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

20 September 2024

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

Interim Results

Zinnwald Lithium Plc (AIM:ZNWD), the German focused lithium development company, is pleased announce its Interim Results for the period ended 30 June 2024.

HIGHLIGHTS

Six months to 30 June 2024

·    Announced two updates to the Mineral Resource Estimate ('MRE') - confirmed the Project's position as the second-largest hard rock lithium project in the EU and strengthened the Measured category. 

·    Advanced processing tests with Metso, which continue to generate encouraging results that potentially offer significant advantages in overall recovery, efficiency and environmental impact reduction. 

·    Explored potential to expand project in phases, starting with Phase 1 producing 16,000-18,000 tpa of battery-grade Lithium Hydroxide (LiOH), a 50% increase from the 2022 estimate of 12,000 tpa.

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

·    Strengthened the team to support increased activity.

·    Organised events and engaged in regular dialogue with the local communities.

·    Engaged InvestorHub to streamline communication with shareholders.

Post period end to 17 September 2024

·    Agreed to develop a Pre-Feasibility Study ('PFS') to assess the potential for a Phase 2 expansion and undertake various technical trade-off studies.

·    Progressed workstreams, with several achieving Feasibility Study accuracy and others nearing completion at PFS level.

·    Applied for the Project to be designated as 'strategic' under the European Critical Raw Materials Act ('CRMA'), with a decision expected in December.

·    Held a productive meeting with German Chancellor Olaf Scholz during his visit to the Saxon Mining Authority.

Investor hub presentation

Anton Du Plessis, CEO, will provide a pre-recorded webinar relating to these results, which will be available for viewing via the Company's investor hub. Investors will be notified via email of the presentation if they have signed up to the Zinnwald Investor Hub in advance, which can be done here: https://investors.zinnwaldlithium.com/auth/signup. Investors are invited to submit questions in advance at: https://investors.zinnwaldlithium.com/link/XyOVVP.

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

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.

CHAIRMAN'S STATEMENT

We continue to advance our integrated lithium hydroxide ('LiOH') project in Germany (the 'Project'), which is positioned to supply Europe with a sustainable source of lithium at a competitive cost that reduces its dependency on imports and further develop the EU's battery chain infrastructure.

During the period, we announced two updates to our independent Mineral Resource Estimate ('MRE'). The first, published in February, confirmed the Project's position as the second-largest hard rock lithium project in the EU, while the second, published in June, increased the Measured category. 

Accordingly, the increased size of the resource creates the potential to develop a significantly larger project, which could be developed in phases, starting with Phase 1 production of 16,000-18,000 tonnes per annum ('tpa') of battery-grade (99.5%) LiOH, with the potential of a Phase 2 to add additional production capacity.  Phase 1 would represent a circa 50% increase over the production of approximately 12,000 tpa projected in the 2022 Preliminary Economic Assessment and would be sufficient to power 500,000 electric vehicles per annum.

We also strengthened the team to support increased activity and continued with testwork programmes focused primarily on the Metso Alkaline Leach process. Results from these tests continue to generate encouraging results supporting further development of this processing route. The alkaline leach route potentially offers significant advantages in overall recovery, energy efficiency and environmental impact reduction. 

We had originally planned to incorporate and publish our findings into a Definitive Feasibility Study ('DFS') at the end of this year. However, given the increased scale of the Project and the potential benefits offered by the Metso process, post period end in July we decided to take an interim step and produce a Pre-Feasibility Study ('PFS'), which we expect to complete in Q1 2025. This enables us to evaluate the potential for Phase 2 and ensure that its impact on the environment and local communities is minimised and technical testwork and trade-offs fully examined.

The additional PFS step is not anticipated to delay the overall project timeline.   In fact, several workstreams have already reached Feasibility Study level accuracy and others are either in progress or nearing completion including metallurgical testing, mine planning, permitting, and commercial activities.

In terms of market dynamics, the lithium sector continues to navigate complex trading conditions as a result of geopolitical tensions, regulatory changes and shifting demand patterns. Despite these hurdles, Europe's future demand for lithium is projected to exceed supply as the EU strives to secure its own lithium resources, reduce its reliance on external sources and achieve its climate objectives.

The European Critical Raw Materials Act ('CRMA') was enacted in May and represents a crucial move towards enhancing the bloc's strategic autonomy and economic resilience. In light of this, in August we submitted an application to have our project designated as 'strategic' under the CRMA as we believe it meets the necessary criteria. Achieving this status would offer several benefits including expedited permitting and increased regulatory support, which would be instrumental in advancing the Project and integrating it into the EU's critical raw materials value chain. The EU is expected to announce its decision in December.

Encouragingly, in June we received a strong expression of support from the Government of the State of Saxony for the Project in relation to our application for a grant under the German Government's Temporary Crisis and Transition Framework ('TCTF') scheme for its domestic Battery Chain. Although the amount and certainty of grant funding for the Project remain unknown until the Federal Government makes a formal decision on recommended projects during 2024 and final funding decisions at the end of the year, this support underscores the emphasis on developing domestic supplies of critical raw minerals in Germany and the EU.

We were also delighted to meet German Chancellor Olaf Scholz during his visit to the Saxon Mining Authority earlier this month to discuss the future raw material security. The Chancellor was supportive saying: "We need all of Europe ready to take on projects like this. It's not just a challenge for us; there are critical raw materials across Europe that we can mine and urgently need."

Local support is essential for the long-term success and sustainability of our Project. With this in mind, our team in Germany is actively engaging in regular dialogue with the local communities to foster a shared sense of purpose that promotes mutual prosperity. By supporting our project, we are hopeful that they see the value in ensuring the responsible extraction of resources, economic growth, and job creation while contributing to global climate goals.

Equally important are our shareholders, which is why we have engaged InvestorHub. This platform allows us to streamline our communication, providing shareholders with timely updates, insights, and essential information about the Project as well as helping us to better address shareholder queries.

Financials

The Company continues to maintain its extremely disciplined approach to expenditure and cash management and as such is well funded through completion of the PFS and into the ongoing work in 2024, with cash of €8.1m   as at the date of this report.

Outlook

The remainder of the year promises to be busy as we look to develop a low-risk, scalable project that delivers enduring value to our shareholders, stakeholders, and the communities in which we operate. The updated MRE supports this vision and underscores the potential for increased production of LiOH through a phased development approach.

We look forward to keeping our shareholders informed with regular updates as we progress the Project towards its construction phase.

Jeremy Martin

Non-executive Chairman

OPERATIONAL REVIEW

The first half of 2024 saw Zinnwald Lithium Plc (the "Company") and its wholly owned subsidiary, Zinnwald Lithium GmbH ("ZL GmbH" and together the "Group") accelerate its development strategy for its integrated Zinnwald Lithium Project (the "Project").  During the six months to 30 June, the Company's priorities were completion of its MRE, detailed mine planning and testwork related to mineral and chemical processing.

Six months to 30 June 2024

GEOLOGY AND MINING

Mineral Resource Estimate

On 21 February 2024, the Company published its updated independent MRE that showed a substantial increase in its Mineral Resource at the Project with a 243% increase in contained lithium in the Measured and Indicated categories versus the 2018 MRE. This establishes the Project as the second largest hard rock lithium project by both resource size and contained lithium in the EU and clearly highlights its scale and strategic importance. 

The MRE incorporated 26,911 metres of new diamond core drilling across 84 drill holes and a reinterpreted and updated geological model since the previous MRE, which was released in September 2018.  In addition to the high-grade greisen mineralisation, focus of the recent 2022/2023 drilling was the lithium mineralisation hosted by the broader zone of altered albite granite, which includes internal lenses of higher-grade greisen. The highlights of this initial MRE showed a 445% increase over the previous MRE issued in May 2018, with a total Measured and Indicated resource of 193.5Mt that represents 429,000 tonnes of contained Lithium metal and an Inferred resource of a further 33.3Mt that represents 71,000 tonnes of contained Lithium metal. 

On 6 June 2024, the Company announced a further update to the MRE following a geometallurgical testwork programme recommended by Snowden Optiro on 35 variability drill core samples derived from the 2022 / 2023 drilling campaign.  It was undertaken to provide a higher level of confidence in the Mineral Resource within the mineralised albite granite, which surrounds the lenses of higher-grade greisen mineralisation. The result was to add an additional 25.0Mt @ 2,090ppm Li (52kt contained lithium metal), in the Measured category representing an increase of 221% in tonnes and 133% in contained metal in the Measured category compared with the February 2024 MRE. The Project now has sufficient material in Measured category alone to support over 20 years of production. This is a major milestone as it further de-risks the resource and adds a higher level of confidence in the detailed mine plan, which is key to future financing plans.

Overall, the total Measured category increased to 36.3Mt @ 2,500ppm Li (91kt contained lithium metal) while the total Indicated category is now 157.2Mt @ 2,150ppm Li (337kt contained lithium metal), as a result of the increase in the Measured category. The total Measured and Indicated category remains unchanged at 193.5Mt @ 2,220ppm Li (428kt contained lithium metal). The Inferred category remained unchanged at 33.3Mt @ 2,140ppm Li (71kt contained lithium metal).

The MRE (detailed below) was prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators ("NI 43-101") by independent consulting firm Snowden Optiro Ltd ("Datamine International") of Bristol, United Kingdom.

Table .1 Mineral Resource Statement for Zinnwald Lithium Project, effective 5th June 2024.

This updated MRE cemented the Project's position as the second largest resource in the EU and the third largest in Europe as a whole.  The chart below puts the Project in context of the other European hard rock lithium projects.

Mine Planning Activities

With the completion of the updated MRE, the Company has commenced detailed mine planning with Snowden Optiro.  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.  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.

It is envisaged that the revised mine design will incorporate the strategy of higher productivity mining methods. In addition, operating the mine using a fully electrified trackless equipment fleet will be evaluated.  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.

PROCESS DEVELOPMENT / TESTWORK / ENGINEERING

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

Mineral Processing

Following completion of the pilot scale mineral processing testwork in December 2023 at the GTK pilot facilities in Finland by GTK and Metso, which confirmed the earlier bench scale test work, basic engineering for a feasibility study was initiated later that month.  In H1 2024, Metso completed its mineral processing flowsheet design and equipment selection. 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 for this stage is expected to be completed by the end of September 2024.

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.  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.

The ongoing pyro- and hydrometallurgy testwork is all designed with the goal of further proving the suitability of Zinnwaldite for Metso's proprietary alkaline leach process.  The earlier findings for initial testwork included:

·    No additives needed in calcination;

·    Significantly less waste material produced;

·    Temperature clearly below 1000°C; and

·    Li recovery to solution above 95%.

The Company and Metso believe that the alkaline processing route has the potential to offer significant advantages in terms of overall recovery, efficiency and reduced impact on the environment.  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 under 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 roast 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.

Hydrogeology

In February 2024, the Company completed its hydrogeological drill programme that comprised eight groundwater ('GW') monitoring wells and was started in September 2023. These included six deep wells extending to reach the mineralised Albite Granite, and two shallow drill wells intended to penetrate the Rhyolite rock of the hanging wall.  All of these wells will be converted to long term ground water monitoring wells to collate data on an ongoing basis. 

The results of this programme will support the production of a hydrogeological underground and surface model.  This model will include information received from Geomet in regard to data on the Czech side of the border to support the development of a combined cross-border hydrogeological model. This represents an essential piece of work for both technical and planning as well as environmental impact assessment ('EIA') permitting requirements. 

The Company is supported by a group of consultants in this effort, including Geologische Landesuntersuchung Freiberg GmbH ('GLU'), Fugro and ERM.

Infrastructure

In 2024, the Company has continued its work on defining the optimal solutions for the required infrastructure based on the potential for higher production levels supported by the results of the drilling campaign and the metallurgical testwork carried out. The Company is using Fichtner GmbH, a major German consulting group with experience concerning materials handling, road, and rail infrastructure as well as all civil works. The Group will, using trade-off studies, evaluate the most suitable, economical and environmentally friendly options for all surface facilities.

The Company has also continued with its evaluations for tailings management, supported by Knight Piesold (UK), which specialises in tailings management and 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.

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 in the first half of 2024 was 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 its licenses and site location options.

EUROPEAN UNION MARKET & FUNDING OPPORTUNITIES

Critical Raw Materials Act ("CRMA")

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 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 specified a deadline for the first round of applications to be submitted by 22 August 2024.  

The Company formally applied 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.

SUSTAINABILITY 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.  The Company believes that transparency and ethical behaviour are central to any successful group and undertakes all development with respect to the environment and neighbouring communities.

Permitting and 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 EIA Study. 

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 in 2023 with all relevant authorities and in January 2024, received the Scoping Meeting Report from SOBA, detailing stakeholder feedback on the Project. The Company has also been undertaking an "Early Spatial Planning Procedure" to gather feedback on its 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

With the Project gaining momentum, the Company has continued to build out its long-term operational owners' team in Germany.   Engagement with the local community of Zinnwald remains a priority for the Company. Accordingly, the Company's local MD, Marko Uhlig, holds regular meetings with local and regional representatives to foster collaboration and dialogue on community-related matters.  In May 2024, as part of its continued commitment to the local community, the Company took out a long-term lease on a new property in the City of Altenberg that now houses the Project's extensive core shed and also presentation areas for engagement with the local community.  On 1 June 2024, the Company held a well-attended open day for the community at which several hundred people attended as well as representatives from local government and SOBA. The Company will continue to hold town hall events in the coming months to provide further details on the development of the Project, its benefits, and its aim to mitigate impact on the environment and community.

Post Balance Sheet events to 16 September 2024

Feasibility study strategy

The significant increase in resource size coupled with the identification in 2024 of a 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 Feasibility Study 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.

As with its previous work on the MRE, the Company will continue to use internationally credible consultants to assist the Project through this phase and onwards to the Feasibility Study as this will lend the credibility required by permitting authorities and ultimately finance partners.  For the PFS, the Company is working with Metso for mineral processing and pyro and hydromet engineering, Snowden Optiro for mine planning, Knight Piesold for design of the tailings storage facility, K-Utec for backfill design, DMT for mining electrical and communications, ERM for hydrogeology, Fichtner for infrastructure and Dr Sauer & Partners for tunnel development.

Environmental and Social Impact Assessment ('ESIA') Scoping Study

Following engagement and various meetings with the authorities, the Project will follow an integrated permitting procedure. A Spatial Planning Procedure (under the Saxony State Directorate - Landesdirektion Sachsen - LDS) is underway to feed into the overarching permit the General Operating Plan (GOP - Rahmenbetriebsplan). The Mining Authority of the Federal State of Saxony (Sächsisches Oberbergamt - SOBA) will be the single overarching permitting authority for the GOP. The GOP requires a whole suite of documents including the EIA and other related documentation (e.g. Natura 2000 Impact Assessments, Landscape Management Plan, various environmental technical reports etc.).  The Project has been screened under the Mining EIA legal framework and Project Standards. It has been determined that an EIA is mandatory for the Project.

In August 2024, the Group issued a Request for Quotation ('RfQ') to five leading internationally respected consultancy groups for the production of an ESIA Scoping Study.  The Company expects to select the successful bidder for this Study in October 2024 with work to start immediately. This Scoping Study stage will include the provision of ESIA related inputs to the Stakeholder Engagement Plan ('SEP')', the Land Acquisition & Resettlement Framework ('LARF') and the Environmental and Social sections of the PFS.  The Company will then invite the successful bidder during the later part of the ESIA scoping stage to submit a full technical and commercial proposal for the full ESIA stage. This will include commercial proposal for related assessments such as Appropriate Assessment under Birds & Habitats Directive (if deemed required during scoping) and a full suite of Environmental and Social Management Plan ('ESMP') documents.

The ESIA Scoping Report and then full ESIA will also be used for the purposes of seeking finance from International Financing Institutions ('IFIs') who are signatories to the Equator Principles 4 ('EP4').  EP4 is a risk management framework adopted by IFIs for determining, assessing and managing environmental and social risks of investments, as well as the requirements of the IFC Performance Standards and the broadly aligned EBRD Performance Requirements. In addition, the WBG EHS Guidelines for Mining and General Guidelines are relevant to meeting international lender standards.  The Group will also evaluate the applicability of the Initiative for Responsible Mining Assurance ('IRMA') certification.  The Group also aligns itself to the UN Sustainable Development Goals ('SDGs'), which are a collection of 17 interlinked global goals supported by 5448 actions. The Group will undertake a process to identify its initial and future contributions to the UN SDGs on a local and global scale.

Visit by Chancellor Scholz

On 30 August 2024, Germany's Federal Chancellor, Olaf Scholz, visited the Saxon Mining Authority ('SOBA') in Freiberg to discuss the future raw material security in Germany with the Saxon Minister of Economics, Martin Dulig. Representatives of Zinnwald Lithium GmbH also attended the meeting at which the potential role of Zinnwald Lithium's Project near Altenberg was discussed.

During his visit, Chancellor Scholz was enthusiastic about the possibility of mining lithium in Saxony in an environmentally friendly way.  He said "We are a country that processes modern raw materials.  Germany imports many raw materials from other countries in the world, but some are also available in this country - including lithium. In Saxony, lithium is to be mined on a large scale in an environmentally friendly way in the future. "This creates jobs, prosperity and is therefore a priority", the chancellor wrote on X after the meeting. During his visit to the Oberbergamt, the Chancellor learned about the Project, in which Zinnwald Lithium GmbH near Altenberg wants to implement one of the largest lithium mining projects in Europe - by around 2030. The Company's goal is to mine roughly the amount of lithium needed for about 500,000 car batteries per year. The Federal Government and the Free State of Saxony support the Project.

Lithium Market in 2024

2024 has continued to see ongoing weakness in the price of lithium from the highs of $80,000 per tonne in 2022 to below $15,000 per tonne in 2024.  The lithium market has grown very rapidly from being a relatively small niche market from a global perspective. Partly as a consequence of this, the pricing of lithium has historically been quite volatile if looked at over a purely short-term basis.  The price tends to overshoot in the short term on both the high and low side, as shown in the swings from 2022 to 2023. However, pricing remains materially higher than the prices seen in the previous cyclical low of 2018-19. 

It is important to note that the Company deliberately took a conservative long term price assumption of $22,500/t in its PEA in 2022 to ensure the robustness of its financial forecasts.  This can be shown in comparison to other projects that have issued studies since Zinnwald's PEA was published with their assumed pricing noted below:

The financial analysis included in the 2022 PEA indicated that the Project could be relatively robust financially even at a reduced lithium price.  There are large parts of the current supply chain, most notably Chinese lepidolite production, that produces at a materially higher cost than those estimated for the Project. 

In Canaccord's most recent quarterly assessment of pricing for end Q2 2024, it states: "We have flat lined our price forecast until 2026. We see SC6 pricing being range bound between US$1,000-1,500/t until 2027 on adequate supply. Excursions below US$1,000/ t will result in the supply removal and a quicker rebalancing of the market. We forecast average chemical pricing of US$15,129/t out to 2027. From 2027, we believe the supply additions will have abated and demand growth from North America and Europe will drive pricing higher. We continue to place LT pricing at US$1,500/t (SC6) and US$22,500/t (chemicals); it remains our view that this is needed to stimulate supply longer term."  Accordingly, the Company continues to believe that a Lithium Hydroxide price of $22,500 per tonne is a reasonable long-term assumption.

Outlook

The Project's updated MRE that has shown the potential size and scale of the Project has re-positioned it in terms of its relevance to the German and EU Battery Chain. The Company's near-term priorities are to progress and complete the PFS Study for publication in Q1 2025.  The Company will also continue to advance the work required to successfully permit the Project, including the Spatial Planning submission and the start of its formal ESIA Scoping Study.  Alongside this, advancing the Project from a technical and permitting aspect, the Company will continue to advance its long-term financing strategy including discussions with potential financing partners. 

Financial Review

Notwithstanding that the Company is a UK Plc with its ordinary shares admitted to trading on AIM, the Company presents its accounts in its functional currency of Euros, since the majority of its expenditure, including that of its subsidiary Zinnwald Lithium, is denominated in this currency.

The Group is still at an exploration and development stage and not yet producing minerals, which would generate commercial income.  The Group is not expected to report overall profits until it is able to profitably commercialise its Zinnwald Lithium project in Germany.

During the period, the Group made a loss before taxation of €1.2m compared with a loss of €1.3m for the six-month period ended 30 June 2023.  In the six months to 30 June 2024, administrative expenses remained at €1.2m in line with the previous period.  It includes the costs related to being a public listed company, including the costs of non-executive directors, brokers, nominated adviser and other advisers. There was also a share-based payment expense of €0.3m in both 2024 and 2023, arising from the issuance of new Options and RSUs in each period.  There was rental income in each period of €0.1m arising from the sub-leasing of space at its offices and core shed in Freiberg, which has now ended.  Interest income on the Group's cash balances increased to €0.2m in the period reflecting the higher cash balance flowing through from the Company's fund raise in March 2023.

The Total Net Assets of the Group decreased to €38.9m as at 30 June 2024 compared with €39.9m at 31 December 2023.  The Group's Intangible asset balance increased to €30.6m at 30 June 2024 from €27.6m at 31 December 2023 and cash balances decreased to €9.3m from €14.3m at the end of 2023, which all reflects ongoing spend on the Zinnwald Lithium Project. As at the date of this report, the Group's cash balance is €8.1m.

On behalf of the board

Cherif Rifaat,

CFO and Director

ZINNWALD LITHIUM PLC

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Total loss and comprehensive loss for the year is attributable to the owners of the parent company.

ZINNWALD LITHIUM PLC

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ZINNWALD LITHIUM PLC

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

ZINNWALD LITHIUM PLC

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

ZINNWALD LITHIUM PLC

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 group consists of Zinnwald Lithium Plc and its wholly owned subsidiaries, as follows as at 30 June 2024.

The registered office address of Zinnwald Lithium Holdings Ltd (formerly Deutsche Lithium Holdings Ltd) is 29-31 Castle Street, High Wycombe, Bucks, HP13 6RU.

The registered office address of both Zinnwald Lithium GmbH Zinnwald Lithium Services GmbH is now at Antonstrasse 3a, 01097, Dresden, Germany, with effect from 21 June 2024. 

Basis of preparation

These unaudited interim condensed consolidated financial statements have been prepared under the historical cost convention and in accordance with the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this interim financial information. The unaudited interim condensed financial statements should be read in conjunction with the annual report and financial statements for the year ended 31 December 2023, which have been prepared in accordance with UK-adopted International Accounting Standards (UK IAS) and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under UK IAS (except as otherwise stated).

The unaudited interim condensed consolidated financial statements do not constitute statutory financial statements within the meaning of the Companies Act 2006. They have been prepared on a going concern basis in accordance with the recognition and measurement criteria of UK adopted international accounting standards. Statutory financial statements for the year ended 31 December 2023 were approved by the Board of Directors on 21 March 2024 and delivered to the Registrar of Companies. The report of the auditor on those financial statements was unqualified.

The same accounting policies, presentation and methods of computation are followed in these unaudited interim condensed financial statements as were applied in the preparation of the audited financial statements for the year ended 31 December 2023.

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 30 June 2024 was €1.176955.

Basis of consolidation

The consolidated financial statements incorporate those of Zinnwald Lithium Plc and all of its subsidiaries, as listed above (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).

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation.

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.

Going concern

At the time of approving the financial statements, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Company had a cash balance of €9.3m at the period end and keeps a tight control over all expenditure.  The Board maintains an ongoing strategy to enable the curtailing of a number of areas of expenditure to enable it to meet its minimum fixed costs for the next 12 months, even without raising further funds, whilst still maintaining all licenses in good standing.  Thus, the going concern basis of accounting in preparing the Financial Statements continues to be adopted.

Intangible assets

Capitalised Exploration and Evaluation costs

Exploration and evaluation assets are capitalised as Intangible Assets and represent the costs incurred on the exploration and evaluation of potential mineral resources. They include direct costs (such as permitting costs, drilling, assays and flowsheet testwork done by consulting engineers), licence payments and fixed salary/consultant costs, capitalised in accordance with IFRS 6 "Exploration for and Evaluation of Mineral Resources".  Exploration and Evaluation assets are initially measured at historic 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.

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     No depreciation is charged on these balances

Plant and equipment                  25% on cost

Fixtures and fittings                   25% on cost

Computers                                25% on cost

Motor vehicles                          16.7% on cost for new vehicles, 33.3% on cost for second-hand vehicles

Low-value assets                       100% on cost on acquisition for items valued at less than €800

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.

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.

Cash and cash equivalents

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

Right of Use Assets and Lease Liabilities

On 1 January 2019, the Group adopted IFRS 16, which supersedes IAS 17 and sets out principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract. All leases are accounted for by recognising a right-of-use assets due to a lease liability except for:

·      Lease of low value assets; and

·      Leases with duration of 12 months or less

The Group reviews its contracts and agreements on an annual basis for the impact of IFRS 16. The Group has such short duration leases and lease payments are charged to the income statement with the exception of the Group's lease for the Freiberg office and core shed, which expired in April 2024 and have been replaced by new office leases in Dresden and Core Shed in Altenberg that both started on 1 May 2024.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

On initial recognition, the carrying value of the lease liability also includes:

·      amounts expected to be payable under any residual value guarantee;

·      the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess that option;

·      any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

·      lease payments made at or before commencement of the lease;

·      initial direct costs incurred; and

·      the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

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.

Impairment of Capitalised Exploration Costs

Group capitalised exploration costs had a carrying value as at 30 June 2024 of €30,617,236  (31 December 2023: €27,652,152), which solely relate to the Zinnwald Lithium Project, Management tests annually whether capitalised exploration costs have a carrying value in accordance with the accounting policy stated in note 1.6. 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 Germany, ZLGs core mining license at Zinnwald is valid to 31 December 2047, which underpins the PEA published in September 2022.  In February 2024, and further updated in June 2024, the group published an updated Mineral Resource Estimate that showed a materially increased resource that underpins both the size of the Project and its long mine life.  It shows that the Project is the second largest hard-rock lithium project in the EU and the third largest in Europe as a whole. ZLG has additional exploration licenses at Falkenhain valid to 31 December 2025, at Altenberg to 15 February 2027, at Sadisdorf to 30 June 2026 and at Bärenstein, newly granted in 2023 and valid to 30 June 2028.  The 2022 PEA showed a material increase in size and output of the Project and underpinned a pre-tax NPV of $1.6 billion and a post-tax NPV of $1.0 billion and post-tax IRR of 29%.  Accordingly, the Board has concluded that no impairment charge is required for these assets.

Segmental reporting

The Group operates in the UK and Germany.  Activities in the UK include the Head Office corporate and administrative costs whilst the activities in Germany relate to ongoing development work at the group's wholly owned Zinnwald Lithium Project. The reports used by the Board and Management are based on these geographical segments.  Non-core Assets related to the historic Abbeytown Zinc Project, which was sold in April 2023.

Operating loss

Other operating income

Other operating income primarily comprises includes rental and utilities income from sub-lessors at the Group's former offices in Freiberg.

Finance income

Earnings per share

There is no difference between the basic and diluted earnings per share for the period ended 30 June 2024 or 2023 as the effect of the exercise of options would be anti-dilutive.

Intangible Assets

Intangible assets comprise capitalised exploration and evaluation costs (direct costs, licence fees and fixed salary / consultant costs) of the Zinnwald Lithium project in Germany.

Property plant and equipment

Right of Use Assets and Lease Liabilities

In May 2022, Zinnwald Lithium GmbH entered into a commercial lease agreement for and office and core shed property in Freiberg, Germany.  The duration of the lease is for 2 years and expired in April 2024.  The instalments for the lease were €12,000 per month, fixed for the duration of the lease. 

In May 2024, Zinnwald Lithium GmbH entered into two new commercial lease agreements for an office in Dresden and a Core Shed in Altenberg.  The duration of both leases are for 3 years and expire in April 2027.  The monthly combined leases instalments are €10,515 per month, fixed for the duration of the leases.  The right of use asset and lease liability for each new leases were recognised on 1 May 2022 on inception of the leases.  Movements in the period are shown as follows:

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Share based payment transactions

Share Option Plan (2017)

A total of 2,450,000 Options were granted to employees, consultants and Directors of the Group on 23 March 2023 at a price of 10.41p.  A further total of 4,350,000 Options were granted to employees, consultants and Directors of the Group on 15 January 2024 at a price of 6.75p.  All awards vest 1/3 on award, 1/3 after 12 months and 1/3 after 24 months.  The charges are calculated using the Black Scholes method and expensed over the two year relevant vesting period.

RSU Scheme (2020)

A total of 3,406,780 RSUs were issued on 23 March 2023 with an automatic vesting and exercise date of two years from issue.  These are expensed based on the share price at the date of issue being 10.41p and expensed over the two year vesting period.  A further total of 4,228,475 RSUs were issued on 15 January 2024 with an automatic vesting and exercise date of two years from issue. These are expensed based on a calculation using the Black Scholes method and expensed over the two year vesting period.

PSU Scheme (2020)

The first grant of 4,500,000 PSUs were issued on 15 January 2024 with a two year vesting period.  These are expensed based on a calculation using the Black Scholes method and expensed over the two year vesting period.

Share Capital

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.

Cash (used in)/generated from group operations

Approval of interim condensed consolidated financial statements

These interim condensed financial statements were approved by the Board of Directors on 19 September 2024.

*ENDS*