Operational Update

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

12 July 2024

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

Operational Update

Zinnwald Lithium plc, the European focused lithium company developing the integrated Zinnwald Lithium Project (the 'Project') in Germany, is pleased to provide an operational update on recent activities. This follows the updated Mineral Resource Estimate ('MRE') published in June 2024 (see RNS dated 6 June 2024), which established the Project as the second largest hard rock lithium project in the EU and the third largest in Europe.

HIGHLIGHTS

·    Updated MRE provides potential for a project of significant scale through a phased development approach with an initial phase 1 production of 16,000-18,000 tonnes per annum ("tpa") of battery grade (99.5%) LiOH - c. 50% increase on production of c. 12,000 tpa in the 2022 Preliminary Economic Assessment ('PEA').

·    A Pre-Feasibility Study ('PFS') to be completed to optimise the enlarged Project, to evaluate the potential for a second phase and to ensure that its impact on the environment and local communities is minimised and technical testwork and trade-offs fully examined.

·    Permitting timeline not anticipated to be impacted.

·    Applying to be formally designated as a strategic project under the European Union's Critical Raw Materials Act ('CRMA') - larger project scope improves prospects.

·    Strong expressions of support from Federal and State Governments in Germany with invitation to formally apply for federal grant funding strongly supported by the State of Saxony.

·    Well financed with a current cash position of €9.3m.

Zinnwald Lithium CEO, Anton du Plessis, commented: "Our strategy is focused on developing a low risk, scalable project. The updated MRE published in June supports this vision and the potential to produce larger volumes of lithium end product through a phased development approach.

"In light of this, we have decided to take an interim step by producing a PFS. This will help us further develop the mine plan, optimise the processing route, and minimise our environmental impact. The PFS is expected to be completed in Q1 2025.

"We have already completed many workstreams, with several more underway or nearing completion. Key upcoming milestones include ongoing metallurgical testwork, detailed mine planning, permitting and commercial activities. We look forward to updating the market on our progress as we reach these milestones."

DETAILS

Zinnwald Lithium continues to make significant progress in the development of its integrated lithium hydroxide ('LiOH') project in Germany.

On 6 June 2024, the Company published an updated independent MRE for the Project, which establishes it as the second largest hard rock lithium project in the EU, the third largest in Europe.

The updated MRE also underlines the scale and strategic nature of the Project, having showed a 445% increase in tonnes and a 243% increase in contained lithium to 429kt in the Measured and Indicated category versus the previous 2018 MRE. This includes 36.3 Mt grading 2,500 ppm Li (0.53% Li2O) in the Measured category, 193.5 Mt grading 2,220ppm Li (0.478% Li2O) in the Measured and Indicated ('M&I') category, and 33.3 Mt grading 2,140 ppm Li (0.461% Li2O) in the Inferred category.

The increase in overall tonnage resulted from the completion of the 26,911 metres of new drilling over 84 holes and the incorporation of a broad zone of mineralised granite not previously forming part of the historic MRE.

Mining

With the completion of the updated MRE, the Company is commencing detailed mine planning. Notably, with 36.3Mt in measured resources and the large dimensions of both the High Grade External Greisen ('HGG') and Albite Granite ('AG') domains now confirmed, significantly larger annual mining volumes can be supported, which will positively impact production of end product.

Large scale sub-level stoping with subsequent backfill has previously been determined to be the optimal mining method, which offers higher capacity, lower operating expenditure and easier backfill process than the Room and Pillar-method assumed in earlier studies.

Process Development / Testwork / Engineering

The Company has continued its mineral processing, calcination, and hydrometallurgical testwork programme run by Metso, a frontrunner in sustainable technologies, end-to-end solutions and services for the aggregates, minerals processing and metals refining industries globally.

The processing testwork has utilised representative samples generated from core from the 84 hole drilling campaign the Company completed in Q3 2023 including both HGG and AG ore types.

Mineral Processing

The minerals processing flowsheet design and equipment selection has been completed by Metso. This section of the process is a simple mainstream, proven design with a single crushing stage followed by two production lines consisting of grinding and rougher-scavenger wet magnetic separating and dewatering. Basic engineering is well advanced and likely to be completed in the coming weeks.

Pyro- and Hydrometallurgy

Pilot scale calcination testwork was undertaken at IBU-tec under Metso's supervision during June 2024. A further large scale c. 1 tonne sample has been sent to Metso's facility in York, Pennsylvania, USA for a further testwork programme focused, inter alia, on equipment sizing; this is expected to be completed in August 2024.

The calcination tests undertaken at IBU-Tec have provided calcined material, which will be tested at  large bench-scale at Metso's facility in Pori, Finland, which will help to define the base line hydrometallurgical process and the mass balance. As previously stated, the Metso alkaline leach process has the potential to deliver important advantages in terms of efficiencies, cost, and environmental impact. While the use of this process for zinnwaldite ore is a new application of the process, it has been successfully demonstrated at continuous pilot scale using spodumene feedstock at other operations such as the Keliber lithium project in Finland, which is currently in construction.

A representative sample of zinnwaldite concentrate was also tested by K-Utec during Q2 2024. This confirmed that the large scale tests previously performed by K-Utec based on HGG concentrate are applicable to the material derived from a combination of both HGG and AG. As such, the sulphation process route that underpinned the PEA published in 2022 remains a viable processing route for the larger scale operation. Work to assess this relative to the alkaline leach route will continue to ensure that the route eventually selected is the most optimal in terms of delivery, efficiency, cost, and environmental impact.

Exploration Licenses

Whilst the Company's primary focus is on the development of its core Zinnwald License, it continues to advance targets on its other 100% owned prospective exploration license areas that surround it including Falkenhain, Altenberg, Bärenstein, and Sadisdorf. The primary focus of the geology team over the past several months has been on preparing the updated MRE for Zinnwald, but work has also been carried out to relog and sample historic data and core related to the exploration licenses.

In addition, the team is evaluating an extensive historic geological database derived from historical drilling campaigns such as those undertaken by the former Wismut SAG, which has recently been made available to the public. Notably, there is data for over 900 drill holes of various depths within the areas of interest to the Company that has the potential to provide valuable geological and geotechnical information relevant to the Company's licenses and site location options.

Sustainability / ESG Matters

The Company regards sustainability as a core element of its development strategy and is committed to fulfilling its commitments to shareholders, future investors, clients, employees, local communities, and other stakeholders. The Company believes that transparency and ethical conduct are fundamental to the success of any organisation and is committed to ensuring all development work respects the environment and neighbouring communities.

Permitting and Environmental

The Company has ongoing engagement with all relevant authorities and other stakeholders, including the Saxony Mining Authority ('SOBA'), the Landesdirektion Sachsen (State Directorate responsible for spatial planning) and local municipal, district, state, and federal authorities.

The Company previously held a Scoping Meeting with all relevant authorities and has also been undertaking an "Early Spatial Planning Procedure" to gather feedback on the Company's plans from the relevant authorities. Consequently, an alternative potential processing site location was identified alongside the A17 Highway, the main highway connecting Dresden with Prague. This site is large enough to accommodate an operation that can support the scale of mineral resource that has been confirmed with the updated MRE.

Social

Under the leadership of the Company's local management team headed by Mr Marko Uhlig, Zinnwald Lithium has significantly increased its engagement with authorities and local communities. Over recent months several "town hall" meetings have been held with interested local parties. In early June, the Company moved its registered seat to the town of Altenberg (the municipality in which Zinnwald is located) and established a new core storage facility there. This will provide a local point where individuals from the region can interact with the Zinnwald team. The team has already hosted an open day at the facility that was attended by more than 300 people from the area, at which the Project concept and its various components were explained and described in an interactive forum. Further regular events are planned.

Feasibility Study Strategy

The significant increase in resource size coupled with the potential processing site next to the A17 Highway has created the opportunity for the Company to consider a significantly larger scale project. This will increase the relevance of the Project to the European battery materials markets and improve its prospects of being classified as a strategic project under the CRMA.

In order to properly assess the Project's design and scope, it has been decided to undertake an interim step of producing a PFS to allow a detailed analysis of the trade-off and options associated with the increased scope of the Project and the new site options. The PFS is expected to be completed in Q1 2025, with several parts already reaching FS accuracy. Alongside this, the Company continues to progress the spatial planning and permitting process associated with the Project and, as such, does not anticipate that taking the additional step of producing a PFS will delay the overall project timeline.

European Union Market & Funding Opportunities

On 23 May 2024, the EU's CRMA passed into law, which includes two key pillars that are most relevant to the Project. Firstly, it codifies the EU's benchmark goals for domestic European capacities to be able to extract 10%, process 40% and recycle 25% of its annual consumption of strategic raw materials by 2030. Secondly, it states that "selected strategic projects will benefit from support for access to finance and shorter permitting timeframes (27 months for extraction permits and 15 months for processing and recycling permits)." 

The EU Commission has issued an invitation for applications by promotors of critical materials projects to be formally designated as a "strategic project" under the specific categories of Extraction, Processing, Recycling or Substitution. The invitation specifies a deadline for the first round of applications to be submitted by 22 August 2024. The Company intends to apply for the designation by this deadline under both the Extraction and Processing categories. It believes that there is a strong case that the Project will meet the key criteria for recognition as a Strategic Project, namely, its ability to deliver a meaningful contribution of LiOH to the EU based on the scale of its resource as the second largest hard-rock deposit in the EU; the feasibility of its flowsheet; its sustainability credentials; and its wider benefits to the EU. 

Temporary Crisis and Transition Framework ('TCTF')

In September 2023, the German Federal Ministry for Economic Affairs and Climate Action ('BMWK') announced a new programme for public grant funding under the TCTF, a temporary funding instrument of the EU to promote the production of climate-neutral, strategically important technologies. This specific TCTF programme is to support the "Resilience and Sustainability of the Battery Cell Manufacturing Ecosystem" in Germany.

Zinnwald Lithium submitted an application and, as part of Phase 1 of the application process, underwent a series of detailed reviews with by BMWK's programme management agency, VDI/VDE Innovation + Technology GmbH ('VDI/VDE'). On 27 June 2024, Zinnwald Lithium received an invitation from VDI/VDE to formally apply for the envisaged funding (Phase 2 of the application process). This invitation does not guarantee that funding will be secured but is a recognition of the strong potential of the Project.

If the application is ultimately successful, any funding would be provided 70% by the Federal State Government and 30% by the State of Saxony. On 4 June 2024, the Saxony Government announced its commitment to provide its portion of any funding, subject in part to receipt of formal approval by the Parliament of the State of Saxony, which was duly received on 21 June 2024.

Zinnwald Lithium has mandated IKB Deutsche Industriebank AG to support the application within Phase 1 and 2 of the process.

OUTLOOK

The Company's strategy is centred on developing a project that is significant in scale, economically attractive and founded on a robust technical and sustainable framework. Current and ongoing workstreams are pivotal to this strategy, with significant progress already achieved and several key milestones on the horizon. These include ongoing metallurgical testwork, continuous advancement of hydrogeological drilling campaigns, and detailed mining planning. Concurrently, the team is engaged in permitting and commercial activities.

The scale of the increase in the Company's MRE, the identification of a large potential operational site location, and the encouraging initial testwork results related to the Metso alkaline leaching process has created the opportunity to establish a project with materially larger scale. Working through the implications of these changes to the Project concept has resulted in the decision to take the additional step of producing a PFS. This will allow the team to fully examine options and trade-offs to optimise the Project and ensure that its impact on the environment and local communities is minimised.

The Company remains well financed with a current cash position of €9.3m and the Board looks forward to updating the market on progress on all of these fronts as its various workstreams continue.

Qualified Person

The technical disclosure in this announcement has been approved by Qualified Person EurGeol (#641) Christian Masurenko of Zinnwald Lithium, Dipl. Geo., Member EFG, Fellow SEG.

*ENDS*

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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.