Operational & Corporate Update

Zinnwald Lithium PLC

14 June 2023

 

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the UK Market Abuse Regulation. With the publication of this announcement, this information is now considered to be in the public domain.

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

14 June 2023

Zinnwald Lithium plc ("Zinnwald Lithium" or the "Company")

Operational & Corporate Update

Zinnwald Lithium plc, the European focused lithium company developing the Zinnwald Lithium Project (the 'Project') in Germany, is pleased to provide an operational and corporate update on its activities.

HIGHLIGHTS

·    Successful fundraise at the end of March 2023 of £18.75 million supported by existing shareholders and anchored by AMG Critical Materials N.V. ("AMG"), a European strategic investor with a focus on critical minerals.

·    Funds raised have allowed the Company to accelerate its work across multiple areas, particularly its extensive infill drilling campaign at the Zinnwald Lithium Project.

·    Completed as many drill holes since the beginning of April 2023 as had been drilled previously during this campaign.

·    In total, 16.9 km drilled over 56 drill holes at the Zinnwald license with drill results supporting the Company's understanding of the ore body.

·    The intersections in Albite Granite lithology continue to yield consistent and extensive mineralised intervals. This supports the Company's strategy of planning for high productivity mining methods which will, potentially, support a higher level of production compared to what was estimated in the Preliminary Economic Assessment ("PEA") (c. 12ktpa LiOH*H20 per annum) published in September 2022

·    The new drill-core has also been used to provide a representative bulk sample to Metso and UVR FIA to undertake confirmatory bench and pilot scale mineral processing testwork.

·    Completion of the value-optimised bankable feasibility study ('BFS') anticipated early in 2024 with work ongoing to ensure that the overall timetable of the Project is not unduly impacted.

·    Completion of the sale of the Company's Abbeytown zinc-lead project in Ireland to Ocean Partners.

Zinnwald Lithium CEO, Anton du Plessis, commented: "With a strong cash position of €20.9 million, we are accelerating multiple workstreams as we focus on completing a BFS at our integrated LiOH project in Germany  early in 2024 and expanding the Project's size and scope ahead of commencing construction.  This includes an extensive infill drill campaign at our core deposit, where a total 16.9 km over 56 holes have now been drilled, with results yielding consistent and extensive mineralised intervals that we envisage will enable us to upgrade the resource later in the year and deliver a higher output at the Project than the 12ktpa LiOH highlighted in the PEA released in September 2022."

OPERATIONAL UPDATE

Zinnwald Lithium is making significant progress in the development of its flagship Zinnwald Lithium Project in Germany.

Infill and Resource Delineation Drill Programme

The successful fundraise completed at the end of March 2023 has enabled the Company to significantly accelerate its resource delineation drilling activities. The Company has now doubled the number of drill rigs and, since April, an additional 6,815 m of diamond core drilling across 28 drill holes have been completed taking the total to 16,883 m across 56 drill holes at the Zinnwald Mining license during this drill campaign. It is anticipated that an additional 27 drill holes will be required to complete the programme over the coming months.

The objectives of the programme are to:

·    Increase drillhole and data density in parts of the deposit to further optimise the geological model to support Bankable Feasibility Study ('BFS') level mine planning, metallurgical and geotechnical engineering workstreams;

·    Generate additional geological and geometallurgical data to support inclusion of the mineralised Albite Granite (Type 2) lithology in order to upgrade the existing Mineral Resource Estimate ('MRE');

·    Improve resolution of the extents of the Type 1 (high grade Greisen mineralisation); and

·    Improve confidence in available existing historical drillhole data.

Following completion of the drilling programme, anticipated during Q3 2023, the results will be used to update the geological and mineralisation models with the objective of producing an updated MRE later in 2023. SRK Consulting (UK) ('SRK') has been commissioned to complete the MRE.

The Albite Granite or also previously called the "Greisenised Granite" or "Type 2" is recognised as a mineralised alteration halo surrounding the higher-grade Greisen type mineralisation ("Type 1"). Here the Albite Granite contains disseminated zinnwaldite mineralisation that can be laterally and vertically extensive, reaching up to 80m (vertical) thickness in places. In the 2019 NI43-101 Technical report, the potential in situ mineral inventory of Albite Granite was estimated at 214 Mt at a Li grade of 0.37 % Li2O (1,700 ppm Li). One of the objectives of the ongoing drilling programme is to better delineate and quantify this style of mineralisation for possible inclusion in the updated MRE.

The Company anticipates that the inclusion of Albite Granite mineralisation will increase the Zinnwald Lithium Projects Mineral Resource base. This will also serve to better align the Project's metrics with other known zinnwaldite deposits as well as strengthen the Company's operational and production capacity. Here, the inclusion of the Albite granite will also allow consideration of higher productivity mining methods, such as AVOCA or Sublevel Stoping that will drive productivity and simplify operational planning.

Key insights from results of the current drill programme are (see relevant graphics included at the end of this release):

·    The Greisens, which host the strongest levels of Li mineralisation, trend along a North West-South East axis across the granite cupola (see overview map and sections in appendix).

·    There are further opportunities for expansion to the west, south towards the national boundary, and in particular to the South East where high-grade mineralisation remains open.

·    Intersections in Albite Granite lithology continue to yield consistent and extensive mineralised intervals including up to 92.3 m with average grade of 0.48 % Li2O in (ZGLi-045), supporting the Company's strategy of planning for high productivity mining methods.

·    Shorter drill spacing in the deposit will be used to provide the Company with a sufficient information basis to support detailed mine planning, geotechnical and hydrogeological work in the upcoming phase.

·    The Company has a robust working model for the deposit, demonstrated by new logging and assay results from the ongoing drilling programme which are consistent with the geometries of the mineralisation and expected grades.

Significant drill intersections and assay results from the current drilling campaign include:

·    ZGLi 045/2023:

o  158 m (156.0 m - 314.0 m) at average grade 0.56 % Li2O (383.7 ppm Sn)

§ Within this lies a high-grade interval of 65.7 m (156.0 m - 221.7 m) with an average Li grade 0.68 % Li2O (517.9 ppm Sn)

·    ZGLi 036/2022 in the north of the deposit:

o  81.7 m (158.7 m - 240.4 m) at average grade 0.46 % Li2O (76.9 ppm Sn)

·    ZGLi 031/2022 in the central part of the deposit:

o  High-grade interval of 12.9 m (79.9 m - 92.8 m) with an average Li grade 0.70 % Li2O (963.9 ppm Sn)

o  81.1 m (129.9 m - 211.0 m) at average grade 0.55 % Li2O (205.4 ppm Sn)

·    ZGLi 042/2023:

o  High-grade interval of 24.6 m (85.4 m to 110.0 m) with an average Li grade 0.78 % Li2O (1,463.7 ppm Sn)

o  66.4 m (188.5 m to 254.9 m) at average grade 0.42 % Li2O (246.8 ppm Sn)

The results of the infill drilling campaign continue to validate and support the geological model in line with the Company's expectations. 

Other critical work areas that the Company is focusing on include the hydrogeological testing and modelling, which represents an essential piece of work for both technical planning as well as EIA permitting requirements. It is planned to conduct further geotechnical and hydrogeological drill holes later in the year. The Company is supported by a group of consultants in this effort, including SRK, Geologische Landesuntersuchung Freiberg GmbH ('GLU'), Fugro, and CSA Global.

To fully understand the impact of a new mineral resource, which would potentially comprise new ore feed characteristics, sampling from larger diameter drill core has been completed across the deposit, supported by SRK, with the aim to produce a representative bulk sample for confirmatory metallurgical testing. This sample was taken in Q1 of this year and is currently being used for test work by Metso in Finland (see Metallurgical Process Development section below).

Mine Planning Activities

The drill programme has enabled further optimisation of the geological model and understanding of zinnwaldite/grade distribution throughout the deposit, and this enabled the Company and SRK to update and revise the mine design. It is envisaged that the revised mine design will incorporate the strategy of higher productivity mining methods, as well as operating the mine using a fully electrified trackless equipment fleet. This current work focuses on the understanding of key drivers of costs and efficiency across the entire production operation, taking all technical aspects of the Project into consideration. Detailed understanding of geotechnical aspects at Zinnwald as well as downstream process efficiencies and cost assumptions are crucial to adequately determine future metrics defining the Cut-off-Grade ('COG') and optimal production capacity scenarios.

Metallurgical Process Development / Testwork

Working with several partners including Metso (formerly Metso:Outotec) and UVR FIA, the Company is focused on confirming and optimising the existing mineral processing flowsheet. Metso has been supplied with a representative two-ton bulk sample of drill core in order to undertake confirmatory bench and pilot scale mineral processing test-work. The primary goal of this work is to confirm previous test-work results on a feed material that now also includes the lithium bearing Albite Granite lithology and therefore may differ from the process as described in the PEA. The bench scale results will also deliver additional engineering parameters that will feed into downstream engineering processes.

Mineral processing tests at UVR FIA GmbH in Freiberg earlier this year investigated the efficacy of magnetic separation methods specifically on the Albite Granite lithology, which have yielded further encouraging results and will be taken into account in on-going bench-scale testing at Metso. The target is now to optimise method parameters further in the application of magnetic separation as well as potential down-stream froth flotation stages in a scavenger circuit arrangement.

Ultimately, a pilot test trial will be conducted in late summer / early autumn 2023 to affirm insights from bench scale testing and provide further input for the upcoming engineering processes. Mineral concentrate from this pilot test will be used to validate existing process assumptions and engineering for pyro- and hydro-metallurgical processing at Metso's test centres in the USA and Finland.

Exploration Licenses Falkenhain, Altenberg, Sadisdorf

In the time since the last operational update, the Company has been focussing its efforts on the development the core Zinnwald Project. However, additional work has been undertaken over the Company's other exploration licenses including:

·    Completion of drill hole LiSH-001 at Falkenhain on the Schenkenshöhe with results previously announced to the market on the 30th January 2023 and key highlight intercept including:

o  80 m (114m - 194m) with average 0.62 % Li2O; 492 ppm Sn and 271 ppm W

§ Including 51 m (140.0m - 191.0m) at average 0.73 % Li2O; 519ppm Sn and 361 ppm W

o  10m (334.0m - 344.0m) with average 0.69 % Li2O; > 1,924 ppm Sn and 83 ppm W

·    Re-assay of available historic core from Falkenhain has been carried out to guide further exploration works. This effort yielded highly promising results at the historic hole "SnFhiDi-045", drilled on the "Schenkenshöhe" part of the Falkenhain license by the GDR state in 1973 whilst exploring for tin resources in the area. The core material for this hole is available to the Company and has been re-logged, re-sampled and re-assayed. Whilst the Company recognises the indicative character of results originating from a historic drill hole, it considers these as very valuable in directing further exploration efforts at the Falkenhain license.

The assay results from the c. 600 m deep hole include the following drill intercepts:

o  174.5-187.0 m (12.5 m) average 0.53 % Li2O (824.3 ppm Sn)

o  216.5-346.6 m (119.1 m) average 0.98% Li2O (484.3 ppm Sn)

·    Planning of further exploration and drilling stages at Falkenhain, Altenberg and Sadisdorf licenses will be undertaken in the upcoming phase of project development.

Infrastructure

In collaboration with the owner of the historic Zinnerz Altenberg mine, the LMBV, the Company has undertaken the digitisation of historic mine plans of the Zinnerz mine in Altenberg. The digital plans now cover more than three production and mine infrastructure levels of the historic mine that operated at commercial scale in Altenberg as "VEB Zinnerz Altenberg" for 40 years, but with mining activities dating back to medieval times. These digital plans are vital in the process of developing detailed construction plans and mine designs that will also include utilisation of the existing historic mine infrastructure in Altenberg. This will result in significantly reduced disruption to local residents by hauling the ore underground on the 500m RL elevation towards the processing site, northeast of Altenberg (including via the "De-Watering Tunnel" as mentioned in previous announcements).

Further updates with regards to Infrastructure and Tailings Management Planning:

·    On-going evaluation for tailings management are supported by Knight Piesold (UK), which specialise in tailings management & engineering. The Company is strongly committed to progress planning for a Dry Stack Facility ('DSF'), for which multiple design and site options are being evaluated at this point.

·    DSF tailings are becoming industry standard for new projects and present multiple advantages including:

o  Increased capacity compared with volume / storage capacity of conventional wet tailings facilities;

o  Limited long-term risk of dam failure & liquefaction as DSF are designed to be self-supporting;

o  No or limited requirement for embankment or retention structures are required;

o  Re-naturation / rehabilitation can be completed in step with stack construction; and

o  Option to re-claim materials from stack, presenting opportunities for materials re-utilisation in the future, in line with UN Sustainable Development Goals.

Sustainability / ESG Matters

Zinnwald continues to comply with the QCA corporate governance code and its guidance on sustainability matters.  The Company views sustainability as a guiding principle of its development strategy and is dedicated to delivering on the commitments to its shareholders, future investors, clients, employees, local communities, and other stakeholders with this in mind.  It believes that transparency and ethical behaviour are central to any successful Group and undertakes all development with respect to the environment and neighbouring communities.

Environmental

Zinnwald is committed to applying the highest standards for environmental protection, not only in its future operations, but more immediately in its current on-going exploration phases of the Project. In conjunction with its environmental surveyors and consultants, the team is focused on defining its future environmental management strategies and delivery of its Environmental Impact Assessment ('EIA').  The Company has already commenced its monitoring and baseline studies at its preferred site locations through GLU and Umweltberatung Schulz since September 2022 and this will cover a minimum 12-month (all four seasons) timeframe. 

The Company formally submitted its Scoping Document to the Mining Authority on the 21st of April. This submission started the formal permitting process for the construction and operation in Germany. The Mining Authority is expected to arrange a Scoping Meeting with Stakeholder Authorities later in summer, which will serve as a platform to clarify the Project and get first feedback from Stakeholder Authorities on all aspects of the planned Project, which can be considered and taken forward in subsequent formal application stages.

As previously announced, the Company is pursuing a Mandatory Framework Operating Permit ('MFOP') to cover all operations. It has been agreed that the Saxony Mining Authority will be the determining body for the overall permitting pathway for the processes permitted under the Mining Act. This also provides clarity for participating stakeholder authorities and legal certainty for the Project in the future.

The Projects' permitting is supported by GLU, which has extensive experience of mine and resource project permitting in the region. The Company intends to maintain international best practice in the permitting by keeping a transparent approach to project development and stakeholder engagement.

Social

With the Project gaining momentum, the Company has increased its staff numbers to support the accelerated exploration activities as well as on-going feasibility study development work.  The Company is also working to expand its long-term operational owners' team in Germany.   In total, the Project team now consists of eight geologists that are working at the Project site, as well as the Freiberg core-logging and sample preparation facilities. In total, the Project team includes 23 professionals working across disciplines in both Freiberg and London office locations.

Engagement with the local community of Zinnwald has always been a high priority to the Company, especially given the increased number of drill rigs in the town and its surroundings. In May, the Company held a well-attended information event at the Zinnwald town hall that outlined the on-going drill-campaign as well as future development plans.  This enabled local residents and stakeholders to raise concerns and pose questions directly to the local project team as well as the UK executive team.  The event included a visit to one of the nearby drill rigs and an explanation of the steps taken to keep noise to a minimum, as well as how the Company remediates all drill holes and keeps its environmental impact as low as practicable.

Governance

The Company is working on its formal engagement process with its main stakeholders and will be sending out detailed questionnaires to enable the completion of a formal Materiality Risk Assessment.  This will enable the Company to better tailor its operational policies, activities and reporting to the risks identified.

The Board has decided to formally rebrand the entire Group under the "Zinnwald Lithium" banner and is undertaking the name changes in Germany.  This reflects the close ties that the Group and the Project has to the local town and community and indeed to the very name of the mineral (Zinnwaldite) we will be processing.  The Group will retain the trademark to "Deutsche Lithium" and will use it as the branding for the ultimate end product.  As part of this rebranding, the Group will be relaunching its website later in the year to better support the Group's three core audiences - investors, local stakeholders, and the ultimate end users.

CORPORATE UPDATE

On 29 March 2023, the Company completed a £18.75m fundraise at a 26% premium to its share price at close on the date of announcement.  This raise was cornerstoned by AMG, existing significant shareholders, and new German institutional investors.  These funds have enabled the Company to accelerate its various workstreams and will finance the Company beyond completion of the BFS. As part of the investment from AMG, the Company has welcomed Dr Stefan Scherer to the Board.

The Company has undertaken a formal review of its underlying beneficial shareholder base that shows an ever-increasing ownership by German and EU investors.  Based on the register as at close on 9 June, the Company now shows UK holders at 47%, large German institutional and corporate investors at 31%, other German and EU investors at 12% and Rest of the World at 10%. 

In order to focus its efforts on the Zinnwald Project, in March 2023, Zinnwald signed a Heads of Terms Agreement with Ocean Partners UK Ltd for it to acquire Erris Zinc Ltd, the Company's subsidiary that owns the Abbeytown Zinc License in Ireland ('Abbeytown').  Both parties have signed the definitive legal agreements, subject to the Irish GeoSciences Department approving the transaction.  This approval has now been received and the sale has completed.  Zinnwald shall receive a 1% Net Smelter Royalty and a €200,000 cash payment due six months after commencement of commercial production from Abbeytown. 

EU MARKET DEVELOPMENTS

The impact of the US Inflation Reduction Act ("IRA") continues to reverberate and influence global structures in the battery materials market, and, in March 2023, the EU announced two proposals in response to the IRA.  Firstly, there was further details behind its Critical Raw Materials Act ("CRMA"), which define Lithium as both a  "Critical and Strategic" raw material.  The CRMA proposes benchmarks of 10% of the EU's annual consumption for extraction and 40% for processing; proposals to simplify permitting procedures; and a plan to identify selected strategic projects to benefit from EU financial support.  The CRMA is still to pass through the European Parliament and the EU Council, and any key strategic projects have not yet been identified. 

Secondly, and perhaps of  greater and more immediate relevance to Zinnwald is the relaxation of State Aid rules.   On 9 March 2023, the European Commission adopted the Temporary Crisis and Transition State aid Framework ("TCTF") aimed at boosting and retaining clean tech investments in Europe.  The TCTF allows Member States to provide undertakings with significant State aid support to develop and boost businesses that will drive the EU's energy transition.  These rules apply from the end of 2025 with a further 3 years from receipt of the aid to deliver the projects.

OUTLOOK

The Company's near-term priorities are the completion of the in-fill and hydrogeological drill campaigns at the Zinnwald Project, detailed mine planning and test work programmes related to mineral and chemical processing. The satisfactory completion of these items, which are being done in conjunction with external parties, will impact the timing of the BFS.  While the objective remains to complete this as soon as possible the permitting of certain of these activities as well as the limited availability of necessary testing facilities and staffing carries the risk that the timing will move beyond the end of this year. However, the team remains confident that completion of the BFS by early in the first half of 2024 is highly achievable and is working to ensure that the overall timetable of the Project is not unduly impacted.

The PEA demonstrated a robust Project with very attractive economics and the team is working hard to advance this to the next stage. The additional work done thus far supports the potential to increase the scale of the Project and is being explored further as part of the next phase of the Project.

The technical information relating to geology, the drill programme, mining and processing  in this announcement has been reviewed on behalf of Zinnwald Lithium by Martin Pittuck CEng, FGS, MIMMM of SRK Consulting. Mr Pittuck is a Corporate Consultant of SRK Consulting Ltd. Mr Pittuck has sufficient experience relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he is undertaking to qualify as a Competent Person in accordance with the guidance note for Mining, Oil & Gas Companies issued by the London Stock Exchange in respect of AIM Companies, which outlines standards of disclosure for mineral projects. Mr Pittuck consents to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

*ENDS*

 For further information visit www.zinnwaldlithium.com or contact:

Anton du Plessis Cherif Rifaat	Zinnwald Lithium plc	[e-mail]
David Hart Dan Dearden-Williams	Allenby Capital (Nominated Adviser)	[phone]
Michael Seabrook Adam Pollock	Oberon Capital Ltd (Joint Broker)	[phone]
Richard Greenfield Charles Bendon	Tamesis Partner LLP (Joint Broker)	[phone]
Isabel de Salis Paul Dulieu	St Brides Partners (Financial PR)	[e-mail]

Notes

AIM quoted Zinnwald Lithium plc (EPIC: ZNWD.L) is focused on becoming an important supplier of lithium hydroxide to Europe's fast-growing battery sector. The Company owns 100% of the Zinnwald Lithium Project in Germany, which has an approved mining licence, is located in the heart of Europe's chemical and automotive industries and has the potential to be one of Europe's more advanced battery grade lithium projects.

 

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