limited liability entity, Deutsche Lithium GmbH, and provided the Group and SolarWorld AG (parties to the joint venture agreement) with rights to the net assets of Deutsche Lithium under the arrangements. Therefore, this arrangement was classified as a joint venture up to 24 June 2021 when the Company acquired the remaining 50% of Deutsche Lithium and thereafter consolidated its full results
The investment was assessed at each reporting period date for impairment. An impairment is recognised if there is objective evidence that events after the recognition of the investment have had an impact on the estimated future cash flows which can be reliably estimated. In addition, the assessment as to whether economically recoverable reserves exist is itself an estimation process. Under IFRS 3, on acquisition of the additional stake in the joint venture, the Company remeasured the fair value of its original investment in the joint venture and recognised a gain.
Impairment of Capitalised Exploration Costs
Excluding the newly acquired exploration assets of Deutsche Lithium, other Group capitalised exploration costs had a carrying value as at 31 December 2021 of €186,995 (2020: €1,546,111). Ordinarily, Management tests annually whether capitalised exploration costs have a carrying value in accordance with the accounting policy stated in note 1.6. Due to the acquisition of the remaining shareholding in Deutsche Lithium and the Company's now sole focus on the Zinnwald Lithium project, the Directors elected to undertake a full review of non-core assets as part of the Interim accounts review. Each exploration project is subject to a review either by a consultant or an appropriately experienced Director to determine if the exploration results returned to date warrant further exploration expenditure and have the potential to result in an economic discovery. This review takes into consideration long-term metal prices, anticipated resource volumes and grades, permitting and infrastructure as well as the likelihood of on-going funding from joint venture partners. In the event that a project does not represent an economic exploration target and results indicate that there is no additional upside, or that future funding from joint venture partners is unlikely, a decision will be made to discontinue exploration.
In Ireland, five licences were originally granted for six years in 2013 and in Q3 2019, the Group extended these licences for a further six years. The exploration work identified excellent mineralisation in its drill holes and the metallurgical review has shown a good quality concentrate can be produced. However, in 2021, the Group elected to relinquish the four non-core licences but undertook the required further exploration work to maintain the core licence area (PL 3735) at Abbeytown and expects that this spend meets the requirement to maintain this licence in good standing through to Q3 2022. Whilst the current Zinc market is relatively subdued and Zinnwald is no longer focussed on Ireland, the Company still intends to find a JV Partner for PL 3735. Accordingly, the Board has concluded that an impairment charge should be made in the 2021 interim accounts in regard to capitalised costs from the Irish licences, which has resulted in an impairment of €1,581,677 (2020: €477,595).
In 2021 in Sweden, the Company has been unable to find a joint venture partner to further develop its licences and has elected to cease all operations, close its Filial branch and relinquish all licences. In 2020, the Company fully impaired its Swedish assets and the Board have recommended a further impairment charge of €1,889 for expenditure made in 2021 (2020: €114,870).
3 Financial Risk and Capital Risk Management
The Group's and Company's activities expose it to a variety of financial risks: market risk (primarily currency risks), credit risk and liquidity risk. The overall risk management programme focusses on currency and working capital management.
Foreign Exchange Risk
The Company operates internationally and is exposed to foreign exchange risk arising from one main currency exposure, namely GBP for its Head Office costs and the value of its shares for fund-raising and Euros for a material part of its operating expenditure. The Group's Treasury risk management policy is currently to hold most of its cash reserves in GBPs and to match as promptly as possible its Euro expenditures on its commitments in Germany.
Credit and Interest Rate Risk
The Group and Company have no borrowings and a low level of trade creditors and have minimal credit or interest rate risk exposure.
Working Capital and Liquidity Risk
Cashflow and working capital forecasting is performed in the operating entities of the Group and consolidated at a Group level basis for monthly reporting to the Board. The Directors monitor these reports and rolling forecasts to ensure the Group has sufficient cash to meet its operational needs. The Board has a policy of maintaining at least a GBP 0.5m cash reserve headroom. Aside from its commitments under the Deutsche Lithium Joint Venture, the Group has no other material fixed cost overheads other than Director costs
4 Segmental reporting
The Group operates principally in the UK and Germany with a largely dormant subsidiary in Ireland. Activities in the UK include the Head Office corporate and administrative costs whilst the activities in Germany relate to the work done by Deutsche Lithium on the Group's primary asset of the Zinnwald Lithium Project. The reports used by the Board and Management are based on these geographical segments. As noted earlier, the results of Germany were reported as an Investment in Joint Venture for the period to 24 June 2021, and from thereon are reported on a fully consolidated basis.
|
|
Non-Core Assets |
Germany |
UK |
Total |
|
|
2021 |
2021 |
2021 |
2021 |
|
|
€ |
€ |
€ |
€ |
|
|
|
|
|
|
|
Cost of sales and administrative expenses |
(6,270) |
(151,979) |
(1,206,383) |
(1,364,632) |
|
Share based payments charge |
- |
- |
(7,779) |
(7,779) |
|
Project Impairment |
(1,583,566) |
- |
|
(1,583,566) |
|
Gain/loss on foreign exchange |
(1) |
|
242,099 |
242,098 |
|
Other operating income |
- |
779 |
1,038,707 |
1,039,486 |
|
Share of loss from joint venture |
- |
(52,911) |
- |
(52,911) |
|
|
|
|
|
|
|
Profit/(loss) from operations per reportable segment |
(1,589,837) |
(204,111) |
66,644 |
(1,727,304) |
|
|
|
|
|
|
|
Reportable segment assets |
15,144 |
16,242,874 |
8,369,525 |
24,627,543 |
|
Reportable segment liabilities |
- |
1,664,143 |
357,386 |
2,021,529 |
|
|
|
|
|
|
|
|
Non-Core Assets |
Germany |
UK |
Total |
|
|
2020 |
2020 |
2020 |
2020 |
|
|
€ |
€ |
€ |
€ |
|
|
|
|
|
|
|
Cost of sales and administrative expenses |
(64,358) |
- |
(1,451,017) |
(1,515,375) |
|
Share based payments charge |
- |
- |
(3,725) |
(3,725) |
|
Project Impairment |
(592,465) |
- |
- |
(592,465) |
|
Gain/loss on foreign exchange |
(3,503) |
- |
(67,958) |
(71,461) |
|
Other operating income |
- |
- |
367 |
367 |
|
Share of loss from joint venture |
- |
(32,579) |
- |
(32,579) |
|
|
|
|
|
|
|
Profit/(loss) from operations per reportable segment |
(660,326) |
(32,579) |
(1,522,333) |
(2,215,238) |
|
|
|
|
|
|
|
Reportable segment assets |
1,565,029 |
- |
8,854,280 |
10,419,309 |
|
Reportable segment liabilities |
- |
- |
58,833 |
58,833 |
Non-Core Assets includes Ireland, Scandinavia, Finland and Scotland. Ireland is the only one with material balances within this category and makes up a majority of the balances.
5 Operating loss
|
|
|
|
|
|
|
|
Group |
|
|
|
|
2021 |
2020 |
|
|
|
€ |
€ |
|
|
Operating loss for the year is stated after charging/(crediting): |
|
|
|
|
|
|
|
|
|
Exchange (gains)/losses |
(242,098) |
71,461 |
|
|
Depreciation of owned property, plant and equipment |
7,077 |
244 |
|
|
Profit on disposal of property, plant and equipment |
- |
(5,300) |
|
|
Amortisation of intangible assets |
829 |
- |
|
|
Ireland and Sweden exploration projects impairment |
1,583,566 |
592,465 |
|
|
RTO costs |
- |
839,940 |
|
|
Share-based payments |
7,779 |
3,725 |
|
|
Operating lease charges |
39,098 |
40,942 |
|
|
Exploration costs expensed |
143,735 |
64,358 |
|
|
|
|
|
|
|
|
|
|
|
6 |
Auditor's remuneration |
|
|
|
|
|
2021 |
2020 |
|
|
Fees payable to the company's auditor and associates: |
€ |
€ |
|
|
|
|
|
|
|
For audit services |
|
|
|
|
Audit of group, parent company and subsidiary undertakings |
41,952 |
31,164 |
|
|
|
|
|
|
|
For other services |
|
|
|
|
Taxation compliance services |
3,500 |
3,799 |
|
|
Reporting accountant work for the Admission Document |
- |
61,205 |
|
|
|
|
|
|
|
|
3,500 |
65,004 |
|
|
|
|
|
|
7 |
Other gains and losses |
|
|
|
|
|
2021 |
2020 |
|
|
|
€ |
€ |
|
|
|
|
|
|
|
Gain on re-measurement of initial 50% interest in Deutsche Lithium |
1,038,252 |
- |
|
|
|
|
|
|
8 |
Employees |
|
|
|
|
|
|
|
|
|
The average monthly number of persons (including directors) employed by the group and company during the year was: |
|
|
|
|
|
|
|
|
|
|
Group |
|
|
|
|
2021 |
2020 |
|
|
|
Number |
Number |
|
|
|
|
|
|
|
Directors |
5 |
5 |
|
|
Employees |
6 |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
8 |
|
|
|
|
|
|
|
Their aggregate remuneration comprised: |
|
|
|
|
|
|
|
|
|
|
Group |
|
|
|
|
2021 |
2020 |
|
|
|
€ |
€ |
|
|
|
|
|
|
|
Wages and salaries |
870,447 |
416,827 |
|
|
Social security costs |
111,925 |
40,941 |
|
|
Pension costs |
38,005 |
12,399 |
|
|
|
|
|
|
|
|
1,114,135 |
470,167 |
|
Aggregate remuneration expenses of the group include €225,499 (2020: €150,583) of costs capitalised and included within non-current assets of the group.
Aggregate remuneration expenses of the company include €nil (2020: €3,397) of costs capitalised and included within non-current assets of the group. |
|||
|
|
|
|
|
|
Directors' remuneration is disclosed in note 33. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
Finance income |
|
|
|
|
|
Group |
|
|
|
|
2021 |
2020 |
|
|
|
€ |
€ |
|
|
Interest income |
|
|
|
|
Interest on bank deposits |
455 |
367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
Share of results in Joint Venture |
|
|
|
|
|
Group |
|
|
|
|
2021 |
2020 |
|
|
|
€ |
€ |
|
|
|
|
|
|
|
Share of Loss in Joint Venture |
(52,911) |
(32,579) |
|
|
|
|
|
|
|
|
(52,911) |
(32,579) |
|
11 |
Impairments |
|
|
|
|
|
|
|
|
|
|
|
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss: |
|||
|
|
|
|
|
|
|
|
|
|
2021 |
2020 |
|
|
|
Notes |
€ |
€ |
|
|
In respect of: |
|
|
|
|
|
Intangible assets |
14 |
1,583,566 |
592,465 |
|
|
|
|
|
|
|
|
Recognised in: |
|
|
|
|
|
Administrative expenses |
|
1,583,566 |
592,465 |
|
|
|
|
|
|
|
|
The impairment losses in respect of financial assets are recognised in other gains and losses in the income statement. |
|
||
|
|
|
|
|
|
|
12 |
Taxation |
|
|
|
|
|
|
|
|
|
|
|
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows: |
|||
|
|
|
|
|
|
|
|
|
|
Group |
|
|
|
|
|
2021 |
2020 |
|
|
|
|
€ |
€ |
|
|
|
|
|
|
|
|
Loss before taxation |
|
(1,727,304) |
(2,215,238) |
|
|
|
|
|
|
|
|
Expected tax credit based on the standard rate of corporation tax in the UK of 19.00% (2020: 19.00%) |
|
(328,188) |
(420,895) |
|
|
Disallowable expenses |
|
11,531 |
166,486 |
|
|
Non-taxable gains |
|
(197,268) |
|
|
|
Unutilised tax losses carried forward |
|
513,925 |
254,409 |
|
|
|
|
|
|
|
|
Taxation charge for the year |
|
- |
- |
|
|
|
|
|
|
|
|
Losses available to carry forward amount to €3,730,000 (2020: €2,316,000). No deferred tax asset has been recognised on these losses, as the probability of available future taxable profits is not currently quantifiable. |
|||
|
|
|
|
|
|
|
13 |
Earnings per share |
2021 |
2020 |
|
|
|
|
Number |
Number |
|
|
|
Weighted average number of ordinary shares for basic earnings per share |
232,669,857 |
63,203,583 |
|
|
|
|
|
|
|
|
|
Effect of dilutive potential ordinary shares: |
|
|
|
|
|
Weighted average number of outstanding share options |
2,265,890 |
3,183,333 |
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares for diluted earnings per share |
234,935,747 |
66,386,916 |
|
|
|
|
|
|
|
|
|
Earnings |
€ |
€ |
|
|
|
Continuing operations |
|
|
|
|
|
Loss for the period from continuing operations |
(1,727,304) |
(2,215,238) |
|
|
|
|
|
|
|
|
|
Earnings for basic and diluted earnings per share attributable to equity shareholders of the company |
(1,727,304) |
(2,215,238) |
|
|
|
|
|
|
|
|
|
Earnings per share for continuing operations |
|
|
|
|
|
Basic and diluted earnings per share |
- |
- |
|
|
|
|
|
|
|
|
|
Basic earnings per share |
(1) |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
(1) |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There is no difference between the basic and diluted earnings per share for the period ended 31 December 2021 or 2020 as the effect of the exercise of options would be anti-dilutive. |
||||
|
14 |
Intangible fixed assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
Germany Exploration and Evaluation costs |
Ireland Exploration and Evaluation costs |
Sweden Exploration and Evaluation costs |
Total |
|
|
|
€ |
€ |
€ |
€ |
€ |
|
|
Cost |
|
|
|
|
|
|
|
At 1 January 2020 |
|
|
1,895,332 |
107,002 |
2,002,334 |
|
|
Additions - group funded |
|
|
128,374 |
7,868 |
136,242 |
|
|
|
|
|
|
|
|
|
|
At 31 December 2020 |
- |
- |
2,023,706 |
114,870 |
2,138,576 |
|
|
Revaluation - on acquisition of subsidiary |
1,038,252 |
- |
- |
- |
1,038,252 |
|
|
Additions - on acquisition of subsidiary |
4,493,222 |
8,303,416 |
- |
- |
12,796,638 |
|
|
Reallocated to Germany E&E |
(5,531,474) |
5,531,474 |
- |
- |
- |
|
|
Deferred tax provision on fair value |
- |
1,382,868 |
- |
- |
1,382,868 |
|
|
Additions - group funded |
- |
948,156 |
35,566 |
1,889 |
985,611 |
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
- |
16,165,914 |
2,059,272 |
116,759 |
18,341,945 |
|
|
|
|
|
|
|
|
|
|
Amortisation and impairment |
|
|
|
|
|
|
|
At 1 January 2021 |
- |
- |
477,595 |
114,870 |
592,465 |
|
|
Amortisation charged for the year |
- |
829 |
- |
- |
829 |
|
|
Project impairment |
- |
- |
1,581,677 |
1,889 |
1,583,566 |
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
- |
829 |
2,059,272 |
116,759 |
2,176,860 |
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
|
|
At 31 December 2021 |
- |
16,165,085 |
- |
- |
16,165,085 |
|
|
|
|
|
|
|
|
|
|
At 31 December 2020 |
- |
- |
1,546,111 |
- |
1,546,111 |
|
|
|
|
|
|
|
|
|
|
Intangible assets comprise capitalised exploration and evaluation costs (direct costs, licence fees and fixed salary / consultant costs) of the Zinnwald Lithium project in Germany, as well as the now fully impaired Ireland Zinc and Sweden Gold Projects. |
|||||
|
15 |
Property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold land and buildings |
Fixtures, fittings and equipment |
Motor vehicles |
Total |
|
|
|
|
€ |
€ |
€ |
€ |
|
|
|
Cost |
|
|
|
|
|
|
|
At 1 January 2021 |
- |
14,769 |
- |
14,769 |
|
|
|
Additions - on acquisition of subsidiary |
9,817 |
1,175 |
32,427 |
43,419 |
|
|
|
Additions - group |
- |
8,437 |
- |
8,437 |
|
|
|
Exchange adjustments |
- |
261 |
- |
261 |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
9,817 |
24,381 |
32,427 |
66,886 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and impairment |
|
|
|
|
|
|
|
At 1 January 2021 |
- |
11,107 |
- |
11,107 |
|
|
|
Depreciation |
- |
1,956 |
5,122 |
7,078 |
|
|
|
Exchange adjustments |
- |
80 |
- |
80 |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2021 |
- |
13,063 |
5,122 |
18,265 |
|
|
|
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
|
|
At 31 December 2021 |
9,817 |
11,499 |
27,305 |
48,621 |
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2020 |
- |
3,662 |
- |
3,662 |
|
|
|
|
|
|
|
|
|
|
16 |
Fixed asset investments |
|
|
|
|
|
|
|
|
|
Group |
|
||
|
|
|
Notes |
2021 |
2020 |
|
|
|
|
|
|
€ |
€ |
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries |
17 |
- |
- |
|
|
|
|
Investments in joint ventures |
|
- |
3,852,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
3,852,083 |
|
|
|
|
|
|
|
|
|
|
|
|
Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid. |
|||||
|
|
Movements in non-current investments |
|||
|
|
|
|
|
Shares in group undertakings and participating interests |
|
|
€ |
|
|
|
|
|
Cost |
|
|
|
|
|
At 1 January 2021 |
|
|
3,852,083 |
|
|
Additions |
|
|
735,800 |
|
|
Share of loss |
|
|
(52,911) |
|
|
Reclassified on consolidation of Deutsche Lithium |
|
|
(4,534,972) |
|
|
|
|
|
|
|
|
At 31 December 2021 |
|
|
- |
|
|
|
|
|
|
|
|
Carrying amount |
|
|
|
|
|
At 31 December 2021 |
|
|
- |
|
|
|
|
|
|
|
|
At 31 December 2020 |
|
|
3,852,083 |
|
|
|
|
|
|
|
|
Movements in non-current investments |
|||
16.1 Initial Investment in Deutsche Lithium
On 29 October 2020, the Company completed the acquisition of a 50% shareholding in Deutsche Lithium Gmbh ("Deutsche Lithium") from Bacanora Lithium Plc ("Bacanora") via a reverse takeover. Bacanora contributed its share in Deutsche Lithium and €1.35m in cash in exchange for 90,619,170 new shares in the Company at a price of 5p per share and a 2% Net Profits Royalty. The Company thereafter took over the obligations due under the Deutsche Lithium Joint Venture Agreement and made all payments due monthly from October 2020 to June 2021.
The Company held one of the two managing director positions and a 50% shareholding in Deutsche Lithium, but only had a casting vote on purely operational development matters. Therefore, the Directors concluded that the Company only had significant influence over Deutsche Lithium and not control.
The Company followed the requirements of IAS 28 in applying the equity method and increased or decreased the investment by recognising its share of the profit or loss and other comprehensive income from Deutsche Lithium.
The table below shows the movements in the equity accounted investment:
|
|
€ |
|
Value of 50% share in Deutsche Lithium acquired from Bacanora on 29 October 2020 |
3,685,662 |
|
Funds provided under the terms of the Joint Venture Agreement |
165,000 |
|
Additional committed funds for further testwork |
34,000 |
|
Share of Deutsche Lithium Loss for the period November to December 2020 |
(32,579) |
|
|
|
|
Carrying Value as at 31 December 2020 |
3,852,083 |
|
Funds provided under the terms of the Joint Venture Agreement |
330,000 |
|
Additional committed funds for further testwork |
389,800 |
|
Additional review work |
16,000 |
|
Share of Deutsche Lithium Loss for the period January to June 2021 |
(52,911) |
|
|
|
|
Carrying Value as at 24 June 2021 |
4,534,972 |
16.2 Remeasurement of fair value of initial holding in Deutsche Lithium
Under IFRS 3, on acquisition of the controlling stake, the Company remeasured the fair value of its original investment in Deutsche Lithium. In terms of calculating that revaluation and any resulting gain or loss, the Directors noted that both transactions were conducted on an arms-length basis with unconnected third-parties. The Directors considered that there was a significant control premium in acquiring the second 50% of Deutsche Lithium and used an estimate of 30% in its calculations of the revaluation of the fair value of the initial shareholding.
|
Value of second acquisition |
€ 8,781,062 |
Control premium (30%) of Net Value |
€ 2,388,525 |
|
Less: Cash in company |
(486,213) |
Fair Value of original investment |
€ 5,573,224 |
|
Less: Free Carry eliminated |
(333,100) |
Cash |
€ 486,213 |
|
Net Value of second acquisition |
€ 7,961,749 |
Release of obligation |
€ 333,100 |
|
|
|
Value of second Acquisition |
€ 8,781,062 |
|
|
|
|
|
|
|
|
Carrying Value at 24 June 2021 |
€ 4,534,972 |
|
|
|
Gain recognised on revaluation |
€ 1,038,252 |
16.3 Accounting for acquisition of remaining 50% of Deutsche Lithium
On 24 June 2021, the Company completed the acquisition of SolarWorld AG's 50% shareholding in Deutsche Lithium by the payment of €1.5m in cash and the issuance of 49,999,996 new shares in the Company. These new shares were valued at the closing price on 21 June 2021 of 12.5p, as all legal agreements became legally binding on completion on the morning of 22 June 2021, conditional solely on admission of the new shares on 24 June 2021. These 49,999,996 new shares were valued at 12.5p per share and an exchange rate of €1.16497, equating to a total value of €8,781,062 including the cash element.
On 24 June 2021, by virtue of acquiring the remaining 50% of Deutsche Lithium it did not own, the Company became the owner of 100% of Deutsche Lithium and the Joint Venture Agreement that covered its management was automatically terminated. This transaction is categorised as a 'step acquisition' under IFRS 3 whereby the Company now has a 100% owned subsidiary. Management has concluded that the acquisition is one of a business rather than an asset and accordingly, Deutsche Lithium moves from being equity accounted as a Joint Venture to being fully consolidated as a subsidiary undertaking.
16.4 Commitments under the Deutsche Lithium JV Agreement
The Company signed a Deed of Adherence to abide by the terms of the Joint Venture Agreement. The only outstanding financial commitment was the 2nd Amendment entered into by Bacanora in February 2020 by which it committed to fund Deutsche Lithium with €1.35m in monthly instalments over two years. At the date of completion of the initial acquisition of 50% of Deutsche Lithium by the Company, the amount outstanding was €0.935m, as at 31 December 2020 it was €0.770m and as at 24 June 2021 it was €440,000. On completion of the acquisition of the remaining 50% of Deutsche Lithium, the Joint Venture Agreement was formally terminated and the Company shall henceforth fund the operations at Deutsche Lithium as a normal subsidiary undertaking.
On consolidation as at 24 June 2021, a calculation was required under normal acquisition rules to calculate the goodwill arising at the date of acquisition, but taking into consideration the 50% already owned at that date. The previously held 50% investment in Deutsche Lithium at Fair Value is derecognised and replaced with the assets and liabilities of Deutsche Lithium, so that going forward it is consolidated in full as normal as a subsidiary undertaking. The Directors have concluded that there should be no adjustment to the carrying value of Deutsche Lithium's Net Assets. The Directors undertook a detailed review of Deutsche Lithium's balance sheet at the time of the Company's acquisition of the remaining 50% of Deutsche Lithium it did not own and concluded that no adjustments were required. Since that date, Deutsche Lithium has continued with the same accounting policies, which are in accordance with those of the Company.
|
Fair Value of consideration given to acquire the controlling interest |
|
€ |
|
Cash of €1.5m |
|
1,500,000 |
|
49,999,996 new shares |
|
7,281,062 |
|
|
|
|
|
Total |
|
8,781,062 |
|
Fair value of 50% investment in Deutsche Lithium as at 24 June 2021 |
|
5,573,224 |
|
|
|
|
|
|
|
14,354,286 |
|
Fair value of net assets acquired in Deutsche Lithium as at 24 June 2021 |
|
(8,822,812) |
|
|
|
|
|
Goodwill - allocated to Deutsche Lithium intangible exploration assets |
|
5,531,474 |
17 Subsidiaries
Details of the company's subsidiaries as at 31 December 2021 are as follows:
|
|
|
|
|
% Held |
|
|
Name of undertaking |
Registered office |
Nature of business |
Class of shares held |
Direct |
Indirect |
|
|
|
|
|
|
|
|
Deutsche Lithium Holdings Ltd |
United Kingdom |
Exploration |
Ordinary |
100 |
- |
|
Erris Zinc Limited |
Ireland |
Exploration |
Ordinary |
100 |
- |
|
Deutsche Lithium GmbH |
Germany |
Exploration |
Ordinary |
- |
100 |
On 1 December 2017, Zinnwald Lithium Plc acquired the entire issued share capital of Deutsche Lithium Holdings Ltd (formerly Erris Resources (Exploration) Ltd) by way of a share for share exchange. This transaction has been treated as a group reconstruction and accounted for using the reverse merger accounting method. Its registered office address is 29-31 Castle Street, High Wycombe, Bucks, HP13 6RU.
On 26 February 2018, Zinnwald Lithium Plc acquired the entire issued share capital of Erris Zinc Limited on incorporation. Erris Zinc Limited is a company registered in Ireland. Its registered office address is The Bungalow, Newport Road, Castlebar, Co. Mayo. F23YF24.
On 29 October 2020, Zinnwald Lithium Plc acquired 50% of the issued share capital of Deutsche Lithium GmbH ("Deutsche Lithium"). On 24 June 2021, the Company acquired the remaining 50% of the issued share capital of Deutsche Lithium. Deutsche Lithium is a company registered in Germany. Its registered office is at Am St Niclas Schacht 13, 09599, Freiberg, Germany.
18 Trade and other receivables - credit risk
Fair value of trade and other receivables
The directors consider that the carrying amount of trade and other receivables is equal to their fair value.
No significant balances are impaired at the reporting end date.
19 Financial Instruments
|
|
Group |
|
||
|
|
2021 |
2020 |
|
|
|
|
€ |
€ |
|
|
|
Financial assets at amortised cost |
|
|
|
|
|
Trade and other receivables |
121,845 |
170,926 |
|
|
|
Cash and bank balances |
8,291,991 |
4,846,527 |
|
|
|
|
|
|
|
|
|
|
8,413,836 |
5,017,453 |
|
|
|
|
|
|
|
|
|
Financial liabilities at amortised cost |
|
|
|
|
|
Trade and other payables |
614,859 |
58,833 |
|
|
|
|
|
|
|
|
|
|
614,859 |
58,833 |
|
|
20 Security held over cash
Under the terms of the Deed of Adherence with Bacanora Lithium Plc, entered into on 29 October 2020, Bacanora held a secured charge over a cash amount equal to the amount outstanding under the Deutsche Lithium JV Agreement. On completion of the acquisition of the remaining 50% of Deutsche Lithium in June 2021, the JV Agreement was cancelled and the charge over the company's bank account removed. There are no other securities remaining over any Group assets.
21 Trade and other receivables
|
|
Group |
|
||
|
|
2021 |
2020 |
|
|
|
Amounts falling due within one year: |
€ |
€ |
|
|
|
|
|
|
|
|
|
Amounts owed by group undertakings |
- |
- |
|
|
|
Other receivables |
83,982 |
133,459 |
|
|
|
Prepayments and accrued income |
37,863 |
37,467 |
|
|
|
|
|
|
|
|
|
|
121,845 |
170,926 |
|
|
|
|
|
|
|
|
|
Other receivables primarily comprise VAT recoverable, which were received following the year end. |
||||
|
|
|
|
|
|
|
The carrying amounts of the Group and Company's trade and other receivables are denominated in the following currencies: |
||||
|
|
|
|
|
|
|
|
Group |
|
||
|
|
2021 |
2020 |
|
|
|
Euros |
63,591 |
19,672 |
|
|
|
British Pounds |
58,254 |
151,254 |
|
|
|
|
|
|
|
|
|
|
121,845 |
170,926 |
|
|
|
22 |
Trade and other payables |
|
|
|
|
|
|
|
Group |
|
||
|
|
|
2021 |
2020 |
|
|
|
|
|
€ |
€ |
|
|
|
|
|
|
|
|
|
|
|
Trade payables |
313,391 |
14,108 |
|
|
|
|
Other taxation and social security |
23,802 |
- |
|
|
|
|
Other payables |
13,509 |
- |
|
|
|
|
Accruals and deferred income |
287,958 |
44,725 |
|
|
|
|
|
|
|
|
|
|
|
|
638,660 |
58,833 |
|
|
|
|
|
|
|
|
|
|
|
All Trade payables have been settled since the year end. |
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying amounts of the Group and Company's current liabilities are denominated in the following currencies: |
||||
|
|
|
|
|
|
|
|
|
|
Group |
|
||
|
|
|
2021 |
2020 |
|
|
|
|
Euros |
330,443 |
914 |
|
|
|
|
British Pounds |
308,217 |
57,919 |
|
|
|
|
|
|
|
|
|
|
|
|
638,660 |
58,833 |
|
|
|
|
|
|
|
|
|
|
23 |
Deferred taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon: |
||||
|
|
|
|
|
|
|
|
|
|
Liabilities |
Liabilities |
|
|
|
|
|
2021 |
2020 |
|
|
|
|
Group |
€ |
€ |
|
|
|
|
|
|
|
|
|
|
|
Deutsche Lithium intangible assets - fair value adjustment |
1,382,868 |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The deferred tax liability set out above relates to a 25% provision made on the fair value uplift of the company's acquisition of control of Deutsche Lithium GmbH. |
||||
|
|
|
|
|
|
|
|
24 |
Retirement benefit schemes |
|
|
|
|
|
|
|
2021 |
2020 |
|
|
|
|
Defined contribution schemes |
€ |
€ |
|
|
|
|
|
|
|
|
|
|
|
Charge to profit or loss in respect of defined contribution schemes |
38,005 |
12,099 |
|
|
|
|
|
|
|
|
|
|
|
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund. |
||||
25 Share based Incentives
The Directors believe that the success of the Group will depend to a significant degree on the performance of the Group's senior management team. The Directors also recognise the importance of ensuring that the management team are well motivated and identify closely with the success of the Group. The Company adopted an initial Share Option Plan in December 2017 and will continue to issue options to key employees, consultants and Non-Executive Directors. In October 2020, the Company's shareholders approved two additional new short-term and long-term incentive schemes for Executive Management, the key terms of which are detailed in the Remuneration Committee report.
25.1 Share Option Plan (2017)
Movements in the number of share options, under the Share Option Plan (2017), outstanding and their related weighted average exercise prices are as follows:
|
|
Year ended 31 December 2021 |
Year ended 31 December 2020 |
||
|
|
Average Exercise Price in £ per Share |
Options Number |
Average Exercise Price in £ per Share |
Options Number |
|
|
|
|
|
|
|
At beginning of the period |
£0.091 |
3,350,000 |
0.094 |
3,550,000 |
|
Granted |
- |
- |
- |
- |
|
Lapsed |
£0.100 |
(300,000) |
0.085 |
(400,000) |
|
Exercised |
£0.088 |
(1,150,000) |
|
|
|
|
|
|
|
|
|
At end of period |
£0.092 |
1,900,000 |
0.094 |
3,150,000 |
|
|
|
|
|
|
|
Exercisable at the period end |
|
1,900,000 |
|
3,150,000 |
|
|
|
|
|
|
|
Weighted average remaining exercise period, years |
|
1.27 |
|
2.96 |
|
Option Classification |
Issue Date |
No of Options |
Exercise Price |
Expiry Date |
|
|
01-Mar-14 |
300,000 |
£0.080 |
20/12/2022 |
|
|
01-Feb-17 |
300,000 |
£0.100 |
20/12/2022 |
|
|
21-Dec-17 |
1,100,000 |
£0.100 |
20/12/2022 |
|
|
29-Oct-20 |
200,000 |
£0.050 |
28/10/2025 |
|
|
|
|
|
|
|
|
|
1,900,000 |
£0.092 |
|
25.2 RSU Scheme (2020)
The first awards of RSUs under the new scheme were made on 15 January 2022 relating to the initial performance period from 1 October 2020 to 31 December 2021. A total of 1,909,531 RSUs were issued, which will be included on the register for next year's disclosure.
The next awards of RSUs will be made in January 2023 relating to the second performance period from 1 January 2022 to 31 December 2022.
25.3 - PSU Scheme (2020)
The first awards of PSUs under the new scheme are expected to be issued in January 2024, based on the initial performance period from 1 October 2020 to 31 December 2023. The maximum potential issuance under the first performance period is 6.000,000 PSUs, if all performance metrics are achieved.
The second awards of PSUs will be made in January 2025 relating to the second performance period from 1 January 2022 to 31 December 2024.
26 Share-based payment transactions
|
|
Group |
Company |
||
|
|
2021 |
2020 |
2021 |
2020 |
|
|
€ |
€ |
€ |
€ |
|
Expenses recognised in the year |
|
|
|
|
|
Options issued under the Share Option Plan (2017) |
7,779 |
3,725 |
7,779 |
3,725 |
Awards made under the new RSU and PSU scheme will be expensed over the relevant vesting periods for each scheme. The first RSU awards were made in January 2022 and will expensed over 2022 and 2023. The first PSU awards will be made in January 2024 and will expensed over 2024 and 2025.
27 Share capital
|
Group and company |
|
|
|
|
2021 |
2020 |
|
Ordinary share capital |
€ |
€ |
|
Issued and fully paid |
|
|
|
293,395,464 ordinary shares of 1p each |
3,316,249 |
2,278,155 |
|
|
|
|
|
|
3,316,249 |
2,278,155 |
|
|
|
|
|
The Group's share capital is issued in GBP £ 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 |
€ |
|
Ordinary shares of 1p each |
|
|
|
At 1 January 2021 |
204,455,957 |
2,278,155 |
|
Issue of fully paid shares (cash subscription) |
38,939,511 |
455,609 |
|
Issue of fully paid shares (consideration for shares in DL) |
49,999,996 |
582,485 |
|
|
|
|
|
At 31 December 2021 |
293,395,464 |
3,316,249 |
|
28 |
Share premium account |
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
|
|
Group |
|
||||||
|
|
|
2021 |
2020 |
|
|
||||
|
|
|
€ |
€ |
|
|
||||
|
|
|
|
|
|
|
||||
|
|
At beginning of year |
7,362,699 |
4,151,045 |
|
|
||||
|
|
Issue of new shares |
13,114,010 |
7,643,325 |
|
|
||||
|
|
Exercise of share options |
103,806 |
|
|
|
||||
|
|
Share issue expenses |
(291,028) |
- |
|
|
||||
|
|
Cancellation of share premium |
- |
(4,431,671) |
|
|
||||
|
|
|
|
|
|
|
||||
|
|
At end of period |
20,289,487 |
7,362,699 |
|
|
||||
|
|
In 2020, the Company's share premium account was cancelled by Special Resolution and by Court Order on 15 September 2020 and the funds were converted to retained earnings. |
||||||||
|
29 |
Other reserves |
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
Merger reserve |
Share based payment reserve |
Translation reserve |
Total |
|
|||
|
|
Group |
€ |
€ |
€ |
€ |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
At 1 January 2020 |
688,732 |
122,345 |
- |
811,077 |
|
|||
|
|
Additions |
- |
3,725 |
19 |
3,744 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
At 31 December 2020 |
688,732 |
126,070 |
19 |
814,821 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
Additions |
- |
7,779 |
181 |
7,960 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
At 31 December 2021 |
688,732 |
133,849 |
200 |
822,781 |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
A merger reserve was created in 2017 on the purchase of the entire share capital of Erris Resources (Exploration) Ltd (now renamed Deutsche Lithium Holdings Ltd) which was completed by way of a share for share exchange and which has been treated as a group reconstruction and accounted for using the reverse merger accounting method.
30 Financial commitments, guarantees and contingent liabilities
Bacanora Royalty Agreement
The Company and Bacanora entered into on completion of the Acquisition a royalty agreement which provides, that the Company agrees to pay Bacanora a royalty of 2 per cent. of the net profit received by the Company pursuant to its 50 per cent. shareholding in Deutsche Lithium and earned in relation to the sale of lithium products or minerals by Deutsche Lithium's projects on the Zinnwald and Falkenhain licence areas. The royalty fee shall be paid in Euros and paid by Deutsche Lithium half yearly. The agreement is for an initial term of 40 years and shall automatically extend for additional 20-year terms until mining and processing operations cease at Deutsche Lithium's projects at the Zinnwald and Falkenhain licence areas. The Company has undertaken to Bacanora to abide by certain obligations in relation to Deutsche Lithium's projects at the Zinnwald and Falkenhain licence areas such as complying with applicable laws and ensure that these projects are operated in accordance with the underlying licences and concessions granted to Deutsche Lithium. The Company shall have the right, but not the obligation, to extinguish at any time its right to pay a royalty fee to Bacanora prior to the expiry of the term by paying a one-off payment of €2,000,000. Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome can be considered probable or reasonably estimable and hence no provision has been made in the financial statements.
Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome can be considered probable or reasonably estimable and hence no provision has been made in the financial statements. The Directors note that the Royalty is only applicable to 50% of Deutsche Lithium's production and does not apply to the additional 50% of Deutsche Lithium acquired by the Company in June 2021. The Directors also note that the Royalty obligation will remain due to Bacanora after the completion of the acquisition of Bacanora by Ganfeng Lithium Limited.
Osisko Royalty Agreements
Deutsche Lithium Holdings Ltd ("DLH", formerly Erris Resources (Exploration) Ltd ("ERL") entered into Osisko Royalty Agreement 1 with Osisko on 16 September 2016 pursuant to which it granted a royalty to Osisko for a 1 per cent. net smelter return on the sale or disposition of all minerals provided from the Abbeytown Project. The royalty is based on published spot prices in relation to minerals delivered for processing and actual amounts received where raw ore or concentrates are sold. Osisko shall be entitled to elect to receive the royalty on precious metals in kind rather than cash. This royalty was granted to Osisko in consideration of Osisko's payment of C$500,000 to DLH. The royalty is perpetual and as such the agreement (and obligation on DLH to pay the royalty) shall continue indefinitely. Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome can be considered probable or reasonably estimable and hence no provision has been made in the financial statements.
ERL entered into Osisko Royalty Agreement 2 with Osisko on 16 September 2016 pursuant to which it granted a royalty to Osisko for a 1 per cent. net smelter return on the sale or disposition of all minerals provided from the Swedish properties (originally including Käringberget, Klippen, Nottjärn and Vaikijaur but, as at the date of this document, only Brännberg) licensed by ERL. The royalty also extends to any other mining rights ERL acquires or holds (or from time to time comes to acquire or hold) in Sweden and so applies to all exploration permits currently held in Sweden by ERL. The royalty is based on published spot prices in relation to minerals delivered for processing and actual amounts received where raw ore or concentrates are sold. Osisko shall be entitled to elect to receive the royalty on precious metals in kind rather than cash. This royalty was granted to Osisko in consideration of Osisko's payment of C$250,000 to Erris Resources UK. The royalty is perpetual and as such the agreement (and obligation on ERL to pay the royalty) shall continue indefinitely. Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome can be considered probable or reasonably estimable and hence no provision has been made in the financial statements. The Directors also note that the Company surrendered all licenses in Sweden in 2021 and have no plans to acquire any further licenses in Sweden.
Neither of the Osisko royalties apply to the Zinnwald Lithium project.
Grundtrask Acquisition Agreement
On 13 October 2016, the Company entered into an asset purchase agreement with Beowulf Mining Sweden AB ("Beowulf") pursuant to which the Company purchased exploration rights for the areas known as Grundsträsk nr 6 and Grundträsk nr 7 (together with all information relating thereto) from Beowulf. The consideration of US$200,000 will become payable subject to the Company announcing JORC indicated resource of 100,000 troy ounces of gold, together with a further amount of $2 per troy ounce on the announcement of indicated resource subject to a JORC indicated resource of at least 1 million troy ounces. Pursuant to this agreement, the Company is obliged to grant to Beowulf a royalty under which it is paid 1 per cent. of the net smelting revenue generated by the Company on any gold produced from the property. This royalty shall continue indefinitely unless the Company "buys out" the royalty by payment of US$2,000,000 to Beowulf. Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome can be considered probable or reasonably estimable and hence no provision has been made in the financial statements. The Company surrendered all license areas in Sweden during 2021, including Grundsträsk nr 6 and Grundträsk nr 7, and accordingly the Company considers its obligations under this Royalty to have expired.
|
31 |
Retained earnings |
|
|
|
|
|
|
|
Group |
|
||
|
|
|
2021 |
2020 |
|
|
|
|
|
€ |
€ |
|
|
|
|
|
|
|
|
|
|
|
At the beginning of the year |
(95,199) |
(1,820,744) |
|
|
|
|
Conversion of share premium |
- |
4,431,671 |
|
|
|
|
Loss for the year |
(1,727,304) |
(2,215,238) |
|
|
|
|
Dividends in specie |
- |
(490,888) |
|
|
|
|
|
|
|
|
|
|
|
At the end of the year |
(1,822,503) |
(95,199) |
|
|
32 Events after the reporting date
The assessment of the COVID-19 situation continues to evolve, as the changes to the COVID-19 virus and lock-down impacts continue. The success of the long-term vaccination programme has improved matters in the UK and Europe. This will continue to have some implications for the operations of the Group in the future, for example through restricting travel movements internationally and domestically and therefore delaying development activities. Due to the nature of present activities, the impact has been minimal to date. Management will continue to assess the impact of COVID-19 on the Group and Company, however, it is not possible to quantify the impact, if any, at this stage.
On 17 January 2022, the Company announced the grant of 1,909,530 Restricted Stock Units (RSUs) and 4,000,000 Options. The RSUs were issued to Executive Management under the RSU Scheme approved by shareholders in October 2020 and related to the first performance period from 1st October 2020 to 31st December 2021. The Options were primarily issued to Employees and Consultants under the terms of the Option Scheme approved by shareholders in 2017.
33 Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
|
|
Remuneration |
Pension |
Share Option Charge |
Remuneration |
Pension |
Share Option Charge |
|
|
€ |
|
€ |
€ |
€ |
€ |
|
|
|
|
|
|
|
|
|
Jeremy Martin |
58,289 |
- |
3,889 |
36,664 |
- |
1,863 |
|
Anton du Plessis |
375,454 |
26,128 |
- |
118,453 |
6,588 |
- |
|
Cherif Rifaat |
116,578 |
11,877 |
- |
78,969 |
5,511 |
- |
|
Graham Brown |
34,974 |
- |
3,890 |
28,767 |
- |
1,862 |
|
Jeremy Taylor-Firth |
- |
- |
- |
20,306 |
- |
- |
|
Peter Secker |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
585,295 |
38,005 |
7,779 |
283,159 |
12,099 |
3,725 |
Transactions with related parties
During the year the group entered into the following transactions with related parties:
|
|
Consultancy and expenses |
|
|
|
2021 |
2020 |
|
|
€ |
€ |
|
Group |
|
|
|
Erris Gold Resources |
14,289 |
- |
|
Key management personnel |
- |
50,648 |
|
|
|
|
|
Company |
|
|
|
Key management personnel |
- |
15,585 |
Aggregate consultancy and expenses include €nil (2020: €26,123) of costs capitalised and included within non-current assets. There were no amounts outstanding at the year end.
Henry Maxey, a substantial shareholder in the Company, entered into an agreement with the Company (the "Commitment Agreement") to subscribe for New Ordinary Shares in the December 2021 Placing for up to a value of £4.0 million. The Board considered that the Commitment Agreement was an important factor in the Placing proceeding and, as part thereof, therefore issued 258,064 New Ordinary Shares to Mr Maxey, equivalent to approximately £40,000 at the Placing Price.
34 Cash (used in)/generated from group operations
|
|
|
2021 |
2020 |
|
|
|
€ |
€ |
|
|
|
|
|
|
|
Loss for the year after tax |
(1,727,304) |
(2,215,238) |
|
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
Investment income |
(455) |
(367) |
|
|
Gain on disposal of property, plant and equipment |
- |
(5,300) |
|
|
Impairment of intangible assets in Ireland and Sweden |
1,583,566 |
592,465 |
|
|
Depreciation and impairment of property, plant and equipment |
7,906 |
243 |
|
|
Gain on remeasurement of initial interest in Joint Venture |
|
(1,038,252) |
|
|
Share of loss of Joint Venture |
52,911 |
32,579 |
|
|
Equity-settled share-based payment expense |
7,779 |
3,725 |
|
|
|
|
|
|
|
Movements in working capital: |
|
|
|
|
Decrease/(increase) in trade and other receivables |
79,969 |
(135,629) |
|
|
Increase in trade and other payables |
538,706 |
16,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in operations |
(495,174) |
(1,711,087) |
|
|
|
|
|
|
|
|
|
|
*ENDS*
For further information visit www.zinnwaldlithium.com or contact:
|
Anton du Plessis |
Zinnwald Lithium plc |
|
|
David Hart/Liz Kirchner |
Allenby Capital Limited Nominated Adviser |
+44 (0) 20 3328 5656 |
|
Michael Seabrook Robert Hayward |
Oberon Capital Ltd Broker |
+44 (0) 20 3179 5300 |
|
Isabel de Salis/Catherine Leftley |
St Brides Partners Ltd Financial PR |
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