Savannah Resources Plc
Annual Report 2022

Plain-text annual report

SAVANNAH RESOURCES PLC Company No 07307107 ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022 CONTENTS BUSINESS REVIEW Chairman’s Statement Chief Execu(cid:94)ve’s Report ESG Strategic Report Barroso Lithium Project Overview GOVERNANCE Report of the Directors Remunera(cid:94)on Report Corporate Governance Statement Statement of Directors’ Responsibili(cid:94)es FINANCIAL STATEMENTS Report of the Independent Auditors Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Posi(cid:94)on Company Statement of Financial Posi(cid:94)on Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Cash Flows Notes to the Consolidated Financial Statements COMPANY INFORMATION Page 2 6 13 26 44 53 55 58 60 61 68 69 70 71 72 73 74 75 IBC SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 1 CHAIRMAN’S STATEMENT The energy transi(cid:60)on accelerates The global energy transi(cid:94)on, in which lithium is set to play such a cri(cid:94)cal role, moved forward rapidly in 2022. Russia’s invasion of Ukraine, which is now sadly into its second year, has led western na(cid:94)ons to rapidly reduce their reliance on Russia’s produc(cid:94)on of oil & gas. As energy prices have soared as a result, this has placed even greater emphasis on the need for signi(cid:2)cant, and in domes(cid:94)c renewable energy rapid, genera(cid:94)on capacity and accompanying energy storage methods. Lithium ba(cid:55)eries have a key role to play in renewable energy storage, in addi(cid:94)on to the cri(cid:94)cal role they are already playing in the ever(cid:59)growing electric vehicle market. increases This global geopoli(cid:94)cal backdrop con(cid:94)nues to create a favourable economic environment for Savannah’s planned development of the Barroso Lithium Project (the ‘Project’) in Portugal. As was the case in 2021, EV sales have seen signi(cid:2)cant year(cid:59)on(cid:59)year growth (55% to 10.5m worldwide) and the suite of lithium raw material products – spodumene concentrate, lithium carbonate and lithium hydroxide saw further notable price rises during the year, as supply struggled to keep pace with the rising level of demand. The price rises weren’t quite as marked as those seen as the global economy began to reawaken in 2021 (+250%(cid:59)500%). However, all three key raw materials saw their prices more than double during 2022, with the spodumene concentrate price, which is the par(cid:94)cular focus of Savannah, increasing by over 150% (source: S&P Global Pla(cid:55)s) to nearly US$7,000/t in December 2022. During 2022, there was also a notable change in the level of government support in certain western countries for strategic mineral produc(cid:94)on and industries key to the energy transi(cid:94)on. The US, Canada and Australia began to catalyse the energy transi(cid:94)on they are targe(cid:94)ng for their economies, with the provision of funding for projects deemed cri(cid:94)cal to its successful execu(cid:94)on. The EU’s ‘Cri(cid:94)cal Raw Materials Act’ which was published in mid(cid:59)March 2023 iden(cid:94)(cid:2)es lithium as both a cri(cid:94)cal and a strategic raw material and calls for at least 10% of the EU’s annual demand for strategic raw materials, such as lithium, to be sourced from domes(cid:94)c supplies by 2030. Among many other measures the Act also talks of selected ‘Strategic Projects’ bene(cid:2)(cid:94)ng from support for access to (cid:2)nance and shorter permi(cid:24)ng (cid:94)meframes. Whether our own Project receives (cid:2)nancial support will come down to speci(cid:2)c factors no doubt, but we were pleased to see that a clear message in support of domes(cid:94)c, responsibly managed produc(cid:94)on of cri(cid:94)cal raw materials for use in Europe was given by the region’s governing body. We (cid:2)rmly believe that our industry, par(cid:94)cularly when focused on provision of the ‘new’ raw materials which society so desperately needs if it is to e(cid:53)ec(cid:94)vely tackle climate change, can sit comfortably alongside communi(cid:94)es and other industries and earn a valued place in society. Transi(cid:60)on within a transi(cid:60)on While the market backdrop to our e(cid:53)orts grew stronger in 2022, and commercial interest in the Project remained very encouraging, two events speci(cid:2)c to our own situa(cid:94)on last July required us to adapt rapidly and e(cid:53)ect our own transi(cid:94)on to keep our goal of responsible track. As lithium raw material produc(cid:94)on on shareholders will remember, the (cid:2)rst event was the proposal from Portugal's environmental regulator that the evalua(cid:94)on process of the Project’s Environmental Impact Assessment (‘EIA’), the major step in obtaining the Environmental licence required, should con(cid:94)nue under ‘Ar(cid:94)cle 16’ of the relevant legisla(cid:94)on. Following the previous phases of the EIA review process, which began in 2020, we took the decision to accept this proposal as this op(cid:94)on featured both a (cid:2)xed (cid:94)me period, 180 working days, and provided Savannah with greater opportunity to engage directly with Portugal's environmental regulator, Agência Portuguesa do Ambiente (‘APA’) than in previous phases. The second event was the departure of David Archer from the CEO role, a(cid:29)er nearly nine years at the helm. Both events created a sizeable challenge for our Company but pleasingly, as I discuss below, our team have shown great for(cid:94)tude and commitment when it has been needed and have led us to the point we have now reached, awai(cid:94)ng a decision on the Project’s future in just a few weeks. Taking responsibility and moving forward During his long tenure as CEO, David Archer did much to progress Savannah to a point where it wholly owns, in a stable European jurisdic(cid:94)on, one of the most signi(cid:2)cant projects in one of the market’s most prized commodi(cid:94)es. A(cid:29)er his departure, it was important that those remaining make the most of this opportunity. It was also important that we quickly appointed a new CEO who could not only take on the CEO’s du(cid:94)es around market and stakeholder engagement, but also take a leading role in the upcoming engagement with APA in the Ar(cid:94)cle 16 process. 2 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CHAIRMAN’S STATEMENT Dale Ferguson, Savannah’s long (cid:94)me Technical Director and a signi(cid:2)cant shareholder, was the ideal candidate and I was delighted he accepted the role on an interim basis to steer the Company through the then unknown process of Ar(cid:94)cle 16. With so much to be done against the clock, it has been equally pleasing to see other members of the team also step up and take on new and greater responsibility. In many cases this has meant managing rela(cid:94)onships with key stakeholders and poten(cid:94)al partners in addi(cid:94)on to other du(cid:94)es. While we don’t shy away from the reality of the challenge that faces us in terms of wider acceptance, I believe that many of our rela(cid:94)onships with key stakeholders are improving, even when views on the Project may not always be shared. Beyond the CEO change, we have also made other changes to our board with the focus on broadening the knowledge and relevant experience of the Group in readiness towards produc(cid:94)on. the much(cid:59)desired move for As Maqbool Ali Sultan (Non(cid:59)Execu(cid:94)ve Director) and Murtadha Ahmed Sultan (Alternate Director for Imad Sultan) re(cid:94)red from the Board, Manohar Shenoy (Alternate Director to Maqbool Sultan) became a Non(cid:59)Execu(cid:94)ve Director and Mary Jo Jacobi joined last April as an Independent Non(cid:59)Execu(cid:94)ve Director. Mary Jo brings a wealth of experience in business and ESG ma(cid:55)ers gained through (cid:94)me with major energy companies and banks, as well as periods working in the public sector both in the UK as a member of the UK Advisory Commi(cid:55)ee on Business Appointments, and the US as Assistant United States Secretary of Commerce, and Special Assistant to US President Ronald Reagan. Mary Jo has already made a valuable contribu(cid:94)on providing sage advice around communica(cid:94)on of our key messages and helping to orientate our focus in the rapidly evolving landscape of ESG guidelines and repor(cid:94)ng. In November, Diogo da Silveira joined as another Independent Non(cid:59)Execu(cid:94)ve Director. As a former McKinsey Partner, CEO of Portuguese forestry operator, Navigator, and current Chair of Floene Energias, the leading Gas Distribu(cid:94)on System Operators in Portugal, Diogo has signi(cid:2)cant business experience, par(cid:94)cularly within Portugal. As a result, he has a comprehensive network among Portugal’s leading players in mul(cid:94)ple industries as well as amongst poli(cid:94)cians, key decision makers, and opinion leaders. Diogo is now taking a leading role in communica(cid:94)ng the key messages from the revised EIA to the Portuguese poli(cid:94)cal and business communi(cid:94)es and the media. Meanwhile the search for a permanent CEO con(cid:94)nues. If we are fortunate enough to receive a posi(cid:94)ve decision from APA and can move ahead with the Project’s ongoing evalua(cid:94)on and development, it would be ideal to have a new CEO in place as early as possible for that journey. However, we are looking for a very speci(cid:2)c combina(cid:94)on of skills, not least the ability to lead what is e(cid:53)ec(cid:94)vely a Portuguese business, making sure it integrates e(cid:53)ec(cid:94)vely into Portuguese business and social frameworks, while also being comfortable with the technical and social challenges of mining and dealing with interna(cid:94)onal investors and other stakeholders. We look forward to making an appointment during 2023. EIA: We listened and responded When wri(cid:94)ng my statement for last year’s Annual Report I said that our key focus for 2022 would be on ge(cid:24)ng the approval of the EIA for the Barroso Lithium Project in Portugal. It was indeed the main focus of all of 2022, but not in the way we expected at the beginning of the year. At the start of 2022, we had expected to receive a decision on the ini(cid:94)al EIA during the year. However, as shareholders will now be very well aware, the regulator, APA, suggested in July that in order to progress its review of the EIA, the applica(cid:94)on should move into the so(cid:59) called 'Ar(cid:94)cle 16' process. Updates on this process are given throughout our Annual Report but as we stated in our 6 July announcement, a(cid:29)er the extended previous phases of the review process we welcomed this phase’s strict (cid:94)me(cid:59)control element and the opportunity it brings to engage regularly in(cid:59)person with APA. Having submi(cid:55)ed our revised EIA by the 17 March deadline set by the Ar(cid:94)cle 16 process, we now expect a decision from APA on or before 31 May 2023. Dale Ferguson and his team have certainly taken on board the feedback received from APA and have adapted the Project’s design to re(cid:3)ect these preferences including with respect to the road layout, the storage of mine waste and tailings, protec(cid:94)on of water courses and aqua(cid:94)c ecosystems and shorter hours of opera(cid:94)on in the mining opera(cid:94)ons. We hope our team’s e(cid:53)ort has resulted in a (cid:2)nal design which is to APA's sa(cid:94)sfac(cid:94)on so we can move forward with the Project. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 3 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i CHAIRMAN’S STATEMENT Being responsible and respec(cid:4)ul to stakeholders We have persistently tried to engage with all stakeholders, par(cid:94)cularly local communi(cid:94)es, through a variety of formats during our (cid:94)me on the Project. During the year, for example, we increased the number of informa(cid:94)on centres in the area with shop space taken in the centre of Bo(cid:94)cas town and we were pleased to recruit new sta(cid:53) from the local popula(cid:94)on to sta(cid:53) the centres and to represent Savannah in the community. However, during this extended period of EIA review, it has been di(cid:37)cult to provide comprehensive and (cid:94)mely informa(cid:94)on on the Project and its status while signi(cid:2)cant uncertain(cid:94)es persist. Pleasingly, some good progress is being made with a Social Impact Assessment (the 'Assessment' or the 'SIA') in rela(cid:94)on to the Project. In the (cid:2)rst phase of the study, completed in Autumn 2022, Community Insights Group were on the ground in the local area, listening to views of local people on the Project and their expecta(cid:94)ons and preferences for bene(cid:2)t sharing from the Project. The resul(cid:94)ng 'Social Issues Scoping Report' was submi(cid:55)ed to APA as part of Savannah's revised EIA submission and Savannah has used these (cid:2)ndings to shape its current and future communica(cid:94)on with stakeholders now that the revised EIA has been resubmi(cid:55)ed and its details made public. Some of the new formats being tried as a result of the study are a comprehensive series of fact sheets which summarise the key topics in the EIA as well as a second community informa(cid:94)on sheet which summarises the Project and highlights the new features which have been introduced to further reduce the Project’s impact following feedback from stakeholders. Financial Overview Star(cid:94)ng 2022 with a cash balance of £13.0m put Savannah in a strong posi(cid:94)on to begin its plans to progress the Barroso Lithium Project De(cid:2)ni(cid:94)ve Feasibility Study (’DFS’). The unexpected development in the environmental licencing process caused by the movement into the addi(cid:94)onal Ar(cid:94)cle 16 phase caused Savannah to change its planned ac(cid:94)vi(cid:94)es somewhat. However, con(cid:94)nuing prudent cost management has resulted in a year end cash balance of £7.2m. Importantly, throughout the period, the Company con(cid:94)nued to invest in its asset base in Portugal (£2.6m; 2021: £1.9m). Hence, our opening cash posi(cid:94)on for 2023 is more than su(cid:37)cient to see us through the Ar(cid:94)cle 16 process, and will carry us into the second phase of the environmental licencing process and allow us to progress the DFS, which would follow a posi(cid:94)ve decision from APA on the EIA. In terms of the broader (cid:2)nancial performance, Savannah recorded a loss from con(cid:94)nuing opera(cid:94)ons of £2.7m (2021: £3.5m) with a £0.8m exchange rate gain resul(cid:94)ng from treasury management (2021: loss £0.2m). Administra(cid:94)on fees were rela(cid:94)vely (cid:3)at over the period at £3.5m (2021: £3.3m), however H2 2022 Administra(cid:94)on fees were £0.3m lower than in H1 2022, resul(cid:94)ng from a reduc(cid:94)on in professional fees plus the remunera(cid:94)on costs eliminated following the departure of David Archer who stepped down as CEO in July. Outlook Our team has worked tremendously hard over recent months to make the revisions to the Project’s design and I thank them sincerely for all their e(cid:53)orts. We hope the resul(cid:94)ng EIA will meet with approval from APA’s Evalua(cid:94)on Commi(cid:55)ee and the wider stakeholder group as well. We are currently undertaking a fresh communica(cid:94)on campaign in the local communi(cid:94)es to explain the changes we have made to the Project and to explain the poten(cid:94)al bene(cid:2)ts it can bring to local society. Assuming that Savannah receives a posi(cid:94)ve decision from APA, we will look to move forward with the Project in a responsible way, being sure to communicate its plans to all stakeholders. As we look towards the future, your board will con(cid:94)nue to follow the same responsible approach it has adopted up to now in the overall management and posi(cid:94)oning of Savannah. As we all know, the con(cid:94)nua(cid:94)on of the con(cid:3)ict in Ukraine and wider global geopoli(cid:94)cal tensions are placing considerable strain on the global economy in the near term through rising cost in(cid:3)a(cid:94)on and risks to supply chains. While the underlying market drivers for the development of the Barroso Lithium Project remain posi(cid:94)ve, Savannah’s board will con(cid:94)nue to closely monitor both internal and external risks to the business, and make decisions with a clear focus on the long term stability and growth of the business. For 2023, subject to receipt of the EIA, the next steps in the overall Project development process would include; re(cid:59)commencing the (cid:2)eldwork required for the DFS and advancing second, Environmental Compliance Report of the Execu(cid:94)on Project (‘RECAPE’) phase of the environmental licencing process, and progressing with the decarbonisa(cid:94)on study ini(cid:94)a(cid:94)ng Study, the the 4 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CHAIRMAN’S STATEMENT and o(cid:21)ake discussions. We also plan to provide a new Scoping Study on the Project based on the latest design and updated lithium price forecasts. Pu(cid:24)ng an ini(cid:94)al o(cid:21)ake agreement or strategic partnership in place would then, along with the comple(cid:94)on of all outstanding technical studies in 2024, allow Savannah to move into project (cid:2)nancing and ini(cid:94)a(cid:94)ng construc(cid:94)on of the Project in 2025. 2026 would bring the comple(cid:94)on of construc(cid:94)on and the long awaited (cid:2)rst produc(cid:94)on of spodumene concentrate from the Barroso Lithium Project. With that agenda ahead, 2023 could be Savannah’s most exci(cid:94)ng year to date. My thanks also go to our shareholders for their own commitment to being part of Savannah’s journey. Ma(cid:3)hew King Chairman Date: 4 April 2023 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 5 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i CHIEF EXECUTIVE’S REPORT It is an exci(cid:94)ng (cid:94)me to be wri(cid:94)ng my (cid:2)rst CEO report because in a few short weeks we will reach a de(cid:2)ning moment for our Company. By the end of May the decision from the Portuguese environmental regulator on the Barroso Lithium Project Environmental Impact Assessment is due to be announced. If we receive a posi(cid:94)ve decision at that point, the development of the Project as a source of responsibly produced lithium raw material in Europe, and for Europe, will move a signi(cid:2)cant step closer. revised EIA Everyone at Savannah along with our consultants and advisers has worked fantas(cid:94)cally hard to get the Company to this point. Whether it has been working on the itself, producing submission communica(cid:94)on materials in support of the EIA, mee(cid:94)ng with stakeholders and shareholders, maintaining rela(cid:94)onships with poten(cid:94)al commercial partners, or managing our spending and cash (cid:3)ow, everyone has played their part. Many of the dedicated employees and Directors are also shareholders, including myself. If the award of an environmental licence was based on e(cid:53)ort alone, I’m sure Savannah would receive one. However, as part of taking a responsible approach I should reiterate that we cannot provide a guarantee that the regulator will give a posi(cid:94)ve decision. If we receive a nega(cid:94)ve decision, we would be required to submit a wholly new EIA for the Project. Equally, I am keen to point out, par(cid:94)cularly to the popula(cid:94)on living near the Project, what a posi(cid:94)ve decision would mean in respect of Project construc(cid:94)on (cid:94)melines and other associated work streams. I have outlined the ‘next steps’ in the process below, so that everyone is clear about what lies ahead and when to expect each step to take place. Stakeholders can be assured that Savannah will match the outstanding technical work that must be completed before we reach a Final Investment Decision with ongoing community and stakeholder engagement. While much of the talk over the past year has been about the EIA, it is important to highlight that from a commercial perspec(cid:94)ve, the Project remains the same. There has been no change to the overall JORC compliant resources present on the Project across the C(cid:59)100 Mining Lease (23.5Mt at 1.02% Li2O) and Aldeia Mining Lease Applica(cid:94)ons areas (3.5Mt at 1.3% Li2O). The Mine Plan submi(cid:55)ed to APA is s(cid:94)ll based on the sequen(cid:94)al mining of four spodumene lithium bearing orebodies on the C(cid:59)100 Mining Lease and the assumed tonnage of ‘mineable material’ is also unchanged at 17.3Mt. The central plant will u(cid:94)lise conven(cid:94)onal technology and an environmentally sensi(cid:94)ve processing circuit to produce spodumene concentrate and a quartz(cid:59)feldspar by(cid:59)product. The annual mining rate and spodumene concentrate annual produc(cid:94)on rate are retained at around 1.5Mtpa and c.200ktpa, respec(cid:94)vely, or approximately 15% larger than the Project perceived for the 2018 Scoping Study. Environmental Impact Assessment – Work done, decision awaited While the extension to the EIA review process was not something we had planned for, I’m hopeful that the addi(cid:94)onal (cid:94)me spent will ul(cid:94)mately prove to be a good investment for all stakeholders in the Project and deliver the full opportunity for all which this project can o(cid:53)er. Most importantly, the Ar(cid:94)cle 16 process has allowed us the direct engagement with APA and the other groups on its Evalua(cid:94)on Commi(cid:55)ee which was very limited in the previous parts of the EIA review process. I trust this engagement in turn has resulted in us producing a revised design which gives the decision makers the addi(cid:94)onal reassurances and peace of mind they need to make an informed decision on the Project. We believe that the revised design addresses the feedback we have received during our construc(cid:94)ve mee(cid:94)ngs with APA and its Evalua(cid:94)on Commi(cid:55)ee while retaining many of the key components and features of the original design, which have always made it a Project which tries to balance the produc(cid:94)on of a mineral cri(cid:94)cal to Europe’s e(cid:53)orts to tackle climate change with being sympathe(cid:94)c to the local environment and popula(cid:94)on. Savannah has provided a series of updates in recent (cid:94)mes on the revised design and I brie(cid:3)y summarise just four of the key areas below. Waste management: Dry stack tailings storage to be maintained, waste rock used for back(cid:2)ll The original design included an ‘Integrated Waste Landform’ approach to onsite waste storage, which would have seen the inert waste rock from the mine workings stored together with the inert, dried, and compacted tailings from the processing plant in a highly stable ‘dry stack’ structure. This innova(cid:94)on meant that there would be no tradi(cid:94)onal, upstream ‘wet’ tailings dam. In the revised design, the same innova(cid:94)ve, stable dry stack approach is maintained for the tailings, however, waste rock and tailings will be stored separately. Furthermore, despite the inert nature of the 6 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CHIEF EXECUTIVE’S REPORT tailings, the storage facility will be lined with an impermeable membrane, elimina(cid:94)ng the possibility of any solu(cid:94)ons from the tailings percola(cid:94)ng into the subsoil and entering groundwater. Furthermore, the natural groundwater (cid:3)ow direc(cid:94)on from the tailings storage facility (‘TSF’) is back towards the Pinheiro pit, which would contain any (cid:3)uids moving away from the TSF if the lining was compromised. This represents another degree of environmental protec(cid:94)on which the new design provides. To meet with the addi(cid:94)onal requirements of APA, signi(cid:2)cant quan(cid:94)(cid:94)es of waste rock will now be stored in Waste Rock Facili(cid:94)es (‘WRFs’) and then used for back(cid:2)ll purposes. Savannah has taken an extremely cau(cid:94)ous approach to this aspect of the design and ensured that in the unlikely event of any failure of the largest WRF adjacent to the Grandao pit, it can be contained in the valley immediately surrounding the structure and no material will reach the Covas River. Under the new plan, the smaller Pinheiro and NOA pits will be completely back(cid:2)lled, while the larger Grandao and Reservatorio pits will be back(cid:2)lled to above the local water table to avoid the forma(cid:94)on of a waterbody at each pit. In addi(cid:94)on, any watercourses impacted by the workings will be remediated and reinstated. A proposed WRF to the north of the Grandao deposit has now been moved to avoid impact on marshland in that area. There is no risk from acid mine drainage as test work shows that the waste rock is inert and that any trace elements will not be leached out. Sediment runo(cid:53) from the WRFs repor(cid:94)ng to the Covas River is considered the main risk associated but detailed designs have been drawn up to ensure that this will not happen. The residual, permanent WRFs will be landscaped into the natural topography and revegetated with na(cid:94)ve species. Water: Local supply and aqua(cid:60)c environment to be una(cid:8)ected due to Project’s self(cid:1)su(cid:6)ciency & recycling In our design we have carefully considered both the Project’s own water requirements and its impact on the area’s water ecosystem. The Project will be its own water source with water collected from within or beneath mine workings and from the wider Project footprint. The water will then be stored in dedicated facili(cid:94)es on the Project (see image on sec(cid:94)on ‘Waste management: Dry stack tailings storage to be maintained, waste rock used for back(cid:2)ll’) which will also act as sediment control structures and have been designed to withstand a once in a 100 year storm event. This approach means there will be no requirement to extract water from the Covas River. The Project’s water system is made more e(cid:37)cient by the 85% recycling level expected to be achieved in the processing plant, which accounts for 80% of the Project’s overall water requirement. With this level of recycling, which includes using recycled water in the Project’s buildings for drinking, means that once the system is (cid:2)lled (a process which can begin during the construc(cid:94)on phase) the annual requirement for ‘top up’ water will equate to less than half of the Project’s total water requirement. In terms of protec(cid:94)ng the local water ecosystem, the Project’s water system will be a closed network, with signi(cid:2)cant water treatment infrastructure and recycling capacity installed. Process water will not be discharged to the environment, and any water that does need to be released will meet with the Portuguese Government’s regula(cid:94)ons. Furthermore, due to the local geology and poor (cid:3)ow rates in the area’s aquifers, the Project is not expected to in(cid:3)uence groundwater abstrac(cid:94)on for either public supply (the nearest extrac(cid:94)on point is Simula(cid:32)on of the Grandao pit, tailings storage facility, processing plant and water storage facili(cid:32)es during the opera(cid:32)ng phase (le(cid:5)) and following rehabilita(cid:32)on, landscaping, revegeta(cid:32)on and closure (right): Source: Company SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 7 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i CHIEF EXECUTIVE’S REPORT 1.3km upstream from the nearest pit) or agricultural use. However, Savannah has commi(cid:55)ed to install a replacement water source of equal size if there is any impact. As highlighted above, Savannah has commi(cid:55)ed to avoiding impact on watercourses wherever possible to protect these important habitats and to preserve water quality. Where loca(cid:94)on of workings or infrastructure makes this avoidance impossible, Savannah has designed to minimise impact. For example, the new river crossing that will be required to access the Reservatorio and NOA deposits will feature a single span bridge to avoid infrastructure in the river and to minimise disturbance on the riverbank. Savannah will rehabilitate watercourses on a progressive basis where they have been impacted. Road access: Avoiding local villages and towns, improving access to the area A detailed Tra(cid:37)c Study in accordance with the regula(cid:94)ons of the Municipal Master Plan (PDM de Bo(cid:94)cas) and Infraestruturas de Portugal, S.A. (IP, SA) was completed into access op(cid:94)ons for the planned Project for both light and heavy vehicles and to access poten(cid:94)al impacts. Based on this study and stakeholder consulta(cid:94)on a transport plan was developed including two new roads which will further limit the movement of Project(cid:59)related tra(cid:37)c through local communi(cid:94)es. Savannah has commi(cid:55)ed to limi(cid:94)ng road transport to weekdays only between 7am and 8pm and by accessing the Project from the north of the concession with a new purpose built 11.6km access road, which connects the Project to the R311 highway, all communi(cid:94)es to the north of the Project would be bypassed and no water crossings would be required. Furthermore, a sec(cid:94)on of this road will be available for use by the public. A second proposed 17km bypass sec(cid:94)on connec(cid:94)ng to the A24 highway would also avoid tra(cid:37)c passing through Bo(cid:94)cas, Granja and Sapiaos which will mean that no Project tra(cid:37)c will pass through any villages or towns between the Project and the A24 freeway. Rehabilita(cid:60)on The revised EIA sees Savannah reitera(cid:94)ng its previous commitment to rehabilita(cid:94)on of the Project area. Our objec(cid:94)ve at the end of the project is to leave the land rehabilitated, safe, valued and with new opportuni(cid:94)es for di(cid:53)erent uses by the popula(cid:94)on. Savannah commits to ensuring future sustainable use, whether for tourism, agriculture, or other purposes. Today, of the 271 hectares (2.71km2) which will be temporarily or permanently impacted by the Project’s development is 95% forest or scrub vegeta(cid:94)on with just 14 hectares, or 5%, consis(cid:94)ng of agricultural land and pastures. Hence, the opera(cid:94)on’s impact on local agricultural land is very limited. Furthermore, one of the key advantages of the Barroso Lithium Project is that mining will take place in a sequen(cid:94)al fashion which will allow for con(cid:94)nual rehabilita(cid:94)on from early in the Project’s life. Hence, the Project will never have large, disturbed areas and only essen(cid:94)al opera(cid:94)ng areas will be le(cid:29) open at the end of the Project’s opera(cid:94)ng life for the (cid:2)nal phase of rehabilita(cid:94)on. Soil removed from working areas will be carefully stored, maintained and enhanced to allow its use during the landscape recovery phase. Focus will be placed on harmonising the Project area back into the local landscape by contouring landforms and back(cid:2)lling the pits, replan(cid:94)ng with na(cid:94)ve species of plants and trees, some of which have been lost in forest (cid:2)res. In turn, this will encourage local fauna to recolonise previously impacted areas. On closure, the processing plant, other suppor(cid:94)ng facili(cid:94)es, semi(cid:59)mobile and (cid:2)xed equipment will all be dismantled and removed from site. Structures used to deviate exis(cid:94)ng water courses will also be removed, and water courses reinstated as close to their original orienta(cid:94)on as reasonably possible. O(cid:37)ce buildings and other facili(cid:94)es could be retained for subsequent alterna(cid:94)ve use by the local community or local businesses. Monitoring of key environmental performance indicators, such as water quality, will be maintained over the long term once rehabilita(cid:94)on is completed. The Project area will be o(cid:53)ered to the respec(cid:94)ve Parish Councils, making it available for use by the communi(cid:94)es for agriculture, tourism, and community owned businesses. 8 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CHIEF EXECUTIVE’S REPORT Barroso Lithium Project: Proposed new road layout avoids Project(cid:3)related tra(cid:7)c passing through local villages: w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i Source: Company Stakeholder Engagement – As cri(cid:60)cal as the mineral itself The extra (cid:94)me added by the Ar(cid:94)cle 16 process, as well as the management and responsibility changes that we have made amongst our team in the past nine months, has allowed us to refresh and strengthen our rela(cid:94)onships with key contacts within local and na(cid:94)onal government, associated agencies and the broader stakeholder group. As a result, we are pleased with the greater level of engagement we are achieving with key contacts. members going forward. We have also been proac(cid:94)ve in our provision of informa(cid:94)on about the revised EIA for the community. The community informa(cid:94)on sheet, men(cid:94)oned by the Chairman, was delivered to every residence in the Municipality, and the follow up fact sheets on individual EIA topics hopefully press home the key messages we are keen to make regarding the responsible manner in which we have designed and plan to operate the Project. We are looking forward to feedback on these publica(cid:94)ons as the Social Impact Assessment work con(cid:94)nues. As the Chairman outlined, we have also been undertaking more ‘hands on’ interac(cid:94)on with local communi(cid:94)es under the banner of the Social Impact Assessment via Community Insights Group (‘CIG’). As part of this exercise, CIG will be training our own sta(cid:53) to make for more e(cid:53)ec(cid:94)ve engagement with community Although they do not represent examples of the posi(cid:94)ve stakeholder engagement we are trying to generate, we are also equally comfortable to provide an update on the two legal cases which have been brought involving our Project. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 9 CHIEF EXECUTIVE’S REPORT lodged by the Management In the civil claim Commission of the Covas do Barroso Baldios (the 'Baldios Commission') against certain private landowners in respect of some land packages at the Project which they sold to Savannah (RNS 25 July 2022), Savannah and the private owners submi(cid:55)ed their contesta(cid:94)on to the lawsuit at the end of October 2022. The claimant had un(cid:94)l 13 January 2023 to reply to our contesta(cid:94)on, which it did not. On 24 January 2023, the Vila Real district court provided an addi(cid:94)onal (cid:94)meline of 10 working days for the Baldios Commission to reply, this (cid:94)me only applies to the legal protocols (i.e., not the legal arguments in the lawsuit). During that extension the Baldios Commission requested the judge to provide a minimum of 30 days to allow it to correct some documenta(cid:94)on and a response is awaited from the judge. Assuming this request is granted, and the Baldios Commission is permi(cid:55)ed to amend its documenta(cid:94)on, we would then have to wait for the Vila Real district court to set a date for a preliminary hearing (expected mid(cid:59)2023). In the case brought by the Parish of Covas do Barroso (‘Parish Council’) against the Republic of Portugal and the Ministry of Economy as defendants in which Savannah's wholly owned subsidiary, Savannah Lithium Unipessoal Lda, was joined as the counter(cid:59)interested party (not a defendant), the Mirandela Fiscal and Administra(cid:94)ve Court acqui(cid:55)ed the defendants and Savannah’s subsidiary in February 2023 having ruled that the defendants were not the legi(cid:94)mate par(cid:94)es in the lawsuit. The case was subsequently ex(cid:94)nguished in March 2023 a(cid:29)er the period available for the Parish Council to appeal expired. The li(cid:94)ga(cid:94)on was seeking to nullify certain administra(cid:94)ve ac(cid:94)ons taken by the defendants in June 2016 including the addi(cid:94)on of lithium to and the expansion in the area of the C(cid:59)100 Mining Lease. The lawsuits have neither impacted the Barroso Lithium Project’s ac(cid:94)vi(cid:94)es nor the current environmental impact assessment process which is moving to a conclusion. The C(cid:59)100 Mining Lease which contains the Barroso Lithium Project is fully granted, has a term of 30 years to 2036 and remains in good standing. The advice from Savannah’s lawyers was and remains that the both the ex(cid:94)nguished and ongoing claim are without founda(cid:94)on. Next steps – The Barroso Lithium Project through to produc(cid:60)on Ongoing licencing: As we have (cid:3)agged in our recent releases, if we receive a posi(cid:94)ve ‘DIA’ decision from APA at this stage, we expect it will be condi(cid:94)onal upon us ful(cid:2)lling some further speci(cid:2)c design requirements which will be set out with the decision. This is a normal aspect of the environmental licencing process, which Savannah has planned for, and this will be managed through the remainder of the licencing process. The DIA award is the (cid:2)rst approval in a mul(cid:94)(cid:59)stage environmental licencing process. Receipt of the DIA would allow the approval process to move on to the subsequent Environmental Compliance Report of the Execu(cid:94)on Project (‘RECAPE’) and environmental licence stages during which approval of the Project's detailed (cid:2)nal designs are received ('DCAPE') and the Project’s environmental (cid:94)tle is awarded. These stages are expected to run in parallel. If Savannah receives a posi(cid:94)ve DIA decision, we expect the RECAPE phase to take approximately 9(cid:59)12 months, meaning the TUA could be awarded in second half of 2024. Once the DCAPE declara(cid:94)on has been made and environmental licence received, Savannah will then be able to apply for the remainder of the licences required for the Project’s development and opera(cid:94)on. These licences cover permissions for construc(cid:94)on and use of services on site such as power and water. The condi(cid:94)ons set by the DIA and the agreement of the Project’s (cid:2)nal designs in the RECAPE phase will also provide important input parameters for the DFS. Updated Scoping Study: The extended (cid:94)metable on EIA and the accompanying De(cid:2)ni(cid:94)ve Feasibility Study has meant we have not been able to publish an update to the 2018 Project Scoping Study. If the DIA decision is posi(cid:94)ve, we will prepare and publish a new Scoping Study in the second half of 2023 based on the revised EIA and Mine Plan. This study won’t re(cid:3)ect all of the details which will come through the RECAPE phase however, it will act as a useful prelude to the De(cid:2)ni(cid:94)ve Feasibility Study for all stakeholders. As many shareholders will know, cost in(cid:3)a(cid:94)on in the mining sector over the last 12 months has been running at over 20%, and Savannah will need to re(cid:3)ect this in our modelling, along with any addi(cid:94)onal costs (and savings) that result from the latest Project design. Overall, between in(cid:3)a(cid:94)on and the Project’s expansion and the EIA revisions, we expect this to result in an increase in capex from the c.US$125m (including con(cid:94)ngencies) es(cid:94)mate in the Scoping Study nearly (cid:2)ve years ago. However, no amount of cost in(cid:3)a(cid:94)on, however sizeable, has matched the 1300% in(cid:3)a(cid:94)on seen in lithium prices since the low of US$375/t in August(cid:59)October 2020. While we will not run our models using today’s spot price of US$4,750/t over the long term, we will be able to incorporate a spodumene price deck which re(cid:3)ects updated forecasts from banks, brokers and market 10 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CHIEF EXECUTIVE’S REPORT commentators, which all far exceed the average US$685/t we used in the 2018 Study. I am con(cid:2)dent, the new Scoping Study level economics will remain highly posi(cid:94)ve. De(cid:2)ni(cid:32)ve Feasibility Study: In terms of (cid:94)ming, assuming a posi(cid:94)ve DIA decision is received, work to complete the DFS will be undertaken in parallel with the remainder of the environmental licensing process. Alongside the (cid:2)nal Project designs which will come through the RECAPE phase of the ongoing environmental licencing process, a modest (cid:2)eldwork programme is also required. This will include drilling for reserve and resource delinea(cid:94)on and geotechnical purposes. This programme has been planned and Savannah would look to ini(cid:94)ate it during H2 2023, subject to the DIA decision. Savannah expects the DFS to be completed no later than 12 months following the restart of the required (cid:2)eldwork, so in H2 2024. Importantly, the process (cid:3)owsheet for the concentrator plant was (cid:2)nalised in Q1 2022. Based on industry standard equipment and processing techniques and an environmentally friendly reagent regime, which complies with all relevant regula(cid:94)ons and allows both mica and spodumene (cid:3)ota(cid:94)on to operate at near neutral pH, the plant will be capable of producing a high quality, spodumene concentrate grading (cid:1)5.5% Li2O with low levels of impuri(cid:94)es. Decarbonisa(cid:32)on Study: We are excited and commi(cid:55)ed to decarbonising the Project and achieving our goal of net zero carbon over the life of the Project. The (cid:2)rst phase of the Decarbonisa(cid:94)on Study took longer than we had expected, but we have been pleased by its (cid:2)ndings, including the 54% reduc(cid:94)on in the calculated Scope 2 emissions the Project before we ini(cid:94)ate any changes. We have also been very pleased by the interest we have generated with a number of OEMs (vehicle manufacturers), which are developing new zero emissions surface mining vehicles. As we announced in early 2023, we the key will be inves(cid:94)ga(cid:94)ng some of further recommenda(cid:94)ons from the (cid:2)rst phase of the study in the second phase, with the assistance of our consultants and ABB. This will include our op(cid:94)ons around increasing the renewable power supply to the Project and forging commercial partnerships with one or more of the OEMs which has expressed interest in working with Savannah. We look forward to providing further updates on the study during the year and incorpora(cid:94)ng its (cid:2)nal recommenda(cid:94)ons into our DFS and subsequent opera(cid:94)ons. Commercial discussions: With our focus on the EIA in recent months, we have not been looking to (cid:2)nalise o(cid:21)ake agreements during the period. Equally, for most of the counterpar(cid:94)es we have been in discussions with, the uncertainty regarding the EIA has checked their own willingness to commit to a long term commercial arrangement. Importantly though, the level of underlying interest in Savannah’s future produc(cid:94)on of spodumene concentrate has not waned, despite the EIA process. We con(cid:94)nued to receive new commercial inquiries throughout the year and that has also con(cid:94)nued into 2023. This is clear evidence, along with the persistent high price levels, that sourcing of lithium raw materials, par(cid:94)cularly from low risk jurisdic(cid:94)ons remains a signi(cid:2)cant challenge for downstream users. EV sales have remained very strong with European EV sales growing again to 2.7m units (+15%) as part of global sales of 10.5m (+55%, source EV(cid:59)volumes.com). Hence, when Savannah is in a posi(cid:94)on to proceed to (cid:2)nalise commercial arrangements, which we expect to do next year, we will be pushing hard to secure deals which meet our criteria including working with a partner or partners commi(cid:55)ed to using Savannah’s product within the European ba(cid:55)ery value chain, willing to talk about pricing levels in line with reported spot prices at the (cid:94)me, and prepared to contribute signi(cid:2)cantly towards the CAPEX of our Project as part of the o(cid:21)ake’s (cid:2)nancial arrangements. European Electric Vehicle Sales Global Electric Vehicle Sales # & * ) ( ' & % $ # " " " &%!!! $%"!! $%!!! #%"!! #%!!! "!! ! $" $! #" #! " ! ! # & * ) ( ' & % $ $ # " " " #$%!!! #!%!!! *%!!! (%!!! '%!!! $%!!! ! #' #$ #! * ( ' $ ! $ ! $!#& $!#' $!#" $!#( $!#) $!#* $!#+ $!$! $!$# $!$$ $!#& $!#' $!#" $!#( $!#) $!#* $!#+ $!$! $!$# $!$$ ,-./0123.456/7 8.9:;01.<2=>?12./0123.4@6/7 A6,-.30123 B,-.30123 8.9:;01.<2=>?12./0123.4@6/7 Source: EV(cid:59)volumes.com SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 11 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i CHIEF EXECUTIVE’S REPORT Construc(cid:32)on & Produc(cid:32)on: 2025, 2026 and beyond: If the above (cid:94)metable can be met, Savannah should be in a posi(cid:94)on to make its (cid:2)nal investment decision on the Project in late 2024 / early 2025 and move on with securing the (cid:2)nance required to construct the Project. Construc(cid:94)on could then begin in H2 2025, and is expected take approximately 15 months. Commissioning of the plant, ramp up of produc(cid:94)on, and delivery of Savannah’s (cid:2)rst product to a European customer could then all take place in H2 2026. to Outlook Ge(cid:24)ng Savannah to this point, where we are just a few weeks away from receiving a DIA decision that we have waited for since 2020, has been a huge e(cid:53)ort for everyone in the Company. I would like to take this opportunity to thank them for their hard work and resolve. My thanks also go to our shareholders for their pa(cid:94)ence and support, and to those stakeholders who have been willing to engage with us over the past year. Savannah hopes to bring bene(cid:2)ts to all as it looks to make its contribu(cid:94)on to Europe’s e(cid:53)orts to tackle climate change through the provision of responsibly sourced, low carbon, European lithium. Dale Ferguson Chief Execu(cid:94)ve O(cid:37)cer Date: 4 April 2023 12 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 ESG This review of Savannah’s ESG ac(cid:94)vi(cid:94)es represents the Company’s (cid:2)(cid:29)h year of repor(cid:94)ng on these themes in a dedicated sec(cid:94)on of the Annual Report. We trust that the dura(cid:94)on of this repor(cid:94)ng gives some indica(cid:94)on of the Company’s long(cid:59)term commitment to these ma(cid:55)ers, a commitment which is matched by the ever greater focus placed on corporate ESG prac(cid:94)ces by shareholders and other stakeholders alike. For some, a natural resource like Savannah, does not (cid:2)t with their company, percep(cid:94)on of an ESG ‘type’ company, but for the energy transi(cid:94)on away from fossil fuels to be successfully achieved, the mining industry is going to be needed more than ever before by society to provide the raw materials it needs. Therefore, it is in the interests of society and the mining sector alike that the necessary expansion of the industry and mass produc(cid:94)on of cri(cid:94)cal raw materials is conducted as a mature and respec(cid:10)ul partnership. From a mining company’s perspec(cid:94)ve this means opera(cid:94)ng in a highly responsible and transparent way with a (cid:2)rm focus on safety, environmental management, stakeholder engagement and bene(cid:2)t sharing. Savannah recognises the importance of sound environmental, social and corporate governance: Source: Adobe stock images The next (cid:2)ve years are set to be a de(cid:2)ning period for Savannah during which the Company hopes to achieve its goal of becoming an established responsible, low carbon, producer of lithium in Europe which shares the social and economic bene(cid:2)ts of its developments with stakeholders while also genera(cid:94)ng value for shareholders. To achieve that goal, the Company’s commitment and delivery of good ESG prac(cid:94)ces will need to equal its commitment to technical excellence on a Project’s development and opera(cid:94)on. Environmental and Social Management System The work begun in 2021 on the Corporate Environmental and Social Management System (‘ESMS’) has been completed. The ESMS can now act as the ‘manual’ that provides the framework for Savannah to systema(cid:94)cally iden(cid:94)fy and manage its most poten(cid:94)ally signi(cid:2)cant ESG risks. It also provides a roadmap for our opera(cid:94)ng Portuguese subsidiary to develop its own project(cid:59)speci(cid:2)c ESMS, aligned with the Corporate ESMS, and in SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 13 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i ESG compliance with all applicable ESG(cid:59)related regula(cid:94)ons and permits. laws, Applica(cid:60)on of other guidelines and protocols The ESMS incorporates elements from the Interna(cid:94)onal Finance Corpora(cid:94)on’s Performance Standards on Environmental and Social Sustainability, the World Bank Group’s Environmental Health & Safety, Mining and General Guidelines, and re(cid:3)ects the applicable principles and provisions of the Quoted Companies Alliance’s Corporate Governance Code. However, as many stakeholders will already be aware, there is a growing number of other ESG(cid:59)related guidelines, goals, and frameworks produced by a number of highly relevant groups and agencies. As Savannah moves forward and looks to ini(cid:94)ate and then mature a comprehensive ESG strategy, part of the requirement will be to select the most appropriate guidelines to apply and subsequently report to. Savannah is currently in the process of assessing a number of these repor(cid:94)ng frameworks put forward by various groups. Portugal Our environmental and social e(cid:53)orts during the year were naturally heavily focused on Portugal and par(cid:94)cularly dominated by the work in the second half of the year engaging with APA and other key stakeholders and undertaking the work of revising the EIA and associated Mine Plan. Environmental All at Savannah were disappointed that the wait for the DIA decision on the Barroso Lithium Project EIA was extended last July. However, a(cid:29)er the previous 24 months spent with great uncertainty during the ini(cid:94)al review period, we were keen to take the opportuni(cid:94)es which the Ar(cid:94)cle 16 phase o(cid:53)ered Savannah. This included direct engagement with APA and the other groups on its Evalua(cid:94)on Commi(cid:55)ee, and a clearly de(cid:2)ned (cid:94)meline in law. As was reported during the second half of 2022, our mee(cid:94)ngs with APA and the other groups were cordial and very construc(cid:94)ve. Savannah’s team and its consultants were given a clear understanding of what aspects of the Project’s physical design and its associated socio(cid:59)economic programmes needed to be addressed to give the Project the best chance of receiving a posi(cid:94)ve DIA decision from APA. The revised EIA, featuring an updated site layout and mine plan which re(cid:3)ects the feedback received, has now been submi(cid:55)ed and we await the decision on or before 31 May 2023. The Barroso Lithium Project has been speci(cid:2)cally designed to minimise impact on the natural its environment and local communi(cid:94)es wherever possible and should, via the responsibly sourced lithium it will produce, bring a signi(cid:2)cant net bene(cid:2)t with respect to removal of CO2 and other emissions within the European Union. The Project and all its processes have been designed to meet or exceed the stringent regula(cid:94)ons that exist in Portugal and the European Union. One of the key advantages of the Barroso Lithium Project is that mining will take place in a sequen(cid:94)al fashion which will allow for con(cid:94)nual remedia(cid:94)on and rehabilita(cid:94)on of the areas impacted from early in the Project’s life. Focus will be placed on reharmonising the Project area with the local landscape, replan(cid:94)ng with na(cid:94)ve species of plants and trees to encourage local fauna, and protec(cid:94)ng and re(cid:59)establishing local water courses. Another cri(cid:94)cal feature is the innova(cid:94)ve ‘dry stacking’ technique that will be used for the storage of tailings from the processing plant. This will completely avoid the need for a tradi(cid:94)onal ‘wet tailings dam’ onsite. Our objec(cid:94)ve at the end of the project is to leave the land rehabilitated, safe, valued and with new opportuni(cid:94)es for di(cid:53)erent uses by the popula(cid:94)on. Savannah commits to ensuring future sustainable use, whether for tourism, agriculture, or other purposes. With regards to water, Savannah appreciates the cri(cid:94)cal importance of both water availability and water quality to the popula(cid:94)on and natural environment in the Barroso region. Hence, the Project has been designed so that its water usage does not impact other local users or the natural environment. The Project is expected to be self(cid:59)su(cid:37)cient for its water needs with the water required collected on the site, primarily from within or below the mine workings. The single largest consumer of water on the Project will be the processing plant, and 85% of the water used in the plant will be recycled and used again. In addi(cid:94)on to not depriving other local users or the local environment of water, nor will the Project pose a threat to local water quality, thanks to its benign produc(cid:94)on processes and innova(cid:94)ve water treatment and storage process. To provide peace of mind to local residents, we are also planning to o(cid:53)er real(cid:59)(cid:94)me data on the Project’s environmental performance to the public (air quality, water quality, noise, ground vibra(cid:94)ons). This will be done by making the relevant data, which we will collect from 14 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 ESG a series of sensors located across the Project area and local surroundings, available via an app and our website. In addi(cid:94)on, local communi(cid:94)es will be saved from disturbance from Project(cid:59)related tra(cid:37)c thanks to a road plan which avoids villages and towns and allows trucks safe and e(cid:37)cient access onto the na(cid:94)onal highway network. strategy has been underway since March 2022. The Project is signi(cid:2)cantly aided in its decarbonisa(cid:94)on goal by the 60%+ renewable energy mix which already exists in Portugal’s grid power. The commercialisa(cid:94)on of zero or ultra(cid:59)low emission surface mining equipment over the medium term is also likely to contribute signi(cid:2)cantly to our plans. As part of its commitment to the decarbonisa(cid:94)on of Europe, in 2021 Savannah announced its inten(cid:94)on to target net zero scope 1 and 2 emissions over the life of the Project and is also seeking to signi(cid:2)cantly minimise scope 3 emissions by exploring a number of innova(cid:94)ve technology op(cid:94)ons. Work on this decarbonisa(cid:94)on The following table summarises the key steps that Savannah has taken and intends to take to minimise its impact on the natural and urban environment neighbouring the Barroso Lithium Project. Summary of Environmental protec(cid:60)on measures and commitments made at the Barroso Lithium Project Previous & Recent ac(cid:60)vi(cid:60)es/ Considera(cid:60)on commitments Future ac(cid:60)vi(cid:60)es/commitments Air quality management Baseline monitoring of local air quality completed • • Annual monitoring of local air quality, during exploita(cid:94)on works on the NOA pit • Constant monitoring of local air quality during opera(cid:94)ng phase and real(cid:59)(cid:94)me repor(cid:94)ng of data to stakeholders • Dust suppression through regular dowsing of site roads from water trucks and use of ‘fog cannons’ at plant delivery point • Future air quality to bene(cid:2)t from targeted reduc(cid:94)ons to Scope 1 & 2 emissions to net zero and addi(cid:94)onal reduc(cid:94)ons to Scope 3 emissions • Comprehensive ac(cid:94)on plan prepared to deal with any air pollu(cid:94)on incidents Biodiversity • Baseline monitoring of local (cid:3)ora and fauna completed • Survey of local land use completed • Annual monitoring for the Iberian • Rehabilita(cid:94)on and revegeta(cid:94)on of impacted areas on the Project and on surrounding Savannah owned lands beginning during opera(cid:94)ng phase Wolf completed • Con(cid:94)nue monitoring of key land and aqua(cid:94)c fauna in the area, including the Iberian Wolf SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 15 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i  Previous & Recent ac(cid:60)vi(cid:60)es/ Considera(cid:60)on commitments Future ac(cid:60)vi(cid:60)es/commitments Carbon abatement • • Decarbonisa(cid:94)on studies to be con(cid:94)nued. Next steps to include: o More detailed analysis of the op(cid:94)ons available for 100% renewable energy provision as part of the De(cid:2)ni(cid:94)ve Feasibility Study on the Project; and o Studies with a number of mining equipment OEMs to determine a site speci(cid:2)c solu(cid:94)on for a transi(cid:94)on to ba(cid:55)ery operated mining (cid:3)eet and associated charging infrastructure Execu(cid:94)on of study (cid:2)ndings to deliver on the de(cid:2)ned emissions targets through (cid:2)nal project design, ongoing op(cid:94)misa(cid:94)on during produc(cid:94)on ESG 3rd party Scope 1(cid:59)3 emissions assessment completed in 2019. Scope 1 & 2 emissions inventory es(cid:94)mate revised and restated in 2022 (see below) • Commitment to move towards net zero Scope 1&2 emissions during opera(cid:94)ng phase target addi(cid:94)onal Scope 3 reduc(cid:94)ons announced and • Decarbonisa(cid:94)on strategy ini(cid:94)ated in March 2022 with study led by the Portuguese environmental consultant, ECOPROGRESSO. First phase of study concluded: • o o o the poten(cid:94)al Con(cid:2)rma(cid:94)on that Ba(cid:55)ery Electric Mining Equipment will provide the most e(cid:53)ec(cid:94)ve and (cid:3)exible means to reduce Scope 1 emissions at the Project to zero. Scope 1 emissions represent 68% of the Scope 1 and 2 total The es(cid:94)mate of Scope 2 baseline emissions was reduced by 54% from the original 2019 forecast, based for a on reduc(cid:94)on in the es(cid:94)mated power requirement of the Project's plant and a 41% reduc(cid:94)on in the emissions associated with Portugal's grid power A number of viable op(cid:94)ons are to secure 100% available renewable energy supply to the Project including regional solar and wind genera(cid:94)on, on market purchase, via direct Power Purchase Agreements, or a combina(cid:94)on of these. Use of 100% renewable energy would reduce the Project's Scope 2 emissions to zero 16 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 ESG • Previous & Recent ac(cid:60)vi(cid:60)es/ Considera(cid:60)on commitments Future ac(cid:60)vi(cid:60)es/commitments Signed a Memorandum of Understanding (‘MoU') with ABB, the global technology leader as the (cid:2)rst of the decarbonisa(cid:94)on ‘specialist’ appointments. Under the MoU, ABB will: Land rehabilita(cid:94)on Noise & light abatement Transport management o Apply its industrial automa(cid:94)on and electri(cid:2)ca(cid:94)on exper(cid:94)se to develop and co(cid:59)ordinate an extensive suite of produc(cid:94)on control and process solu(cid:94)ons for the Project o Work with ECOPROGRESSO and its partners to provide engineering support for the Barroso Project Lithium De(cid:2)ni(cid:94)ve Feasibility Study • Ongoing rehabilita(cid:94)on of areas impacted by previous explora(cid:94)on ac(cid:94)vi(cid:94)es (drill pads and access routes) • Annual monitoring ongoing of the small exploita(cid:94)on works on the NOA deposit • Baseline noise studies completed • • Annual monitoring ongoing of the small exploita(cid:94)on works on the NOA deposit Processing plant loca(cid:94)on selected to reduce light and noise impact on local communi(cid:94)es Time limited, regulated blas(cid:94)ng schedule included in Project plan • • • • • Con(cid:94)nue with rehabilita(cid:94)on of previous explora(cid:94)on sites comprehensive Progressive rehabilita(cid:94)on during and a(cid:29)er opera(cid:94)ng phase using na(cid:94)ve species to revegetate impacted areas and Execute Project design and plans at the relevant (cid:94)me Constant monitoring of noise emissions during opera(cid:94)ng phase and real(cid:59)(cid:94)me repor(cid:94)ng of data to stakeholders and the environmental regulator • Noise levels may be further reduced by the introduc(cid:94)on of zero(cid:59)emission mining (cid:3)eet and other equipment • • • • Inclusion of new access roads in the Project design to mi(cid:94)gate impact on local communi(cid:94)es and minimise use of local roads Commitment to daily (cid:94)me limits on truck movements during opera(cid:94)ng phase Execute access road plan Evaluate use of low/zero emission road trucks as part of decarbonisa(cid:94)on strategy SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 17 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i ESG Previous & Recent ac(cid:60)vi(cid:60)es/ Considera(cid:60)on commitments Future ac(cid:60)vi(cid:60)es/commitments Visual impact abatement • • Visual impact proac(cid:94)vely considered in Project design (e.g., processing plant loca(cid:94)on, road layout) Large, vegetated earth berms included in Project design to reduce the visual impact of the opera(cid:94)on on local communi(cid:94)es • Waste management • Waste to be minimised through sale of quartz and feldspar products • Processing plant waste (tailings) to be dried and stacked to avoid risks associated with wet storage in tradi(cid:94)onal tailings dam Water management • • • • • • Waste rock to be stored in temporary storage facili(cid:94)es before being used to (cid:2)ll closed pits as part of rehabilita(cid:94)on programme Beginning in the opera(cid:94)ng phase, residual waste storage areas to be contoured into exis(cid:94)ng topography and progressively re(cid:59)vegetated Con(cid:94)nued baseline monitoring of including local water courses, surface and underground chemical analysis 3rd party es(cid:94)mate of annual water requirement for opera(cid:94)ng phase completed Project to be self(cid:59)su(cid:37)cient for water usage through on(cid:59)site water harves(cid:94)ng, storage, wastewater recycling and recovery of water from concentrate and waste products and Lithium recovery process based on use of REACH registered chemicals with low environmental toxicity; will operate at near neutral pH Vibra(cid:94)ons management • Monitoring of vibra(cid:94)on, during blas(cid:94)ng works at the NOA pit Re(cid:2)ne and (cid:2)nalise Project design through licencing and DFS the environmental processes • Execute (cid:2)nal Project design • • • • • • • • • Re(cid:2)ne and (cid:2)nalise the Project design through the environmental licencing and DFS processes Execute (cid:2)nal Project design Comprehensive ac(cid:94)on plan prepared to deal with any poten(cid:94)al pollu(cid:94)on incidents Re(cid:2)ne and (cid:2)nalise Project design through licencing and DFS the environmental processes Execute (cid:2)nal Project design Constant monitoring of local water quality both upstream and downstream of the process plant during and post opera(cid:94)ng phase and real(cid:59)(cid:94)me repor(cid:94)ng of data to stakeholder Comprehensive ac(cid:94)on plan prepared to deal with any poten(cid:94)al pollu(cid:94)on incidents Constant monitoring of vibra(cid:94)ons during opera(cid:94)ng phase and real(cid:59)(cid:94)me repor(cid:94)ng of data to stakeholders Comprehensive ac(cid:94)on plan prepared in case the vibra(cid:94)ons results exceed what was expected 18 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 ESG One of the other community consulta(cid:94)on ac(cid:94)ons which is underway is dialogue with the local community groups (Baldios) which acts as guardian of parcels of land on behalf of the community, a por(cid:94)on of which may be required for the Barroso Lithium Project. This dialogue is designed to fairly compensate the local community during the period construc(cid:94)on and opera(cid:94)on of the mine. Government & wider engagement We met regularly with a range of ministers during the year to keep them informed of developments on the Project and progress with the Ar(cid:94)cle 16 process, and to ensure that the economic opportunity available to Portugal through our Project and the wider lithium ba(cid:55)ery value chain is fully understood at the highest level. We also met with European Commission Vice President, Maroš Šef(cid:19)ovi(cid:19), who is responsible for coordina(cid:94)ng the Commission’s work on the European Ba(cid:55)ery Alliance, and representa(cid:94)ves of the US Government, which is lobbying for cri(cid:94)cal raw material produc(cid:94)on in Europe, as part of a wider, western, response to the growing global compe(cid:94)(cid:94)on for these resources. Social Local Community engagement During the year Savannah made signi(cid:2)cant e(cid:53)orts to maintain its interac(cid:94)on with the local communi(cid:94)es. However, the ongoing wait for a DIA decision in the (cid:2)rst half followed by Ar(cid:94)cle 16 process in the second half, made it challenging for the Company to provide detailed informa(cid:94)on on the Project’s future development or to make (cid:2)rm commitments on Project(cid:59)related ma(cid:55)ers which would involve the community. We did increase the number of informa(cid:94)on centres in the area with shop space taken in the centre of Bo(cid:94)cas town and we were pleased to recruit new sta(cid:53) from the local popula(cid:94)on to sta(cid:53) the centres and to represent Savannah in the community. We con(cid:94)nued to give preference to local suppliers of goods and services wherever possible, and to provide support to local groups and events including the local (cid:2)re service. Pleasingly, a greater level of community engagement was achieved on Savannah’s behalf by Community Insights Group (CIG), the highly experienced social performance consultancy, which has been commissioned to produce a Social Impact Assessment (the 'Assessment' or the 'SIA') in rela(cid:94)on to the Barroso Lithium Project. The SIA will provide Savannah with a clear assessment of the range of views that exists among stakeholders towards the Project and the Company, as well as the expecta(cid:94)ons and preferences that stakeholders have for bene(cid:2)t sharing from the Project. The (cid:2)rst phase of the Assessment, saw CIG representa(cid:94)ves spending (cid:94)me in the area during the Autumn conduc(cid:94)ng interviews with local residents. The outcome of this phase was a 'Social Issues Scoping Report' which was submi(cid:55)ed to APA as part of Savannah's revised EIA submission. The (cid:2)ndings in this report demonstrated both local residents’ concerns about the impact of the Project and their apprecia(cid:94)on of the poten(cid:94)al for the Project to generate jobs and to make the area more accessible. Savannah has been using these (cid:2)ndings to shape its current and future communica(cid:94)on with stakeholders now that the revised EIA has been resubmi(cid:55)ed and its details made public. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 19 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i ESG Summary of social and government interac(cid:60)on and commitments made in rela(cid:60)on to the Barroso Lithium Project Considera(cid:60)on Recent ac(cid:60)vi(cid:60)es Future ac(cid:60)vi(cid:60)es Community engagement • Addi(cid:94)onal Informa(cid:94)on centre Social • Impact the Comple(cid:94)on of Assessment to support (cid:2)nalisa(cid:94)on of Stakeholder to Engagement complement future phases of the Project Plan • • Re(cid:2)ne and (cid:2)nalise the Bene(cid:2)t Sharing and Good Neighbour Plans Con(cid:94)nue with land acquisi(cid:94)on programme • • • • • Community support opened in Bo(cid:94)cas town Impact Ini(cid:94)al phase of Social by completed Assessment Group, Insights Community incorpora(cid:94)ng interviews with community members and resul(cid:94)ng in a 'Social Issues Scoping Report' which accompanied Savannah’s revised EIA submission to APA Communica(cid:94)on also maintained with local communi(cid:94)es through the Informa(cid:94)on Centres and newsle(cid:55)ers Land programme con(cid:94)nued Produced a comprehensive series of Informa(cid:94)on sheets for stakeholders highligh(cid:94)ng the key design points and socio(cid:59)economic programs within the revised EIA acquisi(cid:94)on Sponsorship of local cultural and spor(cid:94)ng events & teams • • • • Dona(cid:94)ons local (cid:2)re(cid:2)gh(cid:94)ng to service (forest (cid:2)re mi(cid:94)ga(cid:94)on) Repairs made to local housing stock Incorpora(cid:94)on of a founda(cid:94)on as part of the Bene(cid:2)t Share Plan which will invest focused programmes community in Government engagement Engagement/Mee(cid:94)ngs held: European Commission: • Vice President Maroš Šef(cid:19)ovi(cid:19) Portugal: • • • • Portuguese Minister of Economy and Mari(cid:94)me A(cid:53)airs Portuguese Minister of Environment and Energy Transi(cid:94)on Portuguese Infrastructure Minister for Portuguese Secretary of State for Energy 20 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 Con(cid:94)nue with current (cid:2)nancial and resource support for local events, teams and groups; con(cid:94)nue with support for local residents in need if posi(cid:94)ve DIA decision is received • Re(cid:2)ne and (cid:2)nalise the Bene(cid:2)t Sharing and Good Neighbour Plans • Con(cid:94)nue and increase engagement with key na(cid:94)onal government ministers & departments, and local administrators • Maintain contact with Bri(cid:94)sh and US Embassies in Portugal • Maintain European contact with Commission & relevant EU bodies (see Membership sec(cid:94)on in Governance box below) ESG Considera(cid:60)on Recent ac(cid:60)vi(cid:60)es Future ac(cid:60)vi(cid:60)es Environmental regulator, APA Ins(cid:94)tute for Nature Conserva(cid:94)on and Forests • • • • The Northern Portugal Regional Coordina(cid:94)on and Development Commission (CCDR(cid:59)N) The Directorate(cid:59)General for Energy and Geology (DGEG) • Mayor of Bo(cid:94)cas • Mayors of Dornelas parish, Covas do Barroso parish, Ribeira de Pena • Portuguese Ambassador to UK UK: • Bri(cid:94)sh Ambassador to Portugal USA: • US trade delega(cid:94)on at US Embassy, Portugal • O(cid:37)ce of Foreign Investment and Na(cid:94)onal Security, U.S. Department of Energy Health & Safety Local business engagement • • • • • Maintain priority focus on Health & Safety and associated sta(cid:53) training to priori(cid:94)se high Con(cid:94)nued standards of Health & Safety and updated the related policies Zero Health & Safety incidents or loss (cid:94)me injuries reported in 2022 (2021: 0) Became member of Mais Bo(cid:94)cas (local Chamber of Commerce) • Maintain and increase engagement with local suppliers of goods and services Preference given to local suppliers of goods & services • Maintain and increase engagement with suppliers of goods and services across Portugal SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 21 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i ESG Considera(cid:60)on Recent ac(cid:60)vi(cid:60)es Future ac(cid:60)vi(cid:60)es Other stakeholder engagement • A(cid:55)endance at relevant government and trade events in Portugal and elsewhere in the Europe • • Maintain presence at relevant government and industry events in Portugal, UK and across Europe Public rela(cid:94)ons campaigns across mul(cid:94)ple media channels in Portugal and beyond to highlight importance of domes(cid:94)c ba(cid:55)ery raw material supply in Europe and Savannah’s responsible approach to its own lithium opera(cid:94)on • Ac(cid:94)ve engagement with na(cid:94)onal and interna(cid:94)onal press and media resul(cid:94)ng in signi(cid:2)cant coverage of Savannah and the Barroso Lithium in Portugal and across Project Europe Public consulta(cid:94)on phase of EIA completed 2021) including public ‘in(cid:59)person’ mee(cid:94)ngs arranged by environmental regulator (April(cid:59)July • • Met with the Food and Agriculture Organisa(cid:94)on of the United Na(cid:94)ons Sta(cid:53) • 18 members of sta(cid:53) as at February 2023 with 60:40 male:female demographic with 16% from minority ethnic groups; currently 34% of Project sta(cid:53) are from the local community Other ac(cid:94)vi(cid:94)es • Sponsorship of FST Lisboa, the Lisbon University student electric vehicle racing team • Add to the exis(cid:94)ng team across the range of disciplines required to develop the Project • • • Project expected to generate over 300 construc(cid:94)on jobs during its development, around 215 long term direct jobs during the opera(cid:94)ng phase, and around 2,000 indirect and induced jobs Con(cid:94)nue to seek opportuni(cid:94)es to recruit from the local popula(cid:94)on and within Portugal Evaluate other sponsorship and support opportuni(cid:94)es with relevant groups if posi(cid:94)ve DIA decision is received 22 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 ESG Governance Considera(cid:60)on Recent ac(cid:60)vi(cid:60)es Future ac(cid:60)vi(cid:60)es Board Composi(cid:94)on • Annual evalua(cid:94)on of the Board’s • Appointment of Directors to meet needs iden(cid:94)(cid:2)ed by the Nomina(cid:94)on Commi(cid:55)ee • Ongoing annual Board performance review performance implemented • Appointment of Mary Jo Jacobi, Manohar Pundalik Shenoy and Diogo Antonio da Silveira as Non(cid:59) Execu(cid:94)ve Directors in 2022. Re(cid:94)rement from the board of Maqbool Ali Sultan (non(cid:59)execu(cid:94)ve director) and Murtadha Ahmed Sultan (alternate director for Imad Kamal Abdul Redha Sultan) • Mary Jo Jacobi is a leader of the ESG movement and will oversee Savannah's ESG program going forward. She also has a wealth of relevant industry and government rela(cid:94)ons exper(cid:94)se • Diogo Antonio Silveira’s appointment to the Board brings a highly experienced business leader with extensive experience in Portugal and Europe da Environmental & Social Management System • Finalised Corporate ESMS, aligned with interna(cid:94)onally recognised ESG standards • Work ini(cid:94)ated on development of a project(cid:59)level ESMS for the Barroso Lithium Project ESG Repor(cid:94)ng • Comple(cid:94)on of ESG ques(cid:94)onnaires for ins(cid:94)tu(cid:94)onal investors and lithium industry analysts • • • Finalise Barroso Lithium Project ESMS to provide complementary framework for environmental management and social licence engagement commitments alongside Commence repor(cid:94)ng to speci(cid:2)c ESG standards Provision of relevant data into the Digbee system for public disclosure SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 23 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i ESG Considera(cid:60)on Recent ac(cid:60)vi(cid:60)es Future ac(cid:60)vi(cid:60)es Membership of industry Trade bodies & Associa(cid:94)ons Lithium Industry: • Maintain • • current memberships and evaluate membership of addi(cid:94)onal ini(cid:94)a(cid:94)ves which would support our e(cid:53)orts to follow industry best prac(cid:94)ces and complement other ESG and corporate goals Interna(cid:94)onal Lithium Associa(cid:94)on Bri(cid:94)sh Standards Ins(cid:94)tute Technical Commi(cid:55)ee on Lithium Industry Standardisa(cid:94)on (UK is a par(cid:94)cipant Interna(cid:94)onal the member of Standards Organisa(cid:94)on’s Technical Commi(cid:55)ee on Lithium Industry Standardisa(cid:94)on) European Union Associated ini(cid:94)a(cid:94)ves: • Investment Pla(cid:10)orm Business managed by EIT InnoEnergy European Ba(cid:55)ery Alliance EIT RawMaterials European Raw Materials Alliance • • • European Mining Industry: • European Associa(cid:94)on of Mining, Metal Ores & Industrial Minerals ('Euromines’) Portuguese ini(cid:94)a(cid:94)ves: • Associa(cid:94)on for the Ba(cid:55)ery Cluster (founding member) • Mineral Resources Cluster • Business Council for Sustainable Development • Mais of (Chamber Bo(cid:94)cas Commerce in Bo(cid:94)cas area) Forest Associa(cid:94)on of Trás(cid:59)os(cid:59)Montes Forestry Associa(cid:94)on Cotec Portugal • • UK: • Quoted Company Alliance 24 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 Considera(cid:60)on Recent ac(cid:60)vi(cid:60)es Future ac(cid:60)vi(cid:60)es online Policies and Procedures • Annual • Introduc(cid:94)on of policies to re(cid:3)ect the Group’s growing maturity and transi(cid:94)on to building and opera(cid:94)ng a mine Introduce the requirements of poten(cid:94)al customers or (cid:2)nanciers policies re(cid:3)ect to • ESG training / acknowledgement of Company’s Code of Conduct and An(cid:94)(cid:59)Bribery Code (Directors / Employees / Company Consultants) Implementa(cid:94)on of Social Media Policy Implementa(cid:94)on of Travel and Expenses Policy Transla(cid:94)on of key policies Portuguese into Re(cid:2)nement of Group’s insurance coverage in conjunc(cid:94)on with leading global brokers, Marsh • Nomad’s a(cid:55)endance at Board Mee(cid:94)ng to keep the Directors governance abreast developments of • Enhancement of protocols IT security • • • • Risk Management • Review and update of Group’s Financial Repor(cid:94)ng Procedure • Annual Board Risk workshop • Ongoing review of Risk Register SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 25 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT Sec(cid:90)on 414A of the Companies Act 2006 (the ‘Act‘) requires that the Group inform members as to how the Directors have performed their duty to promote the success of the Group, by way of a Strategic Report. Set out below are the applicable repor(cid:90)ng requirements under the Act for the purposes of the Strategic Report, together with guidance to other applicable sec(cid:90)ons of the 2022 Annual Report, which are incorporated by reference into the Group‘s Strategic Report. Principal Ac(cid:45)vi(cid:45)es, Fair Review of the Business and Future Developments The following table provides summary reviews of the principal ac(cid:90)vi(cid:90)es of the Group in the year, (cid:4)nancial results and poten(cid:90)al future developments. The comments below build on the commentary provided in the Chairman‘s Statement and Chief Execu(cid:90)ve‘s Report: Asset & loca(cid:45)on Ownership Ac(cid:45)vi(cid:45)es undertaken The Barroso Lithium project, Portugal 100% • Explora(cid:45)on and Evalua(cid:45)on: Beyond the small amount of mining from the exis(cid:90)ng workings at the NOA deposit, which is undertaken every year to meet the condi(cid:90)ons of the Mining Lease, (cid:4)eldwork was kept to a very limited level during 2022 as a result of the ongoing Environmental Impact Assessment (‘EIA‘) review process (see below). Fieldwork which was undertaken included ongoing baseline studies and monitoring, and speci(cid:4)c tasks required in support of the work for the resubmission of the EIA under the Ar(cid:90)cle 16 process. A modest (cid:4)eldwork programme, including drilling for reserve and resource delinea(cid:90)on and geotechnical purposes, is required for comple(cid:90)on of the De(cid:4)ni(cid:90)ve Feasibility Study (‘DFS‘). This programme has been planned and Savannah would look to ini(cid:90)ate it during H2 2023 if a posi(cid:90)ve decision is received on the EIA from the regulator. • Environmental Licencing Process: For Savannah to achieve its goal of becoming a responsible lithium raw material producer it must secure a new Environmental Licence for its Barroso Lithium Project. The major step in this Licencing process is the approval by Portugal‘s environmental regulator (Agência Portuguesa do Ambiente, ‘APA‘, the ‘Regulator‘) of an Environmental Impact Assessment for the Project. An EIA evaluates a project‘s environmental and social impact during its construc(cid:90)on, opera(cid:90)on, closure and post(cid:59)closure phases. The outcome of the EIA is a project design and a set of ac(cid:90)ons to be undertaken which minimises the environment and social impact of the project throughout all its ac(cid:90)ve phases and over the long term, post closure. Having submi(cid:49)ed the Project‘s EIA in June 2020, Savannah spent the (cid:4)rst half of 2022 con(cid:90)nuing to wait on a Declara(cid:90)on of Environment Impact (‘DIA‘) decision from the Regulator following comple(cid:90)on of the EIA‘s public consulta(cid:90)on phase in mid(cid:59)July 2021. In early July 2022, before giving its (cid:4)nal DIA decision on the Project, APA proposed that the EIA evalua(cid:90)on process for the Project should con(cid:90)nue under Ar(cid:90)cle 16 of Decree(cid:59)Law No. 151(cid:59)B/2013, amended and republished by the Decree(cid:59)law 152(cid:59)B/2017 of 11 December (‘Ar(cid:90)cle 16‘), which regulates Environmental Impact Assessments 26 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 STRATEGIC REPORT Asset & loca(cid:45)on Ownership Ac(cid:45)vi(cid:45)es undertaken in Portugal. Under Ar(cid:90)cle 16, Savannah had up to 180 business days (deadline 17 March 2023) to redesign or revise certain physical aspects of the Project‘s design and associated environment, ecology and socio(cid:59)economic considera(cid:90)ons and resubmit them to APA for considera(cid:90)on. Savannah agreed to the review process entering this extra phase as it allowed the Company to meet with APA and receive direct feedback from its Evalua(cid:90)on Commi(cid:49)ee on the ini(cid:90)al EIA submission, an element which had been lacking in previous parts of the review. Based on feedback received during a number of produc(cid:90)ve mee(cid:90)ngs with APA and other member groups of its Evalua(cid:90)on Commi(cid:49)ee, Savannah duly made revisions to the EIA and resubmi(cid:49)ed its documents on 16 March 2023. Under the legisla(cid:90)on, APA has a maximum of 50 business days to review the resubmission and give its DIA decision. Based on the date of resubmission, this gives APA un(cid:90)l 31 May 2023 to inform Savannah on its decision and Savannah will have up to 10 days to respond. Subject to a posi(cid:90)ve DIA decision, the environmental licencing process would then move onto the (cid:4)nal design phase (Environmental Compliance Report of the Execu(cid:90)on Project, ‘RECAPE‘) and the Environmental License phase, which run in parallel. If both phases are completed and the Project‘s detailed (cid:4)nal designs are approved, the Barroso Lithium Project would receive a posi(cid:90)ve ‘DCAPE‘ decision and its single environmental (cid:90)tle (Título Único Ambiental‘). • Other Licencing processes: Once the DCAPE declara(cid:90)on has been made and environmental licence received, Savannah will then be able to apply for the remainder of the licences required for the Project‘s development and opera(cid:90)on. These licences cover permissions for construc(cid:90)on and use of services on site such as power and water. Permits will also be required for the proposed new road sec(cid:90)ons which are included in the revised Project design to further limit tra(cid:27)c impact for among local communi(cid:90)es. During the period Savannah remained engaged with key stakeholders in these licencing process including local authority leaders, ministers and Secretaries of State. • De(cid:3)ni(cid:45)ve Feasibility Study (‘DFS‘): The major advance made in DFS(cid:59)related workstreams during the year was in metallurgical test work which resulted in the process (cid:5)owsheet for the concentrator plant being (cid:4)nalised in Q1 2022. The Environmental Licencing process once (cid:4)nalised will provide more key inputs, as will the outstanding (cid:4)eldwork programme. The DFS will include: JORC resource and reserve es(cid:90)mates; (cid:4)nal designs and schedules for site layout, mining, processing, storage of processed materials, and infrastructure; capital and opera(cid:90)ng cost es(cid:90)ma(cid:90)ons; labour studies; commodity market studies; and a project risk review. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 27 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT Asset & loca(cid:45)on Ownership Ac(cid:45)vi(cid:45)es undertaken Assuming a posi(cid:90)ve DIA decision is received from APA, we expect the DFS work to be re(cid:59)ini(cid:90)ated in H2 2023 and completed no later than 12 months following the restart of the required (cid:4)eldwork. • Decarbonisa(cid:45)on Study: In March 2022 Savannah announced the ini(cid:90)a(cid:90)on of a Decarbonisa(cid:90)on Strategy to support its goal of producing a net carbon zero lithium product from the Project. By se(cid:21)ng this goal Savannah is helping to minimise the carbon footprint associated with the European lithium ba(cid:49)ery value chain, thus maximising the environment bene(cid:4)t these ba(cid:49)eries can bring. ECOPROGRESSO, a subsidiary of the Portuguese engineering and environmental consultancy, Quadrante Group, was commissioned to lead on the mul(cid:90)ple phased study. Phase 1, which was focused on upda(cid:90)ng the es(cid:90)mate of the Project‘s greenhouse gases (‘GHG‘) emissions based on interna(cid:90)onal guidelines, and de(cid:4)ning targets for overall GHG reduc(cid:90)on was completed during the year and the results announced in January 2023. The study con(cid:4)rmed that: o o o Ba(cid:49)ery Electric Mining Equipment will provide the most e(cid:42)ec(cid:90)ve and (cid:5)exible means to reduce Scope 1 emissions at the Project to zero. Scope 1 emissions represent 68% of the Scope 1 and 2 total. The es(cid:90)mate of Scope 2 baseline emissions was reduced by 54% from the original 2019 forecast, based on the poten(cid:90)al for a reduc(cid:90)on in the es(cid:90)mated power requirement of the Project‘s plant and a 41% reduc(cid:90)on in the emissions associated with Portugal‘s grid power. A number of viable op(cid:90)ons are available to secure 100% renewable energy supply to the Project including regional solar and wind genera(cid:90)on, on market purchase, via direct Power Purchase Agreements, or a combina(cid:90)on of these. Use of 100% renewable energy would reduce the Project‘s Scope 2 emissions to zero. Next steps in the study are to include: o More detailed analysis of the op(cid:90)ons available for 100% renewable energy provision as part of the De(cid:4)ni(cid:90)ve Feasibility Study on the Project; and o Studies with a number of mining equipment OEMs to determine a site speci(cid:4)c solu(cid:90)on for a transi(cid:90)on to ba(cid:49)ery operated mining (cid:5)eet and associated charging infrastructure. • Government Engagement: Savannah sta(cid:42) engaged extensively with stakeholders among government and government(cid:59)related en(cid:90)(cid:90)es at the na(cid:90)onal and local level during the year. The mid(cid:59)year team changes and the move into the Ar(cid:90)cle 16 phase of the EIA review, gave the Company the opportunity to re(cid:59)invigorate previous discussions and exis(cid:90)ng rela(cid:90)onships with stakeholders. 28 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 STRATEGIC REPORT Asset & loca(cid:45)on Ownership Ac(cid:45)vi(cid:45)es undertaken As a result, Savannah is now bene(cid:4)(cid:90)ng from good working rela(cid:90)onships with key o(cid:27)cials in the relevant departments, agencies and ministries. • Community Engagement: Savannah engagement with its local community stakeholders evolved on a number of fronts during the year. As in previous years, Savannah con(cid:90)nued with its support of local groups and events and its preferen(cid:90)al use of local suppliers for goods and services. The Company also increased the number of informa(cid:90)on centres in the local area and recruited new sta(cid:42) from the local popula(cid:90)on to sta(cid:42) these centres and to represent Savannah in the community. In parallel with the Ar(cid:90)cle 16 work on the EIA and to support planning for future stakeholder engagement, Community Insights Group (CIG) were commissioned to produce a Social Impact Assessment (SIA). During H2 2022, CIG‘s sta(cid:42) undertook an extensive survey amongst the local community to build a detailed pro(cid:4)le of local a(cid:21)tudes towards the Project, to be(cid:49)er understand the rela(cid:90)onship that members of the local community expect to have with the Project, and what ac(cid:90)ons they would like Savannah to undertake. The SIA was submi(cid:49)ed alongside the revised EIA to APA in March 2023. • Commercial discussions: Commercial interest in the future produc(cid:90)on of spodumene concentrate from the Project remained strong during the year, as the outlook for future market (cid:90)ghtness persisted and raw material prices rose. During the year Savannah remained in discussions with several poten(cid:90)al customer groups, and kept these par(cid:90)es informed about the move into the Ar(cid:90)cle 16 phase on the EIA, and the impact on the Project‘s (cid:90)meline. Savannah preference remains to supply concentrate to European(cid:59)based customers and with our revised expecta(cid:90)on of (cid:4)rst produc(cid:90)on in 2026, our (cid:90)meline is s(cid:90)ll well aligned with the development schedules of the two proposed merchant re(cid:4)neries in Portugal and other merchant plants elsewhere in Europe. Finalising o(cid:18)ake agreements will be dependent on the Project receiving a posi(cid:90)ve DIA decision and being able to proceed as scheduled. Fair review of business • A review of the Group‘s performance during the period and prospects is included in the Chairman‘s Statement and the Chief Execu(cid:90)ve‘s Report. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 29 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT Principal Risks and Uncertain(cid:45)es The Board has iden(cid:90)(cid:4)ed various risk factors which taken individually or together may have a materially adverse e(cid:42)ect on the Group‘s business. The principal risks and how they are managed are as follows: Environmental Impact Assessment Approval Risk As noted in the Licence and Title Risk and Social Licence Risk sec(cid:90)ons below, the Group understands and takes proac(cid:90)ve steps in order to mi(cid:90)gate or eliminate those risks, and an intersec(cid:90)on of these is demonstrated in the environmental licencing evalua(cid:90)on process, the failure to do so could result in the Project‘s approval being delayed or withheld. Speci(cid:4)cally, in July 2021, following an extended review period, including a public consulta(cid:90)on, the Portuguese environmental regulator, APA, proposed that the environmental licencing evalua(cid:90)on process for the Project should con(cid:90)nue under ‘Ar(cid:90)cle 16‘ which provided Savannah a legally binding (cid:90)meframe to redesign or revise certain physical aspects of the Project‘s design and associated environment, ecology and socio(cid:59)economic considera(cid:90)ons and resubmit them to APA for considera(cid:90)on. Savannah agreed to the review process entering this extra phase as it allowed the Company to meet with APA and receive direct feedback from its Evalua(cid:90)on Commi(cid:49)ee on the ini(cid:90)al submission, an element which had been lacking in previous parts of the review. Based on feedback received during a number of produc(cid:90)ve mee(cid:90)ngs with APA and other member groups of its Evalua(cid:90)on Commi(cid:49)ee, Savannah duly made revisions to the Environmental Report and Mining Plan and resubmi(cid:49)ed those documents on 16 March 2023. Under the legisla(cid:90)on, APA has a maximum of 50 business days to review the resubmission and give its Environmental Impact Statement (‘DIA‘) decision by 31 May 2023. Natural Resource Project Development & Construc(cid:23)on Risk There can be no guarantee that mineral explora(cid:90)on and evalua(cid:90)on programmes will result in the delinea(cid:90)on of a commercially viable project. However, to reduce this risk, the Group focused its ac(cid:90)vity primarily on brown(cid:4)eld loca(cid:90)ons, previously delineated resources or established explora(cid:90)on targets. Notably, the Barroso Lithium Project in Portugal (‘BLP‘) which already has a granted Mining Lease following explora(cid:90)on work conducted by previous owners. When a commercially viable project is delineated, the Group will then be exposed to construc(cid:90)on and project delivery risk factors. These risk factors will include: project (cid:4)nancing (see Future Funding Requirements sec(cid:90)on below); licence and permi(cid:21)ng (see Licence and Title Risk sec(cid:90)on below); key person (see A(cid:49)rac(cid:90)on and Reten(cid:90)on of Key People sec(cid:90)on below); and contractor and contract ful(cid:4)lment/cost overrun. Risks rela(cid:90)ng to the main project contractors will be mi(cid:90)gated by comprehensive tendering and due diligence processes being performed to iden(cid:90)fy competent and (cid:4)nancially robust service providers. Contract ful(cid:4)lment and cost management will be mi(cid:90)gated by structuring contracts to include adequate penalty and incen(cid:90)ve clauses. A(cid:4)rac(cid:23)on and Reten(cid:23)on of Key People The success of the Group is dependent on the exper(cid:90)se and experience of the Directors and Senior Management and the loss of one or more could have a material adverse e(cid:42)ect on the Group. The Board, supported by the Remunera(cid:90)on Commi(cid:49)ee and professional advisers, has adopted a remunera(cid:90)on framework aimed at rewarding performance, encouraging reten(cid:90)on of key sta(cid:42), and aligning their interests with those of shareholders, including via its (share op(cid:90)ons based) Long(cid:59)Term Incen(cid:90)ve Plan. Future Funding Requirements The Group has an ongoing requirement to fund its explora(cid:90)on and mine development ac(cid:90)vi(cid:90)es and will need to obtain addi(cid:90)onal (cid:4)nance to execute its plans. Poten(cid:90)al sources of (cid:4)nance include the established debt and equity capital markets (which themselves may be impacted by global and regional shocks, or macro(cid:59)economic, poli(cid:90)cal or environmental trends), o(cid:18)ake or other industrial partners which could provide prepayment and working capital facili(cid:90)es in exchange for long term supply contracts, commodity based royalty and stream (cid:4)nance groups which can also provide up(cid:59)front payments in exchange for exposure to future revenue or produc(cid:90)on streams, major suppliers, and grants or other facili(cid:90)es from government or other centralised bodies (e.g., EU which is focusing par(cid:90)cularly on the clean energy revolu(cid:90)on which the BLP helps to underpin). Finance could also be raised through the sale of a stake in the Project. Senior Management and 30 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 STRATEGIC REPORT the Board closely monitor the cash(cid:5)ows of the Group. Cash(cid:5)ow projec(cid:90)ons are presented regularly to the Board for review and this assists in ensuring that expenditure is focused on areas of greatest development poten(cid:90)al. Overheads and administra(cid:90)on costs are carefully managed. The mining industry has witnessed in(cid:5)a(cid:90)on running at high levels, but posi(cid:90)ve recent, current, and future outlooks for lithium prices have seen much greater improvements than in(cid:5)a(cid:90)on. Country Risk A greater or lesser degree of sovereign and poli(cid:90)cal risk exists in all countries. At the repor(cid:90)ng date, the Group carried out a combina(cid:90)on of explora(cid:90)on and mine development work in Portugal. Being a member of the EU, Portugal operates within the framework of the EU, and in January 2022 it elected a majority government for the (cid:4)rst (cid:90)me since 2005, and it is a pro(cid:59)lithium industry government. Country risk is further mi(cid:90)gated by ensuring the Group priori(cid:90)ses local in(cid:59)country employment and maintains working rela(cid:90)onships at all levels with government, administra(cid:90)ve bodies, local communi(cid:90)es, and other stakeholders. The Board ac(cid:90)vely monitors relevant poli(cid:90)cal and regulatory developments and the appointment as a Non(cid:59)Execu(cid:90)ve Director in 2022 of Diogo da Silveira, a highly experienced senior Portuguese business leader, has strengthened the Company‘s network within Portugal. Licence and Title Risk The gran(cid:90)ng, maintaining and renewal of the appropriate licence or licence equivalent is essen(cid:90)al to the Group‘s explora(cid:90)on, mineral development, and mining ac(cid:90)vi(cid:90)es, and is usually at the discre(cid:90)on of the relevant government authority. The Group seeks to ensure that its ac(cid:90)vi(cid:90)es are always in compliance with the relevant licencing and associated standards, laws and regula(cid:90)ons and will a(cid:49)empt to respond in a (cid:90)mely manner to any changes in licence regula(cid:90)ons. The costs associated with maintaining and renewing licences and complying with all related licence requirements, together with delays experienced in the issuance of licences or conversion of explora(cid:90)on licences into mining licences, may have a (cid:4)nancial impact on the Group through addi(cid:90)onal costs or extensions to work programmes. The mining licence rela(cid:90)ng to the BLP has been the subject of legal due diligence in order to establish validity of legal (cid:90)tle. It is in good standing and regular communica(cid:90)on is maintained with the relevant government authority (Direção(cid:59)Geral de Energia e Geologia (DGEG)). Such ac(cid:90)ons mi(cid:90)gate the risks posed by challenges from an(cid:90)(cid:59)mine groups in respect of licence and (cid:90)tle risk, as do the ac(cid:90)ons taken in respect of Social Licence Risk. Social Licence Risk In parallel with obtaining the necessary licences and permits to operate from na(cid:90)onal and local administrators, natural resource companies must also operate in a way that is acceptable to local community stakeholders and broader civil society. Obtaining social acceptance is deemed by the industry to be the one of the most signi(cid:4)cant risk factors it faces, and failure to achieve and maintain broad social acceptance could have a temporary or permanent material adverse impact on the ability of a business to operate. The Group places great importance on its rela(cid:90)onships with its neighbouring communi(cid:90)es and wider stakeholder groups and looks to mi(cid:90)gate ‘social licence‘ risk through its proac(cid:90)ve, community engagement programmes, and through its wider group policies, including those rela(cid:90)ng to environmental standards, corporate governance, code of conduct, and repor(cid:90)ng and communica(cid:90)on and in H2 2022 commissioned a Social Impact Assessment. See ESG sec(cid:90)on for more details. The use of ‘lawfare‘ is a common tool used by par(cid:90)es seeking to disrupt project developments, and details of a pending legal case rela(cid:90)ng to the Project is reported in the Chief Execu(cid:90)ve‘s Report. The Group‘s innova(cid:90)ve Bene(cid:4)t Sharing Plan (‘BSP‘) and Good Neighbour Plan (‘GNP‘) were part of the overall EIA submission. Both plans will be (cid:4)nalised a(cid:26)er extensive analysis by the Group and with input from key local stakeholders to address a number of area speci(cid:4)c social, economic, and environmental themes. Via the BSP and GNP, Savannah is demonstra(cid:90)ng its desire to become a valued member of the local community through the commitments it is making to operate the BLP in a responsible and sustainable way and to share with stakeholders the many bene(cid:4)ts the Project can bring. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 31 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT Commodity Price Risk The Group‘s commodity focus is lithium and the price movement in this commodity can be vola(cid:90)le. This vola(cid:90)lity can be caused by numerous factors beyond the Group‘s control. A sustained period of signi(cid:4)cant price vola(cid:90)lity has the poten(cid:90)al to adversely a(cid:42)ect the Group opera(cid:90)ons. Assuming all previously highlighted development and construc(cid:90)on related risks have been mi(cid:90)gated and produc(cid:90)on is established at the BLP, speci(cid:4)c commodity price risk can be more ac(cid:90)vely managed. This could be achieved in the case of the BLP, where spodumene lithium and its co(cid:59)products are not currently exchange traded commodi(cid:90)es, by entering into o(cid:42)(cid:59)take agreements as part of the Project (cid:4)nancing. Global and Regional External Shocks Opera(cid:90)ng in an increasingly globally mobile economy and popula(cid:90)on, the Group may be a(cid:42)ected by global or regional shocks such as pandemics, energy crisis, in(cid:5)a(cid:90)on, or military con(cid:5)icts. The worldwide COVID(cid:59)19 pandemic impacted the Group‘s day to day opera(cid:90)ons (e.g., ability to perform (cid:4)eld(cid:59)work) to undertake a variety of ac(cid:90)vi(cid:90)es, although, the rapid approval and distribu(cid:90)on of mul(cid:90)ple vaccine programs provides an improved back(cid:59)drop for future ac(cid:90)vity. Global or regional shocks poten(cid:90)ally impact the worldwide economy and the Group‘s (cid:4)nancial outlook (e.g., in the event of a global depression impac(cid:90)ng demand for commodi(cid:90)es, albeit, lithium‘s unique place in the EV revolu(cid:90)on provides a basis for its demand growth to remain strong), thus the Group maintains a minimum cash balance to mi(cid:90)gate any such adverse impacts. However, ac(cid:90)ons by the EU and governments show that funds designed to generate economic recovery will be targeted at projects which are deemed to have a posi(cid:90)ve impact on climate goals, such as the BLP. Furthermore, the global response to recent external shocks has led na(cid:90)onal governments, the EU, and global industrial business to focus on energy security and regionalisa(cid:90)on of supply chains, thus increasing the importance to Europe of the BLP. Analysis of the Development and Performance of the Business This informa(cid:90)on is contained in the Chairman‘s Statement, and the Chief Execu(cid:90)ve‘s Report. Analysis of the Posi(cid:45)on of the Business This informa(cid:90)on is contained in the Chairman‘s Statement, and the Chief Execu(cid:90)ve‘s Report. Key Financial Performance Indicators and Milestones Our key performance indicators (‘KPIs‘) help the Board and execu(cid:90)ve Management assess performance against our strategic priori(cid:90)es and business plans. Analysis Using Key Financial Performance Indicators and Milestones KPIs Descrip(cid:45)on Performance Cash balance (for explora(cid:90)on, development and going concern purposes) Cash balance available to con(cid:90)nue with the ac(cid:90)vity of the Group. At the repor(cid:90)ng date the Group‘s cash balance was £7.2m (2021: £13.0m). The major source of cash funding during the year was the 2021 year(cid:59)end balance resul(cid:90)ng from an oversubscribed £10.3m equity placing and subscrip(cid:90)on in April 2021 and the US$9.5m termina(cid:90)on compensa(cid:90)on from Rio Tinto on cancella(cid:90)on of the unconsolidated Mutamba joint venture in December 2021. The Directors believe that the Group‘s project por(cid:8)olio is a(cid:49)rac(cid:90)ve and are con(cid:4)dent that funding will con(cid:90)nue to be secured and that it is appropriate to prepare the Financial Statements on a going concern basis. The Company currently has a number of op(cid:90)ons in respect of future (cid:4)nancing and has engaged with poten(cid:90)al (cid:4)nanciers, strategic partners, and o(cid:18)akers (equity investment and / or prepayments). 32 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 STRATEGIC REPORT KPIs Descrip(cid:45)on Performance Subscrip(cid:90)on and placing of shares To its con(cid:90)nue with opera(cid:90)ng ac(cid:90)vi(cid:90)es as an ac(cid:90)ve and growing mineral development group, the Group has raised funds from the market. Given its opening cash balance of £13.0m at the start of the year, the Company did not deem it necessary to raise any funds via the issuance of ordinary shares in an equity fundraise during 2022. Share price Investment in Explora(cid:90)on & Evalua(cid:90)on Assets (‘E&E Assets‘) and Property, Plant and Equipment (‘PPE‘) the Group The price re(cid:5)ects the value of as determined by the free its ordinary trading of shares on public stock exchanges such as the AIM. From an opening at 4.35p Savannah‘s share price began the year strongly. Backed by rising lithium prices, the share price reached 5.60p during trading on 18 January and set the year‘s high in the process before easing back to below 5p. The price would go on to brie(cid:5)y break back through the 5p level again in early February before falling to below 4p for the (cid:4)rst (cid:90)me in the year on 24 February, despite some posi(cid:90)ve news on the (cid:4)nalisa(cid:90)on of the BLP‘s process (cid:5)owsheet. From that point the price recovered well during early Spring as lithium prices con(cid:90)nued to rise, reaching or breaking the 5p level for 8 consecu(cid:90)ve days during early to mid(cid:59)April. The price was then maintained above the 4.10p level un(cid:90)l mid(cid:59)June. However, from that point the price slipped below 4p, reaching 3.33p as investor anxiety grew about the the expected EIA decision. Following announcement of the move into the Ar(cid:90)cle 16 process on the EIA and the stepping down of David Archer as CEO on 6 July, the price fell to the year‘s low of 2.10p on 7 July with nearly 62m shares traded across the two days (vs. the average daily volume around 1.6m). Pleasingly, backed by Director buying, the share price made a robust recovery from the low, reaching 3.85p during trading on 10 August. With the remainder of the year dominated by work on the revised EIA ahead of its Q1 2023 submission, meaning other goals for the year were depriori(cid:90)sed, the share price eased back below the 3p level in late August and remained range bound between 2.22p and 2.95p for the remainder of the year. Shares closed the year at 2.30p, a 47% decline over the 12 month period. investment As an ac(cid:90)ve and expanding mine development group, the in E&E Assets and PPE Assets can the volume of show ac(cid:90)vity which is adding value. During 2022 the Company con(cid:90)nued its investment in explora(cid:90)on ac(cid:90)vity, but with (cid:4)eld work s(cid:90)ll rela(cid:90)vely limited the increase in E&E Assets was a 6% lower year(cid:59)on(cid:59)year at £1.7m (2021: £1.8m). As in 2021, there was no signi(cid:4)cant equipment purchasing required during the year, but with £0.8m commi(cid:49)ed to land acquisi(cid:90)on at the Barroso Lithium Project, PPE investment increased to £0.9m (2021: £0.6m). SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 33 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT Analysis Using Other Key Performance Indicators and Milestones KPIs Descrip(cid:45)on Performance Project pipeline Mining Lease Applica(cid:90)ons As an ac(cid:90)ve mine group, development Management is up to date in the on the changes market and looking for to new opportuni(cid:90)es increase the poten(cid:90)al of the Company. In recent years there has been (and con(cid:90)nues to be) an increase in the importance of the lithium(cid:59)ion ba(cid:49)ery markets, impac(cid:90)ng on global lithium demand with projec(cid:90)ons showing signi(cid:4)cant increases in demand. In 2016 the Group started its investment in lithium projects with the acquisi(cid:90)on of explora(cid:90)on licences in Finland (subsequently relinquished). Following the acquisi(cid:90)on of the Barroso lithium Project in the north of Portugal in 2017 (100% ownership achieved in 2019), the Group has the poten(cid:90)al to become the (cid:4)rst signi(cid:4)cant lithium spodumene producer in Europe. While the short term focus of the Company has been on revising and resubmi(cid:21)ng the EIA for the Barroso Lithium Project, one of Savannah‘s longer term goals is to further develop its lithium business in the Iberian Peninsula. To this end, it ac(cid:90)vely assesses poten(cid:90)al lithium explora(cid:90)on targets in the area, and expects to par(cid:90)cipate in the much(cid:59)awaited lithium explora(cid:90)on tender process in Portugal when it is launched by the Government. As a mineral development company, the grant of a mining leases to precursor commencement of produc(cid:90)on is a signi(cid:4)cant milestone. as Portugal: A 30(cid:59)year Mining Lease (the C(cid:59)100 Lease) was granted on the Project in 2006. To be allowed to execute its plan of developing a spodumene mine and concentrator opera(cid:90)on of the Lease, Savannah is required to obtain a new Environmental Licence for the Project and associated licences covering areas such as construc(cid:90)on and use of services on site (power, water, etc). In June 2020, the Group submi(cid:49)ed a new Environmental Impact Assessment and Mine Plan to APA, the Portuguese environmental regulator, for the Barroso Lithium Project as part of the overall licencing process for the Project. That submission was made public in April 2021 and underwent a public consulta(cid:90)on between April and July of that year. Before giving its (cid:4)nal decision on the EIA, the Regulator recommended in July 2022 that the review process enter an addi(cid:90)onal phase of evalua(cid:90)on under Ar(cid:90)cle 16 of the relevant EIA legisla(cid:90)on during which Savannah could meet with the Regulator‘s Evalua(cid:90)on Commi(cid:49)ee, receive feedback on its original design and be given 180 working days to revised and resubmit its EIA. Savannah agreed to this proposal and resubmi(cid:49)ed its EIA on 16 March 2023. Under the legisla(cid:90)on, the Regulator is required to publish its decision on the revised EIA by 31 May 2023. Mozambique: A(cid:26)er the conclusion of the Mutamba transac(cid:90)on with Rio Tinto in December 2021, Savannah is in the process of dives(cid:90)ng its residual interest in Mozambique which includes Mining Concession 9735C. 34 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 STRATEGIC REPORT KPIs Descrip(cid:45)on Performance Mineral resources As a mineral development company the repor(cid:90)ng of sa(cid:90)sfactory mineral resource es(cid:90)mates is a key indicator of the poten(cid:90)al of the Group and its projects. Portugal: There was no update to the 2019 JORC resource es(cid:90)mates in 2022. Hence the JORC resource es(cid:90)mates made remained at: • Lithium: Measured Resources of 6.6Mt @ at 1.1% Li2O; Indicated Resources of 8.4Mt @ at 1.0% Li2O; and Inferred Resources of 12.0Mt @ at 1.1% Li2O for a total of 27.0Mt at 1.06% Li2O containing 285,900t of Li2O. In addi(cid:90)on to the JORC Mineral Resource es(cid:90)mate, the Explora(cid:90)on Target1 also remained unchanged from 2019 at 11.0(cid:59)19.0Mt at 1.0%(cid:59)1.2% Li2O. • Co(cid:59)products (Grandao deposit only): Measured resources of 7.1Mt at 32.6% quartz and 42.8% feldspar, Indicated Resources of 6.3Mt at 34.6% quartz and 42.6% feldspar; and Inferred resources of 1.0Mt at 30.9% quartz and 40.3% feldspar for a total Mineral Resource of 14.4Mt at 33.4% quartz and 42.6% feldspar contained 4.79Mt of quartz and 6.11Mt of feldspar. Mozambique: There was no update to the 2017 JORC resource es(cid:90)mate on Mining Concession 9735C during the year. Hence the JORC resource es(cid:90)mate remained at: • Inferred Resource of 65 million tonnes @ 4.2% Heavy Minerals (‘HM‘). Ilmenite represents 60% of the total HM contained. Economic Studies Sa(cid:90)sfactory comple(cid:90)on of economic studies is a key indicator of the viability of the mine Group‘s development projects. The Barroso Lithium Project, Portugal: The major advance made in DFS(cid:59)related workstreams during the year was in metallurgical test work which resulted in the process (cid:5)owsheet for the concentrator plant being (cid:4)nalised in Q1 2022. The Environmental Licencing process once (cid:4)nalised will provide more key inputs, as will the outstanding (cid:4)eldwork programme. Assuming a posi(cid:90)ve DIA decision is received from APA, Savannah expects the DFS work to be re(cid:59)ini(cid:90)ated in H2 2023 and completed no later than 12 months following the restart of the required (cid:4)eldwork and it will prepare and publish a new Scoping Study in the second half of 2023 based on the revised EIA and Mine Plan. 1 Cau(cid:90)onary Statement: The poten(cid:90)al quan(cid:90)ty and grade of the Addi(cid:90)onal Resource Targets is conceptual in nature, there has been insu(cid:27)cient prospec(cid:90)ng work to es(cid:90)mate a mineral resource and it is uncertain if further prospec(cid:90)ng will result in de(cid:4)ning a mineral resource. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 35 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT Sec(cid:45)on 172(1) Statement The following disclosure describes how the directors have had regard to the ma(cid:49)ers set out in sec(cid:90)on 172(1)(a) to (f) and forms the Directors‘ Statement required under sec(cid:90)on 414CZA of the Companies Act 2006. Informa(cid:90)on is presented below on a number of ‘principal decisions‘ which the Board made during the course of 2022. Principal decisions are not de(cid:4)ned in legisla(cid:90)on, but are considered material by the Board from the perspec(cid:90)ve of the Company, impacted stakeholder group, or both. The table below sets out our key stakeholder groups and how we engaged with them during the year: How did the Board and/or Stakeholder Group Importance of engagement management engage trade bodies & Industry associa(cid:45)ons A list of the relevant industry trade bodies and associa(cid:90)ons of which is pleased to be a Savannah in the member can be found Governance table in the ESG sec(cid:90)on and on the Company‘s website. For Savannah: • and Trade associa(cid:90)on can o(cid:42)er industry speci(cid:4)c networking, training educa(cid:90)on, technical advice, and support in interac(cid:90)ons with governments, government departments, agencies, regulators, the media, and other stakeholders During the year members of the Savannah team regularly a(cid:49)ended mee(cid:90)ngs, and interacted with relevant trade associa(cid:90)ons. The Company also joined the following trade associa(cid:90)ons during the year: Mining and raw materials: • Raw Materials European Alliance European of Mining, Metal Ores & Industrial Minerals (‘Euromines‘) Associa(cid:90)on • For trade associa(cid:90)ons: Savannah Interac(cid:90)ng with • trade associa(cid:90)on o(cid:42)ers a another source of industry exper(cid:90)se; an opportunity to extend its network and reach, and an addi(cid:90)onal source of income and sponsorship Shareholders/Investors A table of signi(cid:4)cant shareholders can be found on the Report of the Directors sec(cid:90)on and on the Company‘s website. Key metrics are: • • • Cash Investment in Explora(cid:90)on & Evalua(cid:90)on Assets Share price issued The Company has not addi(cid:90)onal investment instruments beyond shares and share(cid:59)related warrants, such as corporate bonds, and therefore has no other class of investors. For Savannah: • • To maintain access to capital in support of achieving the Group‘s stated business goals To receive feedback/ advice/ assistance on performance and execu(cid:90)on of the Company‘s business plan The key means of engagement with shareholders include: • AGM (held in person in 2022) • Investor roadshows (held both in person and online in 2022) • Mee(cid:90)ngs in rela(cid:90)on to key news/ques(cid:90)ons (largely held online in 2022) For the Shareholder/Investor: • • • To be kept informed on the Company‘s performance, changes to strategy and other developments To assist ongoing investment decision making Social media including Twi(cid:49)er and LinkedIn • A(cid:49)ending industry(cid:59)related conferences and events • Video interviews and corporate videos via the newly designed corporate website in English and Portuguese 36 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 STRATEGIC REPORT How did the Board and/or Stakeholder Group Importance of engagement management engage The key means of engagement with sta(cid:42) include: • • Regular internal calls, mee(cid:90)ngs and visits to Project sites by members of the Board and execu(cid:90)ve team Remunera(cid:90)on framework including Long Term Incen(cid:90)ve Plan (Share op(cid:90)ons) and Short Terms Incen(cid:90)ve Plan (Annual Bonus) the Group‘s Full details of community(cid:59)related ac(cid:90)vi(cid:90)es across its businesses can be found in the ESG sec(cid:90)on. Workforce The average number of monthly sta(cid:42) employed by the Company during 2022 was 17 (2021: 46) see Note 3 for further details. The Company‘s day to day running and long(cid:59)term development relies on the recruitment, reten(cid:90)on and incen(cid:90)visa(cid:90)on of and provision of a safe working environment. sta(cid:42), Community Savannah will be o(cid:26)en working alongside communi(cid:90)es at its project sites. For example, it works alongside a number of small communi(cid:90)es at the Barroso Lithium Project. The Company aims to act with integrity, transparency and its dealings with honesty communi(cid:90)es and wishes for its host communi(cid:90)es to bene(cid:4)t from its projects. in For Savannah: • • • • To ensure that Health & Safety standards and other regula(cid:90)ons rela(cid:90)ng to Savannah‘s interac(cid:90)on with the general public and public services are being met To ensure it secures and maintains social acceptance of its business ac(cid:90)vi(cid:90)es among the communi(cid:90)es it works alongside through e(cid:42)ec(cid:90)ve community engagement programmes its To ensure that indirect bene(cid:4)ts are from opera(cid:90)ons maximised among the local community To receive feedback/ advice/ assistance on the above topics For Communi(cid:90)es: • To receive relevant informa(cid:90)on about site(cid:59)speci(cid:4)c Health & Safety ma(cid:49)ers and other guidance rela(cid:90)ng to Savannah‘s interac(cid:90)on with the general public • Opportunity to receive up to date informa(cid:90)on on Savannah‘s and business programmes to communi(cid:90)es ac(cid:90)vi(cid:90)es relevant SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 37 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT How did the Board and/or Stakeholder Group Importance of engagement management engage • • • To register for and to take part in relevant community programmes To provide feedback on relevant topics To learn about job opportuni(cid:90)es at a Savannah Project or to receive training/coaching For Savannah: • • To maintain good working rela(cid:90)onships and credit terms with suppliers to ensure the (cid:90)mely and cost(cid:59)e(cid:42)ec(cid:90)ve delivery of services and supplies To aid planning for future supply requirements and to iden(cid:90)fy suitable suppliers For Suppliers: • • • To maintain a working rela(cid:90)onship with its customer and provide product informa(cid:90)on To help with planning for changing levels of demand from a client To future business opportuni(cid:90)es with an exis(cid:90)ng client iden(cid:90)fy For Savannah: • • build To and iden(cid:90)fy rela(cid:90)onships with future customers to ensure our projects become commercial businesses viable To access capital for project development either directly from from other customers, or investors which the customer establishment of rela(cid:90)onships as a key de(cid:59)risking factor in an investment decision view Suppliers Savannah requires a wide range of services to maintain its business ac(cid:90)vi(cid:90)es and uses a wide range of domes(cid:90)c and overseas suppliers to meet its needs. When Savannah moves into the development and produc(cid:90)on phase at an opera(cid:90)on, supplier numbers are expected to rise signi(cid:4)cantly in(cid:59)line with the scale up of the project concerned. Customers As a pre(cid:59)produc(cid:90)on business, Savannah is yet to start genera(cid:90)ng revenue from sales of product to customers. However, the Company expects to supply products to a number of industrial customers over (cid:90)me, beginning with customers buying its lithium and co(cid:59)product concentrate products from the Barroso Lithium Project. 38 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 The Company‘s engagement with service current and poten(cid:90)al suppliers has been widespread during the year. For example, considerable (cid:90)me has been spent working with exis(cid:90)ng suppliers of goods and services to the Barroso Lithium Project, and iden(cid:90)fying and evalua(cid:90)ng other groups which may provide key contract services during the construc(cid:90)on and/or produc(cid:90)on opera(cid:90)on. phases Addi(cid:90)onally, the Company is a member of the local chamber of commerce in Portugal and where possible the use of local service providers will be priori(cid:90)sed. the of Management maintained its e(cid:42)orts to build rela(cid:90)onships with mul(cid:90)ple poten(cid:90)al customers for its lithium and co(cid:59)product concentrates from the Barroso Lithium Project as discussed the Chairman‘s in Statement and CEO‘s Report. STRATEGIC REPORT How did the Board and/or Stakeholder Group Importance of engagement management engage For Customers: • • To build a working rela(cid:90)onship with a well(cid:59)managed, long term raw material supplier To secure a long(cid:59)term supply of product from a responsible producer in markets where the outlook is for increasing global compe(cid:90)(cid:90)on for supply, such as lithium For Savannah: • and iden(cid:90)fy build To rela(cid:90)onships with future lenders to ensure su(cid:27)cient (cid:4)nance can be secured to support project development Lenders Savannah currently has no corporate bonds or project (cid:4)nance loans but may seek to secure project (cid:4)nance as part of the (cid:4)nancing mix for the development of its projects, such as the Barroso Lithium Project. For Lenders: • To secure a future lending agreement with a responsible raw material producer opera(cid:90)ng in the ba(cid:49)ery metals sector the Regulators/Government Depending on jurisdic(cid:90)on, mul(cid:90)ple departments and agencies of na(cid:90)onal, regional and/or local government can be involved in the licencing and monitoring of mining ac(cid:90)vi(cid:90)es. For Savannah: • departments To build strong and suppor(cid:90)ve, working rela(cid:90)onships with all of relevant government and to ensure that the Company receives and complies with the required licences and authori(cid:90)es to operate its projects For governments: • • To ensure that the Company is mee(cid:90)ng its responsibili(cid:90)es as per its licences To understand the needs of Savannah as an opera(cid:90)ng en(cid:90)ty with relevant legisla(cid:90)on respect to Management maintained a dialogue with poten(cid:90)al project lenders in rela(cid:90)on to the Barroso Lithium Project during the year. Discussions with these groups are expected to become more detailed once the DFS is completed as that study will be a key part of a lending bank‘s evalua(cid:90)on of the Project. The Company‘s ESMS incorporates elements from the Interna(cid:90)onal Finance Corpora(cid:90)on‘s Performance Standards on Environmental and Social Sustainability, the World Bank Group‘s Environmental Health & Safety, Mining and General Guidelines. the As outlined in the Chairman‘s Statement and CEO‘s Report, Management has had regular relevant interac(cid:90)on with departments and personnel in the various levels of government in both countries where it had opera(cid:90)ons during the period. Savannah views the establishment of ac(cid:90)ve, two(cid:59)way, rela(cid:90)onships with government stakeholders as cri(cid:90)cal to the its successful development of projects and in its decision(cid:59)making regarding the Company‘s long(cid:59)term commitment to any jurisdic(cid:90)on. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 39 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT How did the Board and/or Stakeholder Group Importance of engagement management engage priority In parallel with all our project for a stakeholders, Savannah‘s management to is minimise Company‘s the environmental impact, and work undertaken across all its project sites to date has been completed in accordance with relevant environmental regula(cid:90)ons. the Having collected baseline data and engaged with relevant groups since 2018, in June 2020, Savannah submi(cid:49)ed a new Environmental Impact Assessment and Mine Plan to APA, the Portuguese environmental regulator, for the Barroso Lithium Project as part of the overall licencing process for the Project. That submission was made public in April 2021 and underwent a public consulta(cid:90)on between April and July of that year. Before giving its (cid:4)nal decision on the EIA, the Regulator recommended in July 2022 that the review process enter an addi(cid:90)onal phase of evalua(cid:90)on under Ar(cid:90)cle 16 of the relevant EIA legisla(cid:90)on during which Savannah could meet with the Regulator‘s Evalua(cid:90)on Commi(cid:49)ee, receive feedback on its original design, and be given 180 working days to revise and resubmit its EIA. Savannah agreed to this proposal and resubmi(cid:49)ed its EIA on 16 March 2023. Under the legisla(cid:90)on, the Regulator is required to publish its decision on the revised EIA by 31 May 2023. Environment Savannah is commi(cid:49)ed to minimising the environmental impact of its opera(cid:90)ons design, monitoring, and remedia(cid:90)on. through mi(cid:90)ga(cid:90)on For Savannah: • Savannah places great emphasis on minimising the environmental impact of its opera(cid:90)ons and also realises the importance placed environmental on management by all project including stakeholders governments, communi(cid:90)es, customers, investors and lenders. good 40 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 STRATEGIC REPORT Principal decisions Savannah de(cid:4)nes principal decisions as those which are material to the Group and its key stakeholder groups detailed above. In making the following principal decisions during the year the Board considered the outcome based on the relevant stakeholders as well as the need to maintain a reputa(cid:90)on for high standards of business conduct and the need to act fairly between the members of the Group: Principal Decision 1: Entering into ‘Ar(cid:45)cle 16‘ EIA evalua(cid:45)on process In July 2022, the Company‘s subsidiary, which operates the BLP, entered into the Ar(cid:90)cle 16 of Decree(cid:59)Law No. 151(cid:59)B/2013 (‘Ar(cid:90)cle 16‘), which regulates Environmental Impact Assessments in Portugal. Under Ar(cid:90)cle 16, the Group had up to six months to work collabora(cid:90)vely with APA (Portugal‘s environmental regulator) to further op(cid:90)mise certain physical aspects of the BLP‘s design and associated environment, ecology and socio(cid:59)economic considera(cid:90)ons and resubmit them for considera(cid:90)on. A(cid:26)er submission of revised EIA under Ar(cid:90)cle 16 and acknowledgment of acceptance of the op(cid:90)misa(cid:90)on measures (submi(cid:49)ed on 16 March 2023), Ar(cid:90)cle 16 allows APA a period of up to 50 working days to carry out its assessment and issue any DIA decision. In making the decision the Board considered: • Shareholders and Workforce: Considering the extended (cid:90)melines experienced in the EIA licencing process, entering into the Ar(cid:90)cle 16 process provided certainty on the (cid:90)melines rela(cid:90)ng to a DIA decision. Hence, subject to a posi(cid:90)ve decision, the Group would s(cid:90)ll be on track to be able to supply concentrate to Europe‘s (cid:4)rst genera(cid:90)on of lithium conversion plants as they come online in the mid(cid:59)2020s. • Government / Regulators: APA had invited the Company‘s subsidiary to enter into the Ar(cid:90)cle 16 process. • • Environment: Ar(cid:90)cle 16 provided the opportunity to work in conjunc(cid:90)on with APA and incorporate addi(cid:90)onal perspec(cid:90)ves into the Project‘s design, further reducing impacts on the environment. Community: Ar(cid:90)cle 16 provided the opportunity for a public consulta(cid:90)on exercise to provide addi(cid:90)onal perspec(cid:90)ves to incorporate into the Project‘s design, further reducing impacts on the local community in par(cid:90)cular. Principal Decision 2: Independent Non(cid:5)Execu(cid:45)ve Board appointments The Board was strengthened by the appointments in 2022 (April and November respec(cid:90)vely) of Mary Jo Jacobi and Diogo da Silveira as independent Non(cid:59)Execu(cid:90)ve Directors. Ms Jacobi is a leader of the ESG movement and has a wealth of relevant industry and government experience. Mr Silveira is a highly experienced business leader with extensive experience in Portugal and Europe. In making the decisions the Board considered: • Shareholders and Workforce: Increasing the diversity and independence of the members of the Board, whilst also adding the experience of globally and locally recognised heavyweight business leaders. This experience includes opera(cid:90)ng major Portuguese companies, and employee engagement responsibility for a global mining sector operator. • Government / Regulators, Customers and Suppliers: Ms Jacobi has a wealth of relevant industry and government rela(cid:90)ons exper(cid:90)se, having amongst other experiences working in the UK as a member of the UK Advisory Commi(cid:49)ee on Business Appointments, and in the US as Assistant United States Secretary of Commerce, and Special Assistant to US President Ronald Reagan. Mr Silveira has signi(cid:4)cant business experience, par(cid:90)cularly within Portugal, including as the CEO of Portuguese forestry operator, Navigator, and current Chair of Floene Energias, the leading Gas DSO in Portugal. As a result, SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 41 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STRATEGIC REPORT he has a comprehensive network among Portugal‘s leading players in mul(cid:90)ple industries as well as amongst poli(cid:90)cians, key decision makers, and opinion formers. Addi(cid:90)onally, he was a management member of several Portuguese industrial associa(cid:90)ons such as CIP, APS, Celpa, Cotec and BCSD as well as of European, Brussels based, CEPI and Worldwide, Geneva based, WBCSD. • Community and Environment: Ms Jacobi is a leader of the ESG movement and will oversee Savannah‘s ESG program. Mr Silveira has extensive experience of Environment and Community ma(cid:49)ers from his role as CEO of a forestry operator. Principal Decision 3: Appointment of Dale Ferguson as interim CEO In July 2022, David Archer stepped down as CEO a(cid:26)er almost nine years and he was succeeded on an interim basis by Dale Ferguson, the Company‘s Technical Director, whilst the Company progresses the search for a new full (cid:90)me CEO. In making the decision the Board considered: • Shareholders and Workforce: Mr Ferguson brings a wealth of technical exper(cid:90)se and a strong, global track record of bringing mines into produc(cid:90)on. He has been involved with the Project since the beginning and an integral member of the Board for nine years, providing a familiar and respected face to the sta(cid:42). He also has strong (cid:4)nancial interest in the Company, both directly and via his holding in the Company‘s second largest shareholder, Slipstream Resources Investments, amoun(cid:90)ng to 2.94% of the Company‘s issued share capital. • Government / Regulators, Environment and Community: Mr Ferguson‘s wealth of technical exper(cid:90)se and a strong, global track record of bringing mines into produc(cid:90)on has included naviga(cid:90)ng both regulatory licencing processes and winning the social licence to operate. His familiarity with the technical aspects of the Project facilitates refreshed and e(cid:42)ec(cid:90)ve interac(cid:90)on with APA. Principal Decision 4: Decarbonisa(cid:45)on strategy ini(cid:45)ated (cid:1) In March 2022, the Group entered into an agreement with ECOPROGRESSO (cid:59) Quadrante Group (cid:59) a Portuguese Consultant in Environment, Sustainability, Climate Change and Resources Management, to lead on the crea(cid:90)on of a decarbonisa(cid:90)on strategy for Project. This appointment follows on from the Group‘s commitment in November 2021 to move towards net zero Scope 1 and 2 emissions for the Project whilst also targe(cid:90)ng the reduc(cid:90)on of its Scope 3 emissions. In making the decision the Board considered: • Shareholders: The roadmap to Net Zero established by Savannah further emphasises the strong ESG creden(cid:90)als of Savannah, and in addi(cid:90)on to its own Net Zero plans, Savannah es(cid:90)mates that the lithium from the Barroso Lithium Project could help to remove approximately 100 million tonnes of CO2 from the EU transport sector once it is ac(cid:90)ve in electric vehicle ba(cid:49)eries. The groups developing greener technologies, which Savannah could adopt, are doing so using innova(cid:90)ons that are designed to be both environmentally friendly and cost compe(cid:90)(cid:90)ve, so this, combined with the prospects of increasing (cid:4)nancial burdens (taxes and du(cid:90)es) rela(cid:90)ng to CO2 equivalent emissions, provide an opportunity for reduced opera(cid:90)onal costs compared to tradi(cid:90)onal mining opera(cid:90)ons. • All stakeholders: At the (cid:90)me of the appointment, for the Project‘s Environmental Impact Assessment study, Ecoprogresso es(cid:90)mated that, when opera(cid:90)ng, the Project would produce a maximum of c.62,000t CO2 equivalent emissions per annum across Scopes 1 and 2, and a maximum of 96,200t CO2 equivalent emissions per annum across Scopes 1(cid:59)3. By reducing the Project‘s Scope 1 and 2 emissions to zero, Savannah would reduce the Project‘s overall emissions during its opera(cid:90)ng phase by over 60%. (see ‘Carbon abatement‘ in the ESG sec(cid:90)on for further details). 42 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 STRATEGIC REPORT • Customers and Lenders: Poten(cid:90)al customers have the opportunity to purchase a product with a preferen(cid:90)al carbon footprint and poten(cid:90)al lenders have the opportunity to invest in a highly ESG conscious project. Principal Decision 5: Savannah refreshes brand and launches new website In April 2022, the Company announced its rebrand and the launch of its new website. In making the decision the Board considered: • • Shareholders, Workforce and Customers: The rebranding was in response to the evolu(cid:90)on of the business in the last two years to a singular focus as a European lithium ‘pure play‘ helping to enable Europe‘s energy transi(cid:90)on. It also highlights the Company‘s ESG creden(cid:90)als. Community and All: Easier access to informa(cid:90)on for all stakeholders, and in par(cid:90)cular for Community members thanks to Portuguese language func(cid:90)onality being added. Approval of the Board This Strategic Report contains certain forward(cid:59)looking statements that are subject to the usual risk factors and uncertain(cid:90)es associated with mineral development businesses. While the Directors believe the expecta(cid:90)on re(cid:5)ected herein to be reasonable in view of the informa(cid:90)on available up to the (cid:90)me of the Board‘s approval of this Strategic Report, the actual outcome may be materially di(cid:42)erent owing to factors either beyond the Group‘s control or otherwise within the Group‘s control but, for example, resul(cid:90)ng from a change of strategy. Accordingly, no reliance may be placed on the forward(cid:59)looking statements. On behalf of the Board: Dale Ferguson Chief Execu(cid:90)ve O(cid:27)cer Date: 4 April 2023 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 43 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i BARROSO LITHIUM PROJECT OVERVIEW The Barroso Lithium Project, Portugal Located less than 2 hours’ drive northeast of the city of Porto, the Barroso Lithium project covers an area of 8.36km2 in the Barroso hills of northeast Portugal and consists of the C(cid:57)100 Mining Lease2 (5.42km2) and an adjacent, three block, Mining Lease Applica(cid:84)on area (2.94km2). Through Savannah’s successful explora(cid:84)on programme, the Barroso Lithium Project (the ‘Project’) has been de(cid:4)ned as the most signi(cid:4)cant source of spodumene lithium in western Europe. In recent years, spodumene lithium deposits have surpassed brine deposits as the major source of lithium raw material produc(cid:84)on globally, and Savannah believes that the Barroso Lithium Project can become an important source of this ‘conven(cid:84)onal’ lithium mineral for Europe’s burgeoning domes(cid:84)c lithium ba(cid:30)ery industry. Savannah Resources has operated the Project since May 2017 when an ini(cid:84)al 75% stake was acquired (with all the milestones rela(cid:84)ng to purchase completed by October 2018). Savannah became the sole owner of the project in June 2019 following the acquisi(cid:84)on of the residual 25% stake from the project’s minority shareholders in an all(cid:57)share transac(cid:84)on. June 2019 also saw the Group exercise the op(cid:84)on it had taken in September 2018 to acquire the adjacent three block Mining Lease Applica(cid:84)on area from the Portuguese company Aldeia & Irmão, S.A. (‘Aldeia’) following a period of technical and legal due diligence. This increased the tenement por(cid:11)olio footprint by over 50% to its current size. Plan of the Barroso Lithium Project showing the loca(cid:16)on of the major orebodies: Source: Company Western Europe’s most signi(cid:4)cant spodumene lithium resource To date Savannah’s extensive explora(cid:84)on programme, which includes over 31,000m of drilling, has iden(cid:84)(cid:4)ed 8 deposits bearing spodumene lithium mineralisa(cid:84)on on the project. From being a ‘pre(cid:57)resource’ project when acquired, JORC compliant Mineral Resources have now been es(cid:84)mated on (cid:4)ve of these deposits (4 on the C(cid:57)100 licence and 1 on Aldeia Block A) which, as of May 2019, totalled 27.0Mt at 1.06% Li2O (containing 285.9kt of Li2O or 707kt of lithium carbonate equivalent), represen(cid:84)ng the most signi(cid:4)cant spodumene lithium resource in Western Europe. 2 The exis(cid:84)ng mining lease was granted to the previous project owners in 2006 and is valid for 30 years, but will need amendment or replacement for Savannah’s proposed mine and concentrator development. 44 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 BARROSO LITHIUM PROJECT OVERVIEW Many of the lithium deposits on the project remain open to possible extensions through further explora(cid:84)on and an Explora(cid:84)on Target3 ranging from 11(cid:57)19Mt at 1.0(cid:57)1.2% Li2O has been es(cid:84)mated on three of the deposits as of May 2019. The project currently has a combined resource and explora(cid:84)on target3 of 38(cid:57)48Mt at 1.0 to 1.2% Li2O hence, Savannah believes signi(cid:4)cant explora(cid:84)on upside remains with the poten(cid:84)al to signi(cid:4)cantly extend the Project’s opera(cid:84)onal life. The Barroso Lithium Project’s Lithium JORC Mineral Resource Es(cid:84)mate & Explora(cid:84)on Target3: JORC Mineral Resource Es(cid:32)mate (May 2019, 0.5% Li2O cut(cid:29)o(cid:10)) Deposit Grandao Resource Tonnes Li2O Category (Mt) Li2O grade (%) Fe2O3 grade (%) contained (t) Measured 6.6 1.1 0.7 71,600 Indicated 6.4 1.0 0.8 65,300 Inferred 4.8 1.0 0.7 48,900 Sub(cid:29)total 17.7 1.04 0.7 181,800 Reservatorio Measured – – – – Indicated – – – – Inferred 3.2 1.0 1.4 32,000 Sub(cid:29)total 3.2 1.0 1.4 32,000 Pinheiro Measured – – – – Indicated – – – – Inferred 2.0 1.0 0.7 20,000 Sub(cid:29)total 2.0 1.0 0.7 20,000 NOA Measured – – – – Indicated 0.4 1.2 0.8 4,200 Inferred 0.3 1.0 0.9 2,900 Sub(cid:29)total 0.6 1.1 0.9 7,100 Aldeia Measured – – – – Indicated 1.6 1.3 0.5 21,300 Inferred 1.8 1.3 0.4 23,700 Sub(cid:29)total 3.5 1.3 0.4 45,000 All Deposits Measured 6.6 1.1 0.7 71,600 Indicated 8.4 1.0 0.7 86,700 Inferred 12.0 1.1 0.9 127,600 Grand Total 27.0 1.06 0.8 285,900 Rounding discrepancies may occur Source: May 2019 JORC Resource update RNS 3 Cau(cid:84)onary Statement: The poten(cid:84)al quan(cid:84)ty and grade of the Addi(cid:84)onal Resource Targets is conceptual in nature, there has been insu(cid:21)cient prospec(cid:84)ng work to es(cid:84)mate a mineral resource and it is uncertain if further prospec(cid:84)ng will result in de(cid:4)ning a mineral resource. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 45 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i BARROSO LITHIUM PROJECT OVERVIEW Explora(cid:32)on Target4 Summary (May 2019) Deposit Reservatorio Grandao Aldeia Total Rounding discrepancies may occur Source: May 2019 JORC Resource update RNS Tonnage Range (Mt) Low 5.0 4.0 High 7.0 8.0 Li2O grade (%) 1.0(cid:57)1.2 1.0(cid:57)1.2 2.0 4.0 1.0(cid:57)1.3 11.0 19.0 1.0(cid:29)1.2 Not just a lithium project In addi(cid:84)on to the produc(cid:84)on of signi(cid:4)cant volumes of spodumene lithium concentrate, the Barroso Lithium Project also has the poten(cid:84)al to produce signi(cid:4)cant volumes of feldspar and quartz which is in demand from the large ceramics and glass industries in Portugal and Spain. Sales of these ‘co(cid:57)products’ would have the dual bene(cid:4)ts of reducing the amount of processed material which the Project must store on(cid:57)site and provide addi(cid:84)onal revenue which could signi(cid:4)cantly improve the net produc(cid:84)on costs of the lithium concentrate. During 2019 the Group es(cid:84)mated its (cid:4)rst co(cid:57)product resource on the project, based only on pegma(cid:84)te material located inside the proposed Grandao pit (i.e., wholly within the exis(cid:84)ng lithium mineral resource model). Hence, this resource is expected to increase further once similar es(cid:84)mates are performed on the NOA, Reservatorio, Pinheiro and Aldeia deposits. Savannah also completed marke(cid:84)ng and test work studies during 2019 to con(cid:4)rm the co(cid:57)products’ suitability for various applica(cid:84)ons within the ceramic and glass industries. The Barroso Lithium Project’s Co(cid:57)product JORC Mineral Resource Es(cid:84)mate: JORC Mineral Resource Es(cid:32)mate (September 2019, no lithium cut(cid:29)o(cid:10) grade applied) Resource Tonnes Quartz Feldspar Deposit Category (Mt) Grade (%) Mt Grade (%) Mt Grandao Measured 7.1 32.6 2.32 42.8 3.05 Indicated 6.3 34.6 2.17 42.6 2.67 Inferred 1.0 30.9 0.30 40.3 0.39 Sub(cid:29)total 14.4 33.4 4.79 42.6 6.11 Rounding discrepancies may occur Source: September 2019 JORC Resource update RNS This independent work, completed on separate quartz and feldspar samples and a mixed bulk tail product, con(cid:4)rmed that all three materials were suitable for commercial use. Speci(cid:4)cally, the test work showed that both the separate quartz and feldspar products could be used in a variety of applica(cid:84)ons in both industries such as hotel(cid:57)ware quality ceramics and container glass while the mixed bulk tail product could be used in ceramic applica(cid:84)ons, such as vitri(cid:4)ca(cid:84)on and bone china. Encouragingly, the marke(cid:84)ng study con(cid:4)rmed that prices for all the products could be poten(cid:84)ally higher (in the range of US$40(cid:57)100/t) than had been assumed in the 2018 Scoping Study (US$39 per tonne for feldspar and US$33 per tonne for quartz) as summarised below. Furthermore, produc(cid:84)on of the bulk material would also poten(cid:84)ally eliminate approximately US$15m from the es(cid:84)mated processing plant capex that would otherwise be required to produce separate quartz and feldspar co(cid:57)products. 4(cid:16) Cau(cid:84)onary Statement: The poten(cid:84)al quan(cid:84)ty and grade of the Addi(cid:84)onal Resource Targets is conceptual in nature, there has been insu(cid:21)cient prospec(cid:84)ng work to es(cid:84)mate a mineral resource and it is uncertain if further prospec(cid:84)ng will result in de(cid:4)ning a mineral resource. 46 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 BARROSO LITHIUM PROJECT OVERVIEW Posi(cid:32)ve Scoping Study completed in 2018 Based on the rapid delinea(cid:84)on of an ini(cid:84)al JORC (2012) Mineral Resource es(cid:84)mate and Explora(cid:84)on Target5 during late 2017 and early 2018, Savannah commissioned a Scoping Study on the project. This was completed in June 2018 and reported very posi(cid:84)ve project economics based on a 1.3Mtpa opera(cid:84)on producing an average of 175ktpa of spodumene concentrate and associated co(cid:57)products over an 11(cid:57)year life. The Project design also featured an innova(cid:84)ve ‘dry stack’ tailings facili(cid:84)es, meaning that a ‘wet tailings dam’ was completely avoided. The Barroso Lithium Project 2018 Scoping Study Key Facts: Opera(cid:32)ng Parameters and assump(cid:32)ons Mineable resource (June 2018) 14.4Mt at 1.07% Li2O. All open pit. Life of mine strip ra(cid:84)o (waste: ore): 5.2: 1, years 1(cid:57)4: 1.6:1 Ini(cid:84)al life of mine 11 years at 1.3Mtpa throughput rate Processing route & recovery rate Crush(cid:57)grind(cid:57)Dense Media Separa(cid:84)on(cid:57)(cid:6)ota(cid:84)on (80% recovery) Concentrate produc(cid:84)on & spec 175ktpa (minimum), 6% spodumene Concentrate produc(cid:84)on as LCE/Lithium Hydroxide Equivalent (net of assumed processing losses in a chemical conversion plant) ~22ktpa; ~25.5ktpa. Su(cid:21)cient for ~0.5M 60kWh car ba(cid:30)ery packs per annum Co(cid:57)products Ini(cid:84)al capex Feldspar (~276ktpa), quartz (~173ktpa) for use in the ceramics and other industries US$109m (Addi(cid:84)onal con(cid:84)ngency of US$24.9m, included in (cid:4)nancial model) Sustaining capital & closure costs US$17.2m LoM C1 Cash Opera(cid:84)ng cost (US$/t conc) Financial & economic outcomes Pricing assump(cid:84)ons (Average life of mine) US$271/t (US$210/t average in Years 1(cid:57)4). Costs include all mining, processing, transport, shipping/freight, corporate, admin, marke(cid:84)ng & royalty costs and are net of co(cid:57)product credits (included in gross revenue). Spodumene concentrate: US$685/t; Feldspar US$39/t; Quartz US$33/t Gross Revenue (LoM; Avg pa) US$1,555m; US$140m (includes co(cid:57)product revenue) EBITDA (LoM, Avg pa) Pre(cid:57)tax FCF (LoM; Avg pa) Net FCF (LoM; Avg pa) NPV (8% discount rate) IRR Payback US$805m; US$73m US$651m; US$59m US$458m; US$41m Pre(cid:57)tax US$356m; Post(cid:57)tax US$241m Pre(cid:57)tax 63.2%; Post(cid:57)tax 48.6% Pre(cid:57)tax 1.7 years; Post(cid:57)tax 2.1 years Source: June 2018 Scoping Study and subsequent company press releases 5(cid:16) Cau(cid:84)onary Statement: The poten(cid:84)al quan(cid:84)ty and grade of the Addi(cid:84)onal Resource Targets is conceptual in nature, there has been insu(cid:21)cient prospec(cid:84)ng work to es(cid:84)mate a mineral resource and it is uncertain if further prospec(cid:84)ng will result in de(cid:4)ning a mineral resource. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 47 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i BARROSO LITHIUM PROJECT OVERVIEW Progressing the Project: Environmental Licencing, Economic Studies, and Decarbonisa(cid:32)on As a result of the posi(cid:84)ve Scoping study, Savannah took the decision to progress the Project towards a Final Investment Decision point. While the Project has an exis(cid:84)ng Mining Lease, Savannah’s plan to produce spodumene concentrate and mine on a larger scale than previously envisaged, means it is necessary for the Project to receive a new Environmental Licence and have a new Mine Plan approved by the Portuguese authori(cid:84)es. Savannah must also jus(cid:84)fy its poten(cid:84)al capital investment in the Project with a robust business case. Hence, to progress on both these fronts, Savannah commissioned an Environmental Impact Assessment (‘EIA’) study, the (cid:4)rst stage in the Environmental Licencing process, and a De(cid:4)ni(cid:84)ve Feasibility study (DFS) on the project in the second half of 2018. Environmental Licencing For the Environmental Licencing process, Savannah (cid:4)rst submi(cid:30)ed its Environmental Impact Assessment and Mine Plan to Agência Portuguesa do Ambiente (‘APA’), the Portuguese environmental regulator, in June 2020. The EIA study iden(cid:84)(cid:4)es all the poten(cid:84)al environmental and social impacts the Project may have and details how Savannah would monitor and minimise these throughout all phases of the Project’s life, including a(cid:18)er its closure. Following submission, Savannah’s EIA was made public in April 2021 and underwent a public consulta(cid:84)on between April and July of that year. APA then con(cid:84)nued with its review and considera(cid:84)on of feedback from the public consulta(cid:84)on un(cid:84)l July 2022 when the Regulator recommended that the review process enter an addi(cid:84)onal phase of evalua(cid:84)on under Ar(cid:84)cle 16 of the relevant EIA legisla(cid:84)on. In contrast to the ini(cid:84)al period of the EIA review, Under Ar(cid:84)cle 16 the applicant can meet with the Regulator’s Evalua(cid:84)on Commi(cid:30)ee and receive feedback on its original design. Ar(cid:84)cle 16 also has a closely de(cid:4)ned schedule with the applicant given 180 working days to revise and resubmit its EIA based on the feedback received. Savannah agreed to this proposal, and a(cid:18)er a series of produc(cid:84)ve mee(cid:84)ngs with members of APA’s Evalua(cid:84)on Commi(cid:30)ee and a period of revising the Project’s EIA, resubmi(cid:30)ed its EIA and associated Mine Plan in March 2023. Under the legisla(cid:84)on, the Regulator has 50 working days to review and publish its ‘Environmental Impact Declara(cid:84)on’ (‘DIA’) decision on the revised EIA. In the case of the Barroso Lithium Project this should result in a decision being received in late May 2023. The DIA award is the (cid:4)rst approval in a mul(cid:84)(cid:57)stage environmental licencing process. Receipt of the DIA would allow the approval process to move on to the subsequent Environmental Compliance Report of the Execu(cid:84)on Project ' (‘RECAPE’) and Environmental Licence stages during which approval of the Project's detailed (cid:4)nal designs are received ('DCAPE') and the Project’s environmental (cid:84)tle is awarded. These stages are expected to run in parallel. Once the DCAPE declara(cid:84)on has been made and the environmental licence received, Savannah will then be able to apply for the remainder of the licences required for the Project’s development and opera(cid:84)on. These licences cover permissions for construc(cid:84)on and use of services on site such as power and water. The condi(cid:84)ons set by the DIA and the agreement of the Project’s (cid:4)nal designs in the RECAPE phase will also provide important input parameters for the DFS. 48 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 BARROSO LITHIUM PROJECT OVERVIEW Key elements of the Barroso Lithium Project during the opera(cid:15)ng phase as proposed in the 2023 revised EIA: w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i Source: Company De(cid:5)ni(cid:8)ve Feasibility Study and Updated Scoping Study The DFS is a comprehensive technical and economic study of the proposed Project and will include among other elements; an updated JORC resource for the Project as well as its maiden reserve es(cid:43)mate; (cid:7)nal designs for site layout and associated infrastructure; schedules for mining, processing, storage of processed materials; commodity market studies; and capital and opera(cid:43)ng cost es(cid:43)ma(cid:43)ons and a cash(cid:8)ow model. As a result of the c.90% increase in overall resources de(cid:7)ned since the 2018 scoping study, the DFS is considering the possibility of increasing the annual throughput rate to 1.5Mtpa resul(cid:43)ng in an average annual output of c.200ktpa lithium concentrate. Assuming a posi(cid:43)ve DIA decision is received, work to complete the DFS will be undertaken in parallel with the remainder of the Environmental Licensing process. Alongside the (cid:7)nal Project designs which will come through the ongoing Environmental Licencing process, a modest (cid:7)eldwork programme is also required. This will include drilling for reserve and resource delinea(cid:43)on and geotechnical purposes. This programme has been planned and Savannah would look to ini(cid:43)ate it during H2 2023, subject to the DIA decision. Savannah expects the DFS to be completed no later than 12 months following the restart of the required (cid:7)eldwork. Importantly, the process (cid:8)owsheet for the concentrator plant was (cid:7)nalised in Q1 2022. Based on industry standard equipment and processing techniques and an environmentally friendly reagent regime, which complies with all relevant regula(cid:43)ons and allows both mica and spodumene (cid:8)ota(cid:43)on to operate at near neutral pH, the plant will be capable of producing a high quality, spodumene concentrate grading (cid:1)5.5% Li2O with low levels of impuri(cid:43)es. Assuming a posi(cid:43)ve DIA decision is received from APA, the Company will prepare and publish a new Scoping Study in the second half of 2023 based on the revised EIA and Mine Plan, and is con(cid:7)dent that the new Scoping Study level economics will remain highly posi(cid:43)ve. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 49 BARROSO LITHIUM PROJECT OVERVIEW Simpli(cid:3)ed Process Flowsheet Block Flow Diagram Source: Company Decarbonisa(cid:32)on Study In March 2022 Savannah announced the ini(cid:84)a(cid:84)on of a Decarbonisa(cid:84)on Strategy to support its goal of producing a net carbon zero lithium product from the Project. By se(cid:14)ng this goal Savannah is helping to minimise the carbon footprint associated with the European lithium ba(cid:30)ery value chain, thus maximising the environmental bene(cid:4)t these ba(cid:30)eries can bring. ECOPROGRESSO, a subsidiary of the Portuguese engineering and environmental consultancy, Quadrante Group, was commissioned to lead on the mul(cid:84)ple phased study. Phase 1, which was focused on upda(cid:84)ng the es(cid:84)mate of the Project's greenhouse gases ('GHG') emissions based on interna(cid:84)onal guidelines, and de(cid:4)ning targets for overall GHG reduc(cid:84)on was completed during 2022 and the results announced in February 2023. Key (cid:4)ndings of the (cid:4)rst phase study included; con(cid:4)rma(cid:84)on that ba(cid:30)ery electric mining equipment provides the most e(cid:17)ec(cid:84)ve and (cid:6)exible means to reduce Scope 1 emissions, which account for 68% of the combined Scope 1 & 2 total and; the Scope 2 emissions es(cid:84)mate being reduced by 54% from the 2019 es(cid:84)mate based on a lower power consump(cid:84)on at the Project’s processing plant and a 41% reduc(cid:84)on in the emissions associated with grid power due to the increase in contribu(cid:84)on from renewable sources in the intervening period. The recommenda(cid:84)ons for ongoing studies to further reduce the Project’s CO2 footprint include assessing the op(cid:84)ons for securing a 100% renewable energy supply for the Project, and working with mining equipment OEMs to determine a site speci(cid:4)c solu(cid:84)on for a transi(cid:84)on to a ba(cid:30)ery operated mining (cid:6)eet and associated charging infrastructure. 50 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 BARROSO LITHIUM PROJECT OVERVIEW Developing and commercialising the project Assuming the Project’s environmental licencing is progressing as hoped, a (cid:4)nal investment decision on the project’s development will be taken by the Company once the DFS has been completed in H2 2024. Alongside receiving the necessary regulatory approvals and social acceptance of the project, Savannah also needs to secure the capital required to fund the project’s construc(cid:84)on. The Company expects to obtain the capital it needs from mul(cid:84)ple sources including from new strategic partners inves(cid:84)ng directly in the project or Savannah’s equity, (cid:4)nance linked to o(cid:10)ake agreements for the project’s lithium concentrate, the debt capital markets in the form of a project (cid:4)nance loan, government and/or EU grants or loans, and from the equity capital markets. If the necessary (cid:4)nance can be sourced in a (cid:84)mely manner once a (cid:4)nal investment decision has been made, construc(cid:84)on could begin in 2025 and be followed by commissioning and (cid:4)rst produc(cid:84)on at the Project in 2026. If this schedule can be met, Savannah will be well placed to supply spodumene concentrate into the new merchant lithium chemicals plants being proposed in Europe, including two in Portugal, which are also to be targe(cid:84)ng (cid:4)rst produc(cid:84)on around this (cid:84)me. Drillcore from the Grandao orebody: Source: Company The Barroso Lithium Project – a (cid:4)rst for Portugal in the new lithium ba(cid:3)ery industry Portugal is already established as Europe’s ‘largest’ lithium producer with approximately 900t produced in 2021. However, all of the country’s current lithium produc(cid:84)on is used in the domes(cid:84)c ceramics and glassware industries, and not in lithium ba(cid:30)ery produc(cid:84)on. Signi(cid:4)cant lithium mineralisa(cid:84)on exists in Portugal, including at Barroso Lithium Project, and in 2018 the Portuguese Government announced its ‘lithium strategy’ to support the development of a new na(cid:84)onal manufacturing industry to service the growing lithium ba(cid:30)ery market in Europe. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 51 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i BARROSO LITHIUM PROJECT OVERVIEW As part of this strategy, the Portuguese Government has earmarked six areas prospec(cid:84)ve for lithium mineralisa(cid:84)on which will be made available for explora(cid:84)on via a public tender process in due course. This follows the publica(cid:84)on of strategic environmental assessments on an ini(cid:84)al nine areas and a public consulta(cid:84)on round which was completed in December 2021. As the most advanced lithium development company in the country, Savannah plans to par(cid:84)cipate in the tender process when it is ini(cid:84)ated. In parallel with its plans to develop its lithium mining industry the government published new legisla(cid:84)on rela(cid:84)ng to mineral deposits in 2021, Decree(cid:57)Law 30/2021 from 7th May, which sets more demanding standards of environmental sustainability, the sharing of economic bene(cid:4)ts with the popula(cid:84)ons and gives more powers to municipality(cid:57)level administrators in regard to mineral project development. This new Regulatory Decree is designed to ensure that the explora(cid:84)on and development of mineral deposits complies with the principles of ‘green mining’. Given its own focus on low impact project design and maximising the bene(cid:4)ts which can (cid:6)ow from mineral project development to stakeholders, Savannah welcomes this new legisla(cid:84)on. The Company is already commi(cid:30)ed to developing the Barroso Lithium Project in a responsible way and by applying the best interna(cid:84)onal prac(cid:84)ces that minimise the impact associated with the opera(cid:84)on so that the maximum overall environmental bene(cid:4)t is gained from the lithium once it is incorporated into a ba(cid:30)ery. It also means that Savannah is dedicated to ensuring the best outcomes for the project’s stakeholders in terms of social, demographic and economic bene(cid:4)ts. While larger scale lithium mining alone would represent a new industry for Portugal, the government has stated that it wants to develop a domes(cid:84)c lithium industry that goes beyond mining and features downstream stages such as lithium chemical produc(cid:84)on. Hence, the Barroso Lithium Project must be seen as part of the (cid:4)rst phase in the development of a much larger na(cid:84)onal concern as demonstrated recently by the large lithium chemical produc(cid:84)on plant proposals announced by two partnerships in December 2021. As a result of these objec(cid:84)ves, the Barroso Lithium Project has received strong support at na(cid:84)onal government level. If lithium produc(cid:84)on is achieved at the Barroso Lithium Project, Portugal would be placed at the centre of the new European lithium ba(cid:30)ery supply chain which the European Commission is so keen to establish as part of its e(cid:17)orts to combat climate change while maintaining the region’s large automo(cid:84)ve industry. The transport sector is the second largest generator of emissions (CO2 equivalent) in the EU behind energy supply, and the transi(cid:84)on to mass adop(cid:84)on of zero or low emission vehicles is a key part of the European Commission’s target of achieving a net zero carbon economy by 2050. 52 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 REPORT OF THE DIRECTORS Going Concern This informa(cid:76)on is contained in the Strategic Report in the Key Financial Performance Indicators and Milestones sec(cid:76)on and in Note 1. Streamlined Energy & Carbon Repor(cid:45)ng (‘SECR’) The Group does not meet the SECR requirements and therefore is not required to perform this repor(cid:76)ng. Statement as to Disclosure of Informa(cid:45)on to Auditors So far as the Directors are aware, there is no relevant audit informa(cid:76)on (as de(cid:9)ned by Sec(cid:76)on 418 of the Companies Act 2006) of which the Group’s auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit informa(cid:76)on and to establish that the Group’s auditors are aware of that informa(cid:76)on. Auditors The auditors, BDO LLP, will be proposed for re(cid:25)appointment at the forthcoming Annual General Mee(cid:76)ng. The Directors present their report with the Financial Statements of the Company and the Group for the year ended 31 December 2022. Dividends The Directors do not recommend the payment of a dividend (2021: £nil). Events Since the Repor(cid:45)ng Date This informa(cid:76)on is contained in Note 25 to the Financial Statements. Directors The Directors who have held o(cid:12)ce during the period from 1 January 2022 to the date of this report (unless otherwise stated) are as follows: David Stuart Archer (stepped down on 6 July 2022) Dale John Ferguson Mary Jo Jacobi (appointed on 7 April 2022) Ma(cid:49)hew James Wya(cid:49) King James Gerald Leahy Manohar Pundalik Shenoy (appointed on 7 April 2022, previously Alternate Director) Diogo da Silveira (appointed on 10 November 2022) Imad Kamal Abdul Redha Sultan Maqbool Ali Sultan (re(cid:76)red from the Board on 7 April 2022) Murtadha Ahmed Sultan (Alternate Director, re(cid:76)red from the Board on 7 April 2022) Directors’ Indemnity The Group has agreed to indemnify its Directors against third party claims which may be brought against them and has in place a Directors and O(cid:12)cers’ insurance policy. Financial Instruments Risk This informa(cid:76)on is contained in Note 18 to the Financial Statements. Future Development This Statement and the Chief Execu(cid:76)ve’s Report. is contained informa(cid:76)on in the Chairman’s Key Stakeholder Groups and Principal Decisions Details of how the Directors have had regard to the need to foster Savannah’s business rela(cid:76)onships with suppliers and others, and the principal decisions taken by the Company during the year, can be found in the Strategic report in Sec(cid:76)on 172 (1) Statement. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 53 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i REPORT OF THE DIRECTORS The Directors’ bene(cid:9)cial interests (including the bene(cid:9)cial interests of their immediate family) in the ordinary shares of the Company are as follows: Dale John Ferguson Mary Jo Jacobi Ma(cid:49)hew James Wya(cid:49) King James Gerald Leahy Manohar Pundalik Shenoy Diogo da Silveira Imad Kamal Abdul Redha Sultan2 No. of shares held at 31 December 2022 No. of shares held at 31 December 2021 50,649,5101 – 2,916,528 1,365,889 5,809,524 – – 49,581,6041 – 2,916,528 1,150,000 5,809,524 – – 1 46,161,656 shares (2021: 45,993,750 shares) held indirectly through Slipstream Resources Interna(cid:76)onal Pty Ltd. 2 The Director indicated is a representa(cid:76)ve of Al Marjan Ltd which held 268,262,589 shares at the repor(cid:76)ng date (2021: 268,262,589 shares). Details of Directors’ remunera(cid:76)on are disclosed in the Remunera(cid:76)on Report. Details of Directors’ interests in Share Op(cid:76)ons and Investor Warrants are disclosed in the Remunera(cid:76)on Report. Substan(cid:45)al Shareholding At the date of this report the Company has been no(cid:76)(cid:9)ed or is aware of the following interest in the shares of the Company of 3% or more of the Company’s total issued Share Capital1: Name of Shareholder Al Marjan Ltd (Director2) Slipstream Resources Interna(cid:76)onal Pty Ltd Dale John Ferguson (Director/CEO)3 No. of shares 268,262,589 147,717,300 50,649,510 % 15.88% 8.75% 3.00% 1 Except those exempts under DTR 5.1.5 regula(cid:76)on. 2 One Director is representa(cid:76)ve of Al Marjan. 3 This is including a 2.73% included in the holding reported for Slipstream Resources Interna(cid:76)onal Pty Ltd. On behalf of the Board: Dale Ferguson Chief Execu(cid:76)ve O(cid:12)cer Date: 4 April 2023 54 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 REMUNERATION REPORT The Remunera(cid:76)on Commi(cid:49)ee comprises of James Leahy (Chairman), Manohar Shenoy and Diogo da Silveira. Mary Jo Jacobi also served as a member of the Remunera(cid:76)on Commi(cid:49)ee and relinquished her role and was replaced by Diogo da Silveira in November 2022. The main purpose of the Remunera(cid:76)on Commi(cid:49)ee is to: • • (to the extent prac(cid:76)cable) be independent non(cid:25)execu(cid:76)ve directors in determining and reviewing the remunera(cid:76)on of execu(cid:76)ves on behalf of the ‘Board’; and ensuring that remunera(cid:76)on policies and packages a(cid:49)ract and retain, mo(cid:76)vate quality directors whilst not exceeding market rates. Procedures for developing policy and (cid:6)xing remunera(cid:45)on The Remunera(cid:76)on Commi(cid:49)ee (cid:9)xes execu(cid:76)ve remunera(cid:76)on and ensures that no Director is involved in deciding his or her own remunera(cid:76)on. The Remunera(cid:76)on Commi(cid:49)ee is authorised to obtain outside professional advice and exper(cid:76)se. The Remunera(cid:76)on Commi(cid:49)ee is authorised by the Board to inves(cid:76)gate any ma(cid:49)er within its Terms of Reference, and it is authorised to seek any informa(cid:76)on that it requires from any employee. Details of the remunera(cid:45)on policy The fees to be paid to the Directors and senior management are set by the Remunera(cid:76)on Commi(cid:49)ee. Directors’ service agreements Service agreements for Directors and senior management are terminable by either party on no(cid:76)ce periods up to a maximum of 6 months. Directors’ remunera(cid:45)on The following remunera(cid:76)on informa(cid:76)on comprises Directors’ fees and bene(cid:9)ts in kind that were paid to Directors during the year: Directors’ Directors’ emoluments 2022 emoluments 2021 Salary Bonus Pension Non(cid:8) Total Salary Bonus Pension Non(cid:25) cash cash share share op(cid:45)ons op(cid:76)ons £ £ £ £ £ £ £ £ £ Execu(cid:45)ve Directors Dale Ferguson 241,142 16,2741 – 41,413 298,829 149,837 82,5561 – 35,071 David Archer2 174,268 – 16,525 53,217 244,010 310,000 124,0001 43,400 51,783 Non(cid:8)Execu(cid:45)ve Directors Ma(cid:49)hew King 65,000 – – – 65,000 65,000 – – – Mary Jo Jacobi 29,282 – – – 29,282 – – – – James Leahy 40,000 – – – 40,000 40,000 – – – Manohar Shenoy – – – – – – – – – Diogo da Silveira 6,941 – – – 6,941 – – – – Maqbool Sultan3 – – – – – – – – – Imad Sultan – – – – – – – – – Murtadha Sultan3 – – – – – – – – – 556,633 16,274 16,525 94,630 684,062 564,837 206,556 43,400 86,854 Total £ 267,464 529,183 65,000 – 40,000 – – – – – 901,647 1 Bonuses unpaid as at 31 December 2022 and 31 December 2021 2 Stepped down as Director (and employee) on 6 July 2022 3 Termina(cid:76)on of appointment as Director on 7 April 2022 The Board recognises that Directors’ remunera(cid:76)on is of a legi(cid:76)mate concern to the Company’s shareholders and is commi(cid:49)ed to following the current best business prac(cid:76)ces. The Company operates within a compe(cid:76)(cid:76)ve environment and its performance depends on the individual contribu(cid:76)ons of the Directors. The Board’s policy is to provide execu(cid:76)ve remunera(cid:76)on packages designed to a(cid:49)ract, mo(cid:76)vate and retain directors of the calibre necessary to maintain the Company’s posi(cid:76)on and to reward the Directors (and senior management) SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 55 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i REMUNERATION REPORT for enhancing shareholder value and return. The Company aims levels of remunera(cid:76)on to do this, but to avoid paying more than necessary; the remunera(cid:76)on will also re(cid:10)ect the Directors’ du(cid:76)es and responsibili(cid:76)es. to provide su(cid:12)cient David Archer stepped down from his role as CEO in July 2022 and the Board approved the appointment of Dale Ferguson as the Interim CEO combined with his Technical Director role. The Company sought advice from Company’s Remunera(cid:76)on Adviser, Alvarez and Marsal for the salary benchmarking for the Interim CEO role. Following which the Remunera(cid:76)on Commi(cid:49)ee and Board approved and implemented the Remunera(cid:76)on Adviser’s temporary recommenda(cid:76)on, being a adjustment of Dale Ferguson’s salary in considera(cid:76)on of (an addi(cid:76)onal payment of the expanded role AUD 23,766.66 per month e(cid:16)ec(cid:76)ve July 2022). In the calendar year, the Board appointed two Non(cid:25)Execu(cid:76)ve Directors, with Mary Jo Jacobi joining the Company in April 2022 and Diogo da Silveira in November 2022. Diogo da Silveira was appointed and owing to him being in Portugal he was/is expected to be engaged in regular stakeholder engagement within Portugal, the Board approved an annual fee of £50,000 (which is £10,000 higher than the remunera(cid:76)on of the Board’s standard NEDs). Following the Company’s announcement on the Environmental Impact Assessment evalua(cid:76)on process update and further work required on the Environmental Impact Assessment with Portugal’s environmental regulator, Agência Portuguesa do Ambiente, the Board cancelled the 2022 KPI performance bonus for Mr Dale Ferguson which was replaced by a 10% bonus award versus gross salary (applied to the Technical Director annual fee only – i.e., it did not apply to the temporary increase). Furthermore, following the cancella(cid:76)on of the 2022 KPI performance bonus and in recogni(cid:76)on of the senior management’s valuable contribu(cid:76)ons, including assuming increased responsibili(cid:76)es following David Archer stepping down as CEO, the Company awarded a 10% bonus to recognise this. The Execu(cid:76)ve Directors were awarded a 5% pay rise to re(cid:10)ect the in(cid:10)a(cid:76)onary environment, and this was the (cid:9)rst such adjustment since 2020. Remunera(cid:45)on Policy and Long(cid:8)Term Incen(cid:45)ve Plan In 2019, the Remunera(cid:76)on Commi(cid:49)ee undertook a review of remunera(cid:76)on packages and developed a new remunera(cid:76)on policy aimed at rewarding performance, encouraging reten(cid:76)on of key sta(cid:16) and aligning their interests with those of shareholders. This resulted in a long(cid:25)term incen(cid:76)ve plan (‘LTIP’) intended to support this policy being implemented in March 2019 which is designed to incen(cid:76)vise the Company’s execu(cid:76)ve Management Team and other key employees. Along with the implementa(cid:76)on of the LTIP, the Remunera(cid:76)on Commi(cid:49)ee established an overall remunera(cid:76)on policy which included benchmarking exercises, feedback from ins(cid:76)tu(cid:76)onal shareholders and engaging interna(cid:76)onally recognised consul(cid:76)ng (cid:9)rm Alvarez and Marsal. This resulted in a remunera(cid:76)on policy for the execu(cid:76)ve Directors which combines short term incen(cid:76)ves (‘STI’ – cash bonus which is assessed against key business objec(cid:76)ves) and long(cid:25)term incen(cid:76)ves (‘LTI’ – under the Company’s LTIP). The STI is based upon maximum poten(cid:76)al bonus of 150% / 100% of base salary for the CEO / Technical Director respec(cid:76)vely and is assessed against key business objec(cid:76)ves. The LTIP was established to encourage long(cid:25)term value crea(cid:76)on for Savannah’s shareholders and to align the interests of the par(cid:76)cipants with shareholders. Awards under the LTIP take the form of op(cid:76)ons over the Company’s ordinary shares of 1 pence each, (the ‘Op(cid:76)ons’). The Board believes that the implementa(cid:76)on of the LTIP will incen(cid:76)vise the par(cid:76)cipants and will also help Savannah to a(cid:49)ract and retain talented individuals in the future as the Company expedites the development of its mining projects. The LTIP allows for up to 7.5% of the Company’s issued share capital to be allocated to employees. The Remunera(cid:76)on Commi(cid:49)ee adopted a policy whereby up to 5% of the Company’s issued share capital should be made available via the LTIP to the Execu(cid:76)ve Management Team only, with the balance being available to other employees. These percentages are reviewed annually by the Company’s Remunera(cid:76)on Commi(cid:49)ee and did not change between 2021 and 2022. The LTIP also includes malus and clawback clauses. The LTIP is a share op(cid:76)on scheme of the kind commonly listed companies. The Remunera(cid:76)on adopted by Commi(cid:49)ee took advice and recommenda(cid:76)ons from leading remunera(cid:76)on consultancy, Alvarez and Marsal. David Archer (former CEO) stepped down from the Company in July 2022 and all 20,000,000 Op(cid:76)ons issued to him lapsed on him leaving the Company. No share op(cid:76)ons were issued in 2022 under the LTIP. 56 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 REMUNERATION REPORT The Directors’ interests in the Share Op(cid:76)ons of the Company are as follows: Dale Ferguson1 Dale Ferguson2 Dale Ferguson2 David Archer2, 3 David Archer2, 3 Op(cid:45)ons at 1 Jan 2022 3,000,000 3,625,000 3,625,000 10,000,000 10,000,000 Quan(cid:45)ty granted Exercised during the year during the year Op(cid:45)ons/ Lapsed Warrants during the year 2022 at 31 Dec Exercise price Date of the grant First date of exercise Final date of exercise – – – – – – – – – – – – (10,000,000) – (10,000,000) 3,000,000 3,625,000 3,625,000 – – 10.0p 4.7p 6.2p 4.7p 6.2p 11/03/19 11/03/22 11/03/24 30/06/21 30/06/24 30/06/29 30/06/21 30/06/24 30/06/29 30/06/21 30/06/24 30/06/29 30/06/21 30/06/24 30/06/29 1 Granted under the 2019 LTIP 2 Granted under the 2021 LTIP 3 Stepped down as Director (and employee) on 6 July 2022 Op(cid:76)ons / Warrants at 1 Jan 2021 Quan(cid:76)ty granted during the year Exercised during the year Op(cid:76)ons/ Lapsed Warrants during the year 2021 at 31 Dec Exercise price Dale Ferguson David Archer3 Dale Ferguson1 David Archer2, 3 David Archer2, 3 Dale Ferguson2 Dale Ferguson2 2,000,000 7,000,000 3,000,000 – – – – 10,000,000 – 10,000,000 – 3,625,000 – 3,625,000 – – (2,000,000) – – (7,000,000) 3,000,000 – – – 10,000,000 – – 10,000,000 – 3,625,000 – – 3,625,000 – – 7.59p 7.59p 10.0p 4.7p 6.2p 4.7p 6.2p 1 Granted under the 2019 LTIP 2 Granted under the 2021 LTIP 3 Stepped down as Director (and employee) on 6 July 2022 No share op(cid:76)ons were granted to the Non(cid:25)Execu(cid:76)ve Directors. On behalf of the Board: James Leahy Chairman of the Remunera(cid:76)on Commi(cid:49)ee 4 April 2023 Date of the grant 01/03/17 01/03/17 11/03/19 30/06/21 30/06/21 30/06/21 30/06/21 First date of exercise Final date of exercise 01/03/17 28/02/21 01/03/17 28/02/21 11/03/22 11/03/24 30/06/24 30/06/29 30/06/24 30/06/29 30/06/24 30/06/29 30/06/24 30/06/29 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 57 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i CORPORATE GOVERNANCE STATEMENT The Company strives to ensure that its corporate governance policies and procedures which are in place across the Group are of a high standard. The Board acknowledges the importance of good corporate governance and in light of the Group’s size and rate of progression, decided to adopt the provisions of the QCA Corporate Governance Code in September 2018 (‘the Code’). The Corporate Governance Statement in rela(cid:76)on to the principles of the QCA Corporate Governance Code is provided at h(cid:49)p://www.savannahresources.com/investor(cid:25) rela(cid:76)ons/corporate(cid:25)governance/. Company website the on The Code is described as a prac(cid:76)cal, outcome orientated approach to corporate governance that is tailored for small and mid(cid:25)size companies. It is a valuable reference for growing companies wishing to follow good governance prac(cid:76)ce. The Company has adopted the Code because it allows it to take a (cid:10)exible yet adequate approach to corporate governance, ensuring that the Company places the right people in the right roles and to ensure that right things are being done to deliver value for all its stakeholders. independent non(cid:25)execu(cid:76)ve Director Following the appointment to the Board of James Leahy as an in November 2018, the Company’s Chairman relinquished his roles as Chairman of the Remunera(cid:76)on Commi(cid:49)ee and Chairman of the Audit and Risk Commi(cid:49)ee, and subsequently le(cid:6) both Commi(cid:49)ees, thus strengthening the independence of those Commi(cid:49)ees from the Board itself. In February 2021, the Company established a Nomina(cid:76)ons Commi(cid:49)ee, prior to that the Board itself was responsible for the ma(cid:49)ers falling under the responsibility of this Commi(cid:49)ee, and on an annual basis had reviewed the need for a Nomina(cid:76)ons Commi(cid:49)ee. The ra(cid:76)onale for the crea(cid:76)on of the Commi(cid:49)ee is to re(cid:10)ect the Company’s growing maturity and its planned transi(cid:76)on from explorer / developer into mine operator. The Board of Directors The Board comprises of one execu(cid:76)ve Director, and six non(cid:25)execu(cid:76)ve Directors. Ordinarily, the Board formally meets approximately every quarter, and convenes for business updates in between those formal mee(cid:76)ngs. The Board is responsible for se(cid:11)ng and monitoring group strategy, reviewing budgets and (cid:9)nancial performance, ensuring adequate funding, examining major por(cid:5)olio management ma(cid:49)ers, formula(cid:76)ng policy on key issues and repor(cid:76)ng to the shareholders. The Board was strengthened by the appointment in 2022 of Mary Jo Jacobi and Diogo da Silveira as independent non(cid:25)execu(cid:76)ve directors. Mary Jo Jacobi is a leader of the ESG movement and will oversee the Company’s ESG program, and has a wealth of relevant industry and government experience. Diogo da Silveira is a highly experienced business leader with extensive experience in Portugal and Europe. Internal Financial Control The Board is responsible for establishing and maintaining the Group’s system of internal (cid:9)nancial controls. Internal (cid:9)nancial control systems are designed to meet the par(cid:76)cular needs of the Group and the risk to which it is exposed, and by its very nature can provide reasonable, but not absolute, assurance against material misstatement or loss. The Directors con(cid:76)nue to review the e(cid:16)ec(cid:76)veness of the procedures presently in place to ensure that they are appropriate to the nature and scale of the opera(cid:76)ons of the Group. The Audit and Risk Commi(cid:23)ee The Audit and Risk Commi(cid:49)ee comprises of three Non(cid:25) Execu(cid:76)ve Directors – Manohar Shenoy (who chairs the Commi(cid:49)ee), Mary Jo Jacobi and Diogo da Silveira. The Commi(cid:49)ee’s key responsibili(cid:76)es with respect to audit are for ensuring that the (cid:9)nancial performance of the Group is properly reported on and monitored, and for mee(cid:76)ng the auditors and reviewing the reports from the auditors rela(cid:76)ng to accounts and internal controls. It also reviews the Group’s annual and interim Financial Statements before submission to the Board for approval. including monitoring The Commi(cid:49)ee’s key responsibili(cid:76)es with respect to risk are suppor(cid:76)ng the Board in its assessment of enterprise risk and the determina(cid:76)on of risk appe(cid:76)te as part of the overall se(cid:11)ng of strategy for the Group. It also assists its oversight of the Group’s risk the Board in management framework its e(cid:16)ec(cid:76)veness. The Group operates a Risk Register, with the inten(cid:76)on of allowing risks to be iden(cid:76)(cid:9)ed, tracked and addressed in order to mi(cid:76)gate any poten(cid:76)al damage to the Group or its businesses. The Commi(cid:49)ee facilitates the management of the Risk Register, in conjunc(cid:76)on with the Board, senior managers and appropriate professional advisers. The Commi(cid:49)ee also reviews any items reported under the Company’s Code of Conduct and whistleblowing procedure. 58 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CORPORATE GOVERNANCE STATEMENT Nomina(cid:45)ons Commi(cid:23)ee The Nomina(cid:76)ons Commi(cid:49)ee, established in February 2021, comprises three non(cid:25)execu(cid:76)ve Directors – Ma(cid:49)hew King (who chairs the Commi(cid:49)ee), Mary Jo Jacobi and Imad Sultan. It is responsible for reviewing the structure, size, and composi(cid:76)on of the Board of Directors, giving considera(cid:76)on to succession planning for Directors and senior execu(cid:76)ves, and iden(cid:76)fying and nomina(cid:76)ng candidates for the approval of the Board as required. It is also responsible for monitoring the performance of the Board of Directors. The Nomina(cid:76)on Commi(cid:49)ee played an instrumental role in the changes to the Board Composi(cid:76)on in 2022, which saw the Board strengthened by the addi(cid:76)on of Mary Jo Jacobi who has extensive ESG experience and Diogo da Silveira who is a Portuguese business heavyweight. An(cid:45)(cid:8)Bribery and Corrup(cid:45)on It is the Group’s policy to conduct business in an honest way, and without the use of corrupt prac(cid:76)ces or acts of bribery to obtain an unfair advantage in line with the UK Bribery Act 2010. The Group takes a zero(cid:25)tolerance approach to bribery and corrup(cid:76)on and is commi(cid:49)ed to ac(cid:76)ng professionally, fairly and with integrity in all its business dealings and rela(cid:76)onships wherever it operates and implemen(cid:76)ng and enforcing e(cid:16)ec(cid:76)ve systems to counter bribery. The necessary controls and procedures required in order to comply with the UK Bribery Act 2010 were updated by the Board in 2021 and will con(cid:76)nue to be monitored for appropriateness and e(cid:16)ec(cid:76)veness. In 2022 Internal Audit reviews were completed for UK and Portugal opera(cid:76)ng en(cid:76)(cid:76)es, and the results of the tests demonstrated that controls were adequate to the nature and scale of the opera(cid:76)ons of the en(cid:76)(cid:76)es, and no material instances of noncompliance were noted. The Remunera(cid:45)on Commi(cid:23)ee The Remunera(cid:76)on Commi(cid:49)ee comprises of three Non(cid:25)Execu(cid:76)ve Directors – James Leahy (who chairs the Commi(cid:49)ee), Manohar Shenoy, and Diogo da Silveira. It is responsible for reviewing the performance of the execu(cid:76)ve Directors and for se(cid:11)ng the scale and structure of their remunera(cid:76)on, paying due regard to the interests of shareholders as a whole and the performance of the Group. The remunera(cid:76)on of the Chairman and any non(cid:25)execu(cid:76)ve Director is determined by the Board as a whole, based on a review of the current prac(cid:76)ces in other companies. In 2022 the Remunera(cid:76)on Commi(cid:49)ee, supported by the Company’s Remunera(cid:76)on Adviser, Alvarez and Marsal, led the review for the fee se(cid:11)ng for Dale Ferguson’s temporary increase for the Interim CEO role. AIM Rule Compliance Commi(cid:23)ee The AIM Rule Compliance Commi(cid:49)ee comprises one non(cid:25)execu(cid:76)ve and one execu(cid:76)ve Director – Ma(cid:49)hew King (who chairs the Commi(cid:49)ee) and Dale Ferguson, the CEO. It is responsible for ensuring that resources and procedures are in place to ensure the Company is at all (cid:76)mes in compliance with the AIM Rules for Companies and the Market Abuse Regula(cid:76)ons. The Commi(cid:49)ee is responsible for the Company’s Corporate Governance Code management. The Commi(cid:49)ee is also responsible for ensuring that the execu(cid:76)ve Directors and Management are communica(cid:76)ng e(cid:16)ec(cid:76)vely with the Company’s Nominated Adviser. Furthermore, the Commi(cid:49)ee for monitoring the Company’s compliance with the Market Abuse Regula(cid:76)ons. is responsible SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 59 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i STATEMENT OF DIRECTORS’ RESPONSIBILITIES Website Publica(cid:45)on The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company’s website (www.savannahresources.com) in accordance with legisla(cid:76)on in the United Kingdom governing the prepara(cid:76)on and dissemina(cid:76)on of Financial Statements, which may vary from legisla(cid:76)on in other jurisdic(cid:76)ons. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the Financial Statements contained therein. Directors’ Responsibili(cid:45)es The Directors are responsible for preparing the Strategic Report, the Report of the Directors and the Financial Statements in accordance with applicable law and regula(cid:76)ons. Company law requires the Directors to prepare Financial Statements for each (cid:9)nancial year. Under that law the Directors are required to prepare the Group and Company Financial Statements in accordance with UK adopted interna(cid:76)onal accoun(cid:76)ng standards. Under Company law the Directors must not approve the Financial Statements unless they are sa(cid:76)s(cid:9)ed that they give a true and fair view of the state of a(cid:16)airs of the Group and Company and of the pro(cid:9)t or loss of the Group for that period. In preparing these Financial Statements, the Directors are required to: • select suitable accoun(cid:76)ng policies and then apply them consistently; • make judgements and accoun(cid:76)ng es(cid:76)mates that are reasonable and prudent; • • in state whether they have been prepared accordance with UK adopted interna(cid:76)onal accoun(cid:76)ng standards, subject to any material departures disclosed and explained in the Financial Statements; and prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will con(cid:76)nue in business. The Directors are responsible for keeping adequate accoun(cid:76)ng records that are su(cid:12)cient to show and explain the Company’s transac(cid:76)ons and disclose with reasonable accuracy at any (cid:76)me the (cid:9)nancial posi(cid:76)on of the Company and enable them to ensure that the Financial Statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the preven(cid:76)on and detec(cid:76)on of fraud and other irregulari(cid:76)es. 60 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 REPORT OF THE INDEPENDENT AUDITORS to the members of Savannah Resources Plc Opinion on the (cid:6)nancial statements In our opinion: • • • • the (cid:9)nancial statements give a true and fair view of the state of the Group’s and of the Parent Company’s a(cid:16)airs as at 31 December 2022 and of the Group’s loss for the year then ended; the Group (cid:9)nancial statements have been properly prepared in accordance with UK adopted interna(cid:76)onal accoun(cid:76)ng standards; the Parent Company (cid:9)nancial statements have been properly prepared in accordance with UK adopted interna(cid:76)onal accoun(cid:76)ng standards and as applied in accordance with the provisions of the Companies Act 2006; and the (cid:9)nancial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the (cid:9)nancial statements of Savannah Resources Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 31 December 2022 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Posi(cid:76)on, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Statements of Cash Flows and notes to the (cid:9)nancial statements, including a summary of signi(cid:9)cant accoun(cid:76)ng policies. The (cid:9)nancial repor(cid:76)ng framework that has been applied in their prepara(cid:76)on is applicable law and UK adopted interna(cid:76)onal accoun(cid:76)ng standards and, as regards the Parent Company (cid:9)nancial statements, as applied in accordance with the provisions of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with Interna(cid:76)onal Standards on Audi(cid:76)ng (UK) (ISAs (UK)) and applicable law. Our responsibili(cid:76)es under those standards are further described in the Auditor’s responsibili(cid:76)es for the audit of the (cid:9)nancial statements sec(cid:76)on of our report. We believe that the audit evidence we have obtained is su(cid:12)cient and appropriate to provide a basis for our opinion. Independence We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the (cid:9)nancial statements in the UK, including the FRC’s Ethical Standard as applied to listed en(cid:76)(cid:76)es, and we have ful(cid:9)lled our other ethical responsibili(cid:76)es in accordance with these requirements. Material uncertainty related to going concern We draw a(cid:49)en(cid:76)on to note 1 to the (cid:9)nancial statements concerning the Group’s and the Parent Company’s ability to con(cid:76)nue as a going concern. As stated in note 1 depending on the outcome of the Environmental Impact Declara(cid:76)on (DIA), the group may be required to raise addi(cid:76)onal (cid:9)nance in the forecast period to fund the De(cid:9)ni(cid:76)ve Feasibility Study (DFS) and the Environmental Compliance Report of the Execu(cid:76)on Project (RECAPE). Due to the lack of any binding agreements to raise addi(cid:76)onal funds, there can be no certainty that the addi(cid:76)onal funding required by the Group and the Parent Company will be secured within the necessary (cid:76)mescale. As stated in note 1 these events or condi(cid:76)ons, along with the other ma(cid:49)ers set out in note 1 indicate that a material uncertainty exists that may cast signi(cid:9)cant doubt on the Group and Parent Company’s ability to con(cid:76)nue as a going concern. Our opinion is not modi(cid:9)ed in respect of this ma(cid:49)er. For the reasons set out above and based on our risk assessment, going concern was determined to be a key audit ma(cid:49)er. In audi(cid:76)ng the (cid:9)nancial statements, we have concluded that the Directors’ use of the going concern basis of accoun(cid:76)ng in the prepara(cid:76)on of the (cid:9)nancial statements is appropriate. Our evalua(cid:76)on of the Directors’ assessment of the Group and the Parent Company’s ability to con(cid:76)nue to adopt the going concern basis of accoun(cid:76)ng and in response to the key audit ma(cid:49)er included: • Assessing the reasonableness of Directors’ forecast expenditure for a period of at least twelve months from the date of approval of the (cid:9)nancial statements by reference to Directors’ budgeted ac(cid:76)vity and actual expenditure in 2022. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 61 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i REPORT OF THE INDEPENDENT AUDITORS to the members of Savannah Resources Plc • Agreeing the current cash resources to suppor(cid:76)ng documenta(cid:76)on. • • • Considering the impact on the cash(cid:10)ow forecasts should the DIA be granted or not granted and con(cid:9)rming whether liquidity is maintained under such scenarios. Considering the mi(cid:76)ga(cid:76)ng ac(cid:76)ons available to management such as deferring uncommi(cid:49)ed capital expenditure on the Barroso Lithium Project and con(cid:9)rming whether these are reasonable and within management’s control. Reviewing the adequacy and consistency of the disclosures within the (cid:9)nancial statements in respect of going concern with the Directors assessment including the key judgements made by the Directors. Our responsibili(cid:76)es and the responsibili(cid:76)es of the Directors with respect to going concern are described in the relevant sec(cid:76)ons of this report. Overview Coverage 94% (2021: 100%) of Group pro(cid:4)t before tax 100% (2021: 100%) of Group total assets Key audit ma(cid:23)ers 2022 2021 Materiality Carrying value of the Explora(cid:76)on and Evalua(cid:76)on assets (cid:2) (cid:2) Going concern (cid:2) x Group (cid:4)nancial statements as a whole £390,000 (2021: £430,000) based on 1.5% (2021: 1.5%) of total assets An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the (cid:9)nancial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. Our Group audit scope focused on the Group’s principal opera(cid:76)ng loca(cid:76)on being the Barroso Lithium Project in Portugal held in Savannah Lithium Unipessoal Lda, and the Parent Company, both of which were subject to full scope audits. These represent the signi(cid:9)cant components of the Group. The remaining components of the Group were considered non(cid:25)signi(cid:9)cant and the (cid:9)nancial informa(cid:76)on of these components were principally subject to analy(cid:76)cal review procedures by the Group engagement team, together with addi(cid:76)onal detailed tes(cid:76)ng over UK components subject to a statutory audit where applicable. The Group engagement team performed the audit of the Parent Company and the Portuguese component, Savannah Lithium Unipessoal Lda, was audited by a BDO network member (cid:9)rm in Portugal. Our involvement with component auditors For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude whether su(cid:12)cient appropriate audit evidence has been obtained as a basis for our opinion on the Group (cid:9)nancial statements as a whole. Our involvement with component auditors included the following: • Detailed Group repor(cid:76)ng instruc(cid:76)ons were sent to the component auditor, which included the signi(cid:9)cant areas to be covered by the audit (including areas that were considered to be key audit ma(cid:49)ers as detailed below), and set out the informa(cid:76)on required to be reported to the Group audit team. 62 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 REPORT OF THE INDEPENDENT AUDITORS to the members of Savannah Resources Plc • • • The Group audit team was ac(cid:76)vely involved in the direc(cid:76)on of the audit performed by the component auditor for the Group repor(cid:76)ng purposes along with the considera(cid:76)on of (cid:9)ndings and determina(cid:76)on of conclusions drawn. The Group audit team reviewed the component auditor’s work papers remotely, including review of group repor(cid:76)ng documents and engaged with the component auditor regularly during their (cid:9)eldwork and comple(cid:76)on phases. The Group audit team performed procedures in respect of the signi(cid:9)cant risk areas that represented Key Audit Ma(cid:49)ers in addi(cid:76)on to the procedures performed by the component auditor. Key audit ma(cid:1)ers Key audit ma(cid:49)ers are those ma(cid:49)ers that, in our professional judgement, were of most signi(cid:9)cance in our audit of the (cid:9)nancial statements of the current period and include the most signi(cid:9)cant assessed risks of material misstatement (whether or not due to fraud) that we iden(cid:76)(cid:9)ed, including those which had the greatest e(cid:16)ect on: the overall audit strategy, the alloca(cid:76)on of resources in the audit, and direc(cid:76)ng the e(cid:16)orts of the engagement team. In addi(cid:76)on to the ma(cid:49)er described in the Material uncertainty related to going concern sec(cid:76)on of our report, we have determined the ma(cid:49)er described below to be the key audit ma(cid:49)er to be communicated in our report. These ma(cid:49)ers were addressed in the context of our audit of the (cid:9)nancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these ma(cid:49)ers. Key audit ma(cid:23)er Carrying value of the Explora(cid:45)on and Evalua(cid:45)on Assets (notes 1 and 8) The Group holds one explora(cid:76)on and evalua(cid:76)on asset being the Barroso Lithium Project in Portugal. Accoun(cid:76)ng standards require Management to carry out an assessment at least annually for any indicators of impairment. This requires signi(cid:9)cant management judgement, which is explained in the sec(cid:76)on on key judgements rela(cid:76)ng to the Carrying value of Explora(cid:76)on and Evalua(cid:76)on Assets in note 1 to the (cid:9)nancial statements. Therefore we considered this to be a key audit ma(cid:49)er. How the scope of our audit addressed the key audit ma(cid:23)er We reviewed and assessed whether Management’s assessment was performed in accordance with the requirements of IFRS 6. We challenged Management’s assessment of the indicators of impairment of the Barroso Lithium Project in Portugal, by performing the following procedures: • We agreed management’s assessment to third party suppor(cid:76)ng documenta(cid:76)on where applicable, including: o o o Scoping studies, Explora(cid:76)on and mining licence permits, The revised Environmental Impact Assessment submi(cid:49)ed by the Group to Portugal’s environmental regulator. • We reviewed the Group’s Mina do Barroso mining licence which expires in 2036 and has a 20 years’ extension available. We checked compliance with licence terms through inspec(cid:76)ng suppor(cid:76)ng documents. • We reviewed Management’s plans and budgets to establish whether the Group is commi(cid:49)ed to the development of the project and that substan(cid:76)ve expenditure on further explora(cid:76)on and evalua(cid:76)on of mineral resources in the area is budgeted and planned. We checked consistency of these with the Going concern forecasts. • We considered whether the asset would be commercially viable with reference to the future lithium prices as per forecasts by Consensus Economics. • We reviewed RNS announcements, minutes from the mee(cid:76)ngs of Directors and news ar(cid:76)cles to check whether there were any other poten(cid:76)al impairment indicators. Key observa(cid:45)ons: We consider the judgements made in the impairment indicators assessment of Explora(cid:76)on and Evalua(cid:76)on Assets prepared by Management to be reasonable. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 63 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i REPORT OF THE INDEPENDENT AUDITORS to the members of Savannah Resources Plc Our applica(cid:45)on of materiality We apply the concept of materiality both in planning and performing our audit, and in evalua(cid:76)ng the e(cid:16)ect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could in(cid:10)uence the economic decisions of reasonable users that are taken on the basis of the (cid:9)nancial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of tes(cid:76)ng needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of iden(cid:76)(cid:9)ed misstatements, and the par(cid:76)cular circumstances of their occurrence, when evalua(cid:76)ng their e(cid:16)ect on the (cid:9)nancial statements as a whole. Based on our professional judgement, we determined materiality for the (cid:9)nancial statements as a whole and performance materiality as follows: Group (cid:6)nancial statements Parent company (cid:6)nancial statements 2022 2021 2022 2021 £’000 £’000 £’000 £’000 Materiality 390 430 310 340 Basis for determining materiality Ra(cid:45)onale for the benchmark applied 1.5% of total assets 79% of Group materiality We considered total assets to be the most signi(cid:9)cant determinant of the Group’s (cid:9)nancial performance for users of the (cid:9)nancial statements as the Group con(cid:76)nues to bring its mining assets through to produc(cid:76)on. Capped at a percentage of Group materiality taking into account our assessment of component aggrega(cid:76)on risk. Performance materiality 293 322 233 255 Basis for determining performance materiality 75% of materiality considering the nature of ac(cid:76)vi(cid:76)es and expected total value of known and likely misstatements, based on past experience. Component materiality Materiality for the Parent Company is set out above. Materiality for the second signi(cid:9)cant component, Savannah Lithium Unipessoal Lda, was based on a percentage of 69% (2021: 69%) of Group materiality and amounted to £270,000 (2021: £300,000). We further applied performance materiality levels of 75% (2021: 75%) of the component materiality to our tes(cid:76)ng to ensure that the risk of errors exceeding component materiality was appropriately mi(cid:76)gated. Repor(cid:27)ng threshold We agreed with the Audit Commi(cid:49)ee that we would report to them all individual audit di(cid:16)erences in excess of £7,800 (2021: £8,600). We also agreed to report di(cid:16)erences below this threshold that, in our view, warranted repor(cid:76)ng on qualita(cid:76)ve grounds. 64 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 REPORT OF THE INDEPENDENT AUDITORS to the members of Savannah Resources Plc Other informa(cid:45)on The directors are responsible for the other informa(cid:76)on. The other informa(cid:76)on comprises the informa(cid:76)on included in the annual report and (cid:9)nancial statements other than the (cid:9)nancial statements and our auditor’s report thereon. Our opinion on the (cid:9)nancial statements does not cover the other informa(cid:76)on and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other informa(cid:76)on and, in doing so, consider whether the other informa(cid:76)on is materially inconsistent with the (cid:9)nancial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we iden(cid:76)fy such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the (cid:9)nancial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other informa(cid:76)on, we are required to report that fact. We have nothing to report in this regard. Other Companies Act 2006 repor(cid:45)ng Based on the responsibili(cid:76)es described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and ma(cid:49)ers as described below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit: • • the informa(cid:76)on given in the Strategic report and the Directors’ report for the (cid:9)nancial year for which the (cid:9)nancial statements are prepared is consistent with the (cid:9)nancial statements; and the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit, we have not iden(cid:76)(cid:9)ed material misstatements in the Strategic report or the Directors’ report. Ma(cid:23)ers on which we are required to report by excep(cid:45)on We have nothing to report in respect of the following ma(cid:49)ers in rela(cid:76)on to which the Companies Act 2006 requires us to report to you if, in our opinion: • • • adequate accoun(cid:76)ng records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the Parent Company (cid:9)nancial statements are not in agreement with the accoun(cid:76)ng records and returns; or certain disclosures of Directors’ remunera(cid:76)on speci(cid:9)ed by law are not made; or • we have not received all the informa(cid:76)on and explana(cid:76)ons we require for our audit. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 65 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i REPORT OF THE INDEPENDENT AUDITORS to the members of Savannah Resources Plc Responsibili(cid:45)es of Directors As explained more fully in the Statement of Directors’ responsibili(cid:76)es, the Directors are responsible for the prepara(cid:76)on of the (cid:9)nancial statements and for being sa(cid:76)s(cid:9)ed that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the prepara(cid:76)on of (cid:9)nancial statements that are free from material misstatement, whether due to fraud or error. In preparing the (cid:9)nancial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to con(cid:76)nue as a going concern, disclosing, as applicable, ma(cid:49)ers related to going concern and using the going concern basis of accoun(cid:76)ng unless the Directors either intend to liquidate the Group or the Parent Company or to cease opera(cid:76)ons, or have no realis(cid:76)c alterna(cid:76)ve but to do so. Auditor’s responsibili(cid:45)es for the audit of the (cid:6)nancial statements Our objec(cid:76)ves are to obtain reasonable assurance about whether the (cid:9)nancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to in(cid:10)uence the economic decisions of users taken on the basis of these (cid:9)nancial statements. including fraud, are Extent to which the audit was capable of detec(cid:27)ng irregulari(cid:27)es, including fraud Irregulari(cid:76)es, instances of non(cid:25)compliance with laws and regula(cid:76)ons. We design procedures in line with our responsibili(cid:76)es, outlined above, to detect material misstatements in respect of irregulari(cid:76)es, including fraud. The extent to which our procedures are capable of detec(cid:76)ng irregulari(cid:76)es, including fraud is detailed below: Non(cid:12)compliance with laws and regula(cid:27)ons Based on: • Our understanding of the Group and Parent Company and the industry in which they operate; • Discussion with management and those charged with governance; and • Obtaining and understanding of the Group’s and Parent Company’s policies and procedures regarding compliance with laws and regula(cid:76)ons, we considered the signi(cid:9)cant laws and regula(cid:76)ons to be the applicable accoun(cid:76)ng framework, the Companies legisla(cid:76)on, Act 2006, Corporate Employment Taxes, Health and Safety and the Bribery Act 2010. tax and VAT Our procedures in respect of the above included: • • • • • Review of minutes of mee(cid:76)ng of those charged with governance for any instances of non(cid:25)compliance with laws and regula(cid:76)ons; Review of correspondence with regulatory and tax authori(cid:76)es for any instances of non(cid:25)compliance with laws and regula(cid:76)ons; Review of (cid:9)nancial statement disclosures and agreeing to suppor(cid:76)ng documenta(cid:76)on; Involvement of tax specialists in the audit to assist with assessing the Group’s and Parent Company’s compliance with applicable tax legisla(cid:76)on; Review of legal expenditure accounts to understand the nature of expenditure incurred; and • Direc(cid:76)ng the component auditor’s work to ensure an assessment is performed on the extent of the component’s compliance with the relevant local and regulatory framework. Fraud We assessed the suscep(cid:76)bility of the (cid:9)nancial statements to material misstatement, including fraud. Our risk assessment procedures included: • Enquiry with management and those charged with governance regarding any known or suspected instances of fraud; • Obtaining an understanding of the Group’s and Parent Company’s policies and procedures rela(cid:76)ng to: o o Detec(cid:76)ng and responding to the risks of fraud; and Internal controls established to mi(cid:76)gate risks related to fraud. 66 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 REPORT OF THE INDEPENDENT AUDITORS to the members of Savannah Resources Plc in the (cid:9)nancial statements, the less likely we are to become aware of it. A further descrip(cid:76)on of our responsibili(cid:76)es is available on the Financial Repor(cid:76)ng Council’s website at: www.frc.org.uk/auditorsresponsibili(cid:76)es. This descrip(cid:76)on forms part of our auditor’s report. Use of our report This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those ma(cid:49)ers we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permi(cid:49)ed by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Peter Acloque (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, UK Date: 4 April 2023 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). • Review of minutes of mee(cid:76)ng of those charged with governance for any known or suspected instances of fraud; • Discussion amongst the engagement team as to how and where fraud might occur in the (cid:9)nancial statements; and • Performing analy(cid:76)cal procedures to iden(cid:76)fy any unusual or unexpected rela(cid:76)onships that may indicate risks of material misstatement due to fraud. Based on our risk assessment, we considered the areas most suscep(cid:76)ble to fraud to be management override of controls and areas of judgement due to level of subjec(cid:76)vity involved with them. Our procedures in respect of the above included: • • Tes(cid:76)ng a sample of journal entries throughout the year, which met a de(cid:9)ned risk criteria, by agreeing to suppor(cid:76)ng documenta(cid:76)on; Reviewing the Group’s year end adjus(cid:76)ng entries, consolida(cid:76)on entries and inves(cid:76)ga(cid:76)ng any that appear unusual as to nature or amount by agreeing to suppor(cid:76)ng documenta(cid:76)on; and • Assessing signi(cid:9)cant by management for bias (refer to Carrying value of the Explora(cid:76)on and Evalua(cid:76)on Assets key audit ma(cid:49)er). es(cid:76)mates made We also communicated relevant iden(cid:76)(cid:9)ed laws and regula(cid:76)ons and poten(cid:76)al fraud risks to all engagement team members including component engagement teams who were all deemed to have appropriate competence and capabili(cid:76)es and remained alert to any indica(cid:76)ons of fraud or non(cid:25)compliance with laws and regula(cid:76)ons throughout the audit. For component engagement teams, we also reviewed the result of their work performed in this regard. Our audit procedures were designed to respond to risks of material misstatement in the (cid:9)nancial statements, recognising that the risk of not detec(cid:76)ng a material misstatement due to fraud is higher than the risk of not detec(cid:76)ng one resul(cid:76)ng from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresenta(cid:76)ons or through collusion. There are inherent limita(cid:76)ons in the audit procedures performed and the further removed non(cid:25)compliance with laws and regula(cid:76)ons is from the events and transac(cid:76)ons re(cid:10)ected SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 67 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2022 CONTINUING OPERATIONS Revenue Other Income Administra(cid:38)ve Expenses Foreign Exchange Gain/(Loss) OPERATING LOSS Finance Income Finance Costs LOSS FROM CONTINUING OPERATIONS BEFORE TAX Tax expense LOSS FROM CONTINUING OPERATIONS AFTER TAX (LOSS)/GAIN ON DISCONTINUED OPERATIONS NET OF TAX LOSS AFTER TAX ATTRIBUTABLE TO EQUITY OWNERS OF THE PARENT OTHER COMPREHENSIVE INCOME Items that will not be reclassi(cid:7)ed to pro(cid:7)t or loss: Net change in Fair Value Through Other Comprehensive Income of Equity Investments Items that will or may be reclassi(cid:7)ed to pro(cid:7)t or loss: Exchange Gains arising on transla(cid:38)on of foreign opera(cid:38)ons OTHER COMPREHENSIVE INCOME FOR THE YEAR TOTAL COMPREHENSIVE LOSS FOR THE YEAR ATTRIBUTABLE TO EQUITY OWNERS OF THE PARENT Loss per share a(cid:1)ributable to equity owners of the parent expressed in pence per share: Basic and diluted From Opera(cid:38)ons From Con(cid:38)nued Opera(cid:38)ons From Discon(cid:38)nued Opera(cid:38)ons Notes 2022 £ 2021 £ – – (3,531,894) 814,468 (2,717,426) 34,695 (265) (2,682,996) – (2,682,996) (176,396) – – (3,305,649) (213,088) (3,518,737) 671 (139) (3,518,205) – (3,518,205) 2,371 (2,859,392) (3,515,834) 4 24 (19,598) 82,006 665,656 646,058 154,815 236,821 (2,213,334) (3,279,013) 7 7 7 (0.17) (0.16) (0.01) (0.22) (0.22) 0.00 The Notes form part of these Financial Statements 68 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2022 ASSETS NON(cid:9)CURRENT ASSETS Intangible Assets Right(cid:10)of(cid:10)Use Assets Property, Plant and Equipment Other Receivables Other Non(cid:10)Current Assets TOTAL NON(cid:9)CURRENT ASSETS CURRENT ASSETS Equity instruments at FVTOCI Trade and Other Receivables Other Current Assets Cash and Cash Equivalents TOTAL CURRENT ASSETS TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Share Capital Share Premium Merger Reserve Foreign Currency Reserve Share Based Payment Reserve FVTOCI Reserve Retained Earnings Notes 2022 £ 2021 £ 8 21 9 13 15 11 13 15 14 16 23 16,459,599 17,627 1,583,944 454,651 77,667 14,137,817 5,390 676,536 – 69,542 18,593,488 14,889,285 11,977 560,060 1,036 7,202,334 31,575 962,058 19,300 13,002,084 7,775,407 14,015,017 26,368,895 28,904,302 16,889,598 41,693,178 6,683,000 626,930 403,749 (41,035) (40,999,879) 16,889,598 41,693,178 6,683,000 (38,726) 305,095 (21,437) (38,284,665) TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 25,255,541 27,226,043 LIABILITIES NON(cid:9)CURRENT LIABILITIES Lease Liabili(cid:38)es TOTAL NON(cid:9)CURRENT LIABILITIES CURRENT LIABILITIES Lease Liabili(cid:38)es Trade and Other Payables Other Current Liabili(cid:38)es TOTAL CURRENT LIABILITIES TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES 21 21 17 12,263 12,263 5,364 1,085,778 9,949 1,101,091 1,113,354 – – 1,132 1,677,127 – 1,678,259 1,678,259 26,368,895 28,904,302 The Financial Statements were approved and authorised for issue by the Board of Directors on 4 April 2023 and were signed on its behalf by: Dale Ferguson Chief Execu(cid:38)ve O(cid:3)cer Company number: 07307107 The Notes form part of these Financial Statements SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 69 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i COMPANY STATEMENT OF FINANCIAL POSITION as at 31 December 2022 ASSETS NON(cid:9)CURRENT ASSETS Investments in Subsidiaries Other Receivables Other Non(cid:10)Current Assets TOTAL NON(cid:9)CURRENT ASSETS CURRENT ASSETS Equity instruments at FVTOCI Trade and Other Receivables Cash and Cash Equivalents TOTAL CURRENT ASSETS TOTAL ASSETS EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY Share Capital Share Premium Merger Reserve Share Based Payment Reserve FVTOCI Reserve Retained Earnings TOTAL EQUITY LIABILITIES CURRENT LIABILITIES Trade and Other Payables TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Notes 2022 £ 2021 £ 10 13 15 11 13 14 16 23 17 333,740 31,877,211 6,776 333,831 26,184,402 6,776 32,217,727 26,525,009 11,977 238,189 6,241,356 31,575 207,129 11,085,944 6,491,522 11,324,648 38,709,249 37,849,657 16,889,598 41,693,178 6,683,000 403,749 (41,035) (27,442,644) 16,889,598 41,693,178 6,683,000 305,095 (21,437) (28,707,640) 38,185,846 36,841,794 523,403 523,403 1,007,863 1,007,863 38,709,249 37,849,657 The Company total comprehensive income for the (cid:11)nancial year was £1,101,220 (2021: loss £7,851,723) (Note 6). The Financial Statements were approved and authorised for issue by the Board of Directors on 4 April 2023 and were signed on its behalf by: Dale Ferguson Chief Execu(cid:38)ve O(cid:3)cer Company number: 07307107 The Notes form part of these Financial Statements 70 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2022 Share Foreign Based Share Share Merger Currency Warrant Payment FVTOCI Retained Total Capital Premium Reserve Reserve Reserve Reserve Reserve Earnings Equity £ £ £ £ £ £ £ £ £ At 1 January 2021 14,309,910 34,474,884 6,683,000 (193,541) 12,157 393,865 276,712 (35,450,713) 20,506,274 Loss for the year – – – – – – – (3,515,834) (3,515,834) Other Comprehensive Income – – – 154,815 – – 82,006 – 236,821 Total Comprehensive Income for the year – – – 154,815 – – 82,006 (3,515,834) (3,279,013) Issue of Share Capital (net of expenses) 2,579,688 7,218,294 – – – – – – 9,797,982 Share based payment charges – – – – – 200,800 – – 200,800 Lapse of op(cid:38)ons – – – – – (289,570) – 289,570 – Lapse of warrants (12,157) – – 12,157 – Disposal of FVTOCI investments – – – – – – (380,155) 380,155 – At 31 December 2021 16,889,598 41,693,178 6,683,000 (38,726) – 305,095 (21,437) (38,284,665) 27,226,043 Loss for the year – – – – – – – (2,859,392) (2,859,392) Other Comprehensive Income – – – 665,656 – – (19,598) – 646,058 Total Comprehensive Income for the year – – – 665,656 – – (19,598) (2,859,392) (2,213,334) Share based payment charges – – – – – 242,832 – – 242,832 Lapse of op(cid:32)ons – – – – – (144,178) – 144,178 – At 31 December 2022 16,889,598 41,693,178 6,683,000 626,930 – 403,749 (41,035) (40,999,879) 25,255,541 The following describes the nature and purpose of each reserve within owners' equity: Reserve Share Capital Share Premium Merger Reserve Foreign Currency Reserve Warrant Reserve Share Based Payment Reserve FVTOCI Reserve Retained Earnings Descrip(cid:32)on and purpose Amounts subscribed for share capital at nominal value. Amounts subscribed for share capital in excess of nominal value less costs of fundraising. Amounts subscribed for share capital in excess of nominal value in respect of the considera(cid:38)on paid in an acquisi(cid:38)on arrangement, when the issuing company takes its interest in another company from below 90% to 90% or above equity holding. Gains/losses arising on retransla(cid:38)ng the net assets of group opera(cid:38)ons into Pound Sterling. Fair value of the warrants issued. Represents the accumulated balance of share based payment charges recognised in respect of asset acquired and share op(cid:38)ons granted by Savannah Resources Plc, less transfers to retained losses in respect of op(cid:38)ons exercised, lapsed and forfeited. Cumula(cid:38)ve changes in fair value of equity investments classi(cid:11)ed at fair value through other comprehensive income (FVTOCI). Cumula(cid:38)ve net gains and losses recognised in the Consolidated Statement of Comprehensive Income and other transac(cid:38)ons recognised directly in Retained Earnings. The Notes form part of these Financial Statements SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 71 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2022 Share Based Share Share Merger Warrant Payment FVTOCI Retained Total Capital Premium Reserve Reserve Reserve Reserve Earnings Equity £ £ £ £ £ £ £ £ At 1 January 2021 14,309,910 34,474,884 6,683,000 12,157 393,865 276,712 (21,455,793) 34,694,735 Loss for the year – – – – – – (7,933,729) (7,933,729) Other Comprehensive Income – – – – – 82,006 – 82,006 Total Comprehensive Income for the year – – – – – 82,006 (7,933,729) (7,851,723) Issue of Share Capital (net of expenses) 2,579,688 7,218,294 – – – – – 9,797,982 Share based payment charges – – – – 200,800 – – 200,800 Lapse of op(cid:38)ons – – – – (289,570) – 289,570 – Lapse of warrants – – – (12,157) – – 12,157 – Disposal of FVTOCI investments – – – – – (380,155) 380,155 – At 31 December 2021 16,889,598 41,693,178 6,683,000 – 305,095 (21,437) (28,707,640) 36,841,794 Pro(cid:7)t for the year – – – – – – 1,120,818 1,120,818 Other Comprehensive Income – – – – – (19,598) – (19,598) Total Comprehensive Income for the year – – – – – (19,598) 1,120,818 1,101,220 Share based payment charges – – – – 242,832 – – 242,832 Lapse of op(cid:32)ons – – – – (144,178) – 144,178 – At 31 December 2022 16,889,598 41,693,178 6,683,000 – 403,749 (41,035) (27,442,644) 38,185,846 The following describes the nature and purpose of each reserve within owners' equity: Reserve Share Capital Share Premium Merger Reserve Warrant Reserve Share Based Payment Reserve FVTOCI Reserve Retained Earnings Descrip(cid:32)on and purpose Amounts subscribed for share capital at nominal value. Amounts subscribed for share capital in excess of nominal value less costs of fundraising. Amounts subscribed for share capital in excess of nominal value in respect of the considera(cid:38)on paid in an acquisi(cid:38)on arrangement, when the issuing company takes its interest in another company from below 90% to 90% or above equity holding. Fair value of the warrants issued. Represents the accumulated balance of share based payment charges recognised in respect of asset acquired and share op(cid:38)ons granted by Savannah Resources Plc, less transfers to retained losses in respect of op(cid:38)ons exercised, lapsed and forfeited. Cumula(cid:38)ve changes in fair value of equity investments classi(cid:11)ed at fair value through other comprehensive income (FVTOCI). Cumula(cid:38)ve net gains and losses recognised in the Consolidated Statement of Comprehensive Income and other transac(cid:38)ons recognised directly in Retained Earnings. The Notes form part of these Financial Statements 72 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2022 Cash (cid:2)ows used in opera(cid:32)ng ac(cid:32)vi(cid:32)es Loss for the year Deprecia(cid:38)on and amor(cid:38)sa(cid:38)on charges Impairment of Other Assets Share based payment charge Finance Income Finance Costs Foreign Exchange (Gains)/Losses Gain on relinquishment of the rights and obliga(cid:38)ons of discon(cid:38)nued opera(cid:38)ons Cash (cid:2)ow used in opera(cid:32)ng ac(cid:32)vi(cid:32)es before changes in working capital Increase in Trade and Other receivables (Decrease)/Increase in Trade and Other Payables Net cash used in opera(cid:38)ng ac(cid:38)vi(cid:38)es Cash (cid:2)ow used in inves(cid:32)ng ac(cid:32)vi(cid:32)es Purchase of Intangible Explora(cid:38)on Assets Purchase of Right(cid:10)of(cid:10)Use Assets Purchase of Tangible Fixed Assets Proceeds from sale of Investments Interest received Proceeds from relinquishment of the rights and obliga(cid:38)ons of discon(cid:38)nued opera(cid:38)ons Net cash (used in)/from inves(cid:38)ng ac(cid:38)vi(cid:38)es Cash (cid:2)ow from (cid:7)nancing ac(cid:32)vi(cid:32)es Proceeds from issues of ordinary shares (net of expenses) Proceeds from exercise of share op(cid:38)ons Principal paid on Lease Liabili(cid:38)es Interest paid on Lease Liabili(cid:38)es Net cash (used in)/from (cid:11)nancing ac(cid:38)vi(cid:38)es (Decrease)/Increase in Cash and Cash Equivalents Cash and Cash Equivalents at beginning of year Exchange gains/(losses) on Cash and Cash Equivalents Cash and Cash Equivalents at end of year Notes 9, 21 4, 23 4 8 9 11 24 16 16 21 21 14 14 2022 £ 2021 £ (2,859,392) 23,456 – 242,832 (34,695) 265 (858,679) (3,515,834) 35,369 5,948 200,800 (671) 139 213,088 – (627,078) (3,486,213) (78,217) (538,972) (3,688,239) (267,267) 451,801 (4,103,402) (3,503,705) (1,771,821) – (852,127) – 28,438 (1,603,208) (798) (633,090) 654,347 671 89,981 6,506,852 (2,505,529) 4,924,774 – – (5,022) (265) (5,287) 9,797,982 – (11,607) (139) 9,786,236 (6,614,218) 13,002,084 814,468 11,207,305 2,000,209 (205,430) 7,202,334 13,002,084 The Notes form part of these Financial Statements SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 73 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i COMPANY STATEMENT OF CASH FLOWS for the year ended 31 December 2022 Cash (cid:2)ows used in opera(cid:32)ng ac(cid:32)vi(cid:32)es Gain/(loss) for the year Impairment Investment in Subsidiaries Impairment of Financial Assets Impairment of Other Assets Share based payment reserve charge Dividends Income Finance Income Foreign Exchange (Gains)/Losses Loss on relinquishment of the rights and obliga(cid:38)ons of discon(cid:38)nued opera(cid:38)ons Cash (cid:2)ow used in opera(cid:32)ng ac(cid:32)vi(cid:32)es before changes in working capital Decrease/(Increase) in Trade and Other Receivables (Decrease)/Increase in Trade and Other Payables Net cash used in opera(cid:38)ng ac(cid:38)vi(cid:38)es Cash (cid:2)ow used in inves(cid:32)ng ac(cid:32)vi(cid:32)es Loans to subsidiaries Proceeds from repayment of loans to subsidiaries Proceeds from sale of Investments Proceeds from dividends from subsidiaries Interest received Net cash (used in)/from inves(cid:38)ng ac(cid:38)vi(cid:38)es Cash (cid:2)ow from (cid:7)nancing ac(cid:32)vi(cid:32)es Proceeds from issues of ordinary shares (net of expenses) Net cash from (cid:11)nancing ac(cid:38)vi(cid:38)es (Decrease)/Increase in Cash and Cash Equivalents Cash and Cash Equivalents at beginning of year Exchange gains/(losses) on Cash and Cash Equivalents Cash and Cash Equivalents at end of year Notes 10 4, 23 4 11 4 16 14 14 2022 £ 2021 £ 1,120,818 17,821 102,988 – 242,832 (811,572) (34,695) (2,274,357) (7,933,729) – 39,215 5,948 200,800 – (671) 1,756,702 – 4,439,229 (1,636,165) 168,209 (488,024) (1,492,506) (181,160) 34,184 (1,955,980) (1,639,482) (5,204,762) 799,772 – 811,572 28,438 (4,784,700) 6,014,021 654,347 – 671 (3,564,980) 1,884,339 – – (5,520,960) 11,085,944 676,372 9,797,982 9,797,982 10,042,839 1,237,876 (194,771) 6,241,356 11,085,944 The Notes form part of these Financial Statements 74 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 1. ACCOUNTING POLICIES Basis of Prepara(cid:27)on These Consolidated Financial Statements and the Company Financial Statements have been prepared in accordance with UK adopted interna(cid:72)onal accoun(cid:72)ng standards. The Consolidated Financial Statements and the Company Financial Statements have been prepared under the historical cost conven(cid:72)on with the excep(cid:72)on of FVTOCI investments. Presenta(cid:27)onal and Func(cid:27)onal Currency The func(cid:72)onal currency of the Company is Pound Sterling. Each en(cid:72)ty in the Group determines its own func(cid:72)onal currency and items included in the Financial Statements of each en(cid:72)ty are measured using that func(cid:72)onal currency. The presenta(cid:72)onal currency of the Group is Pound Sterling. Going Concern In common with many mineral explora(cid:72)on companies, the Company has in the past raised equity to fund its explora(cid:72)on ac(cid:72)vi(cid:72)es and to date has not earned any revenues from its explora(cid:72)on projects. The Directors have prepared cash (cid:10)ow forecasts for the period to September 2024. This indicates that if the Barroso Lithium Project’s Environmental Impact Statement (‘DIA’) is granted, addi(cid:72)onal funding will be required in late 2023 in order to fund the work on the DFS and Environmental Compliance Report of the Execu(cid:72)on Project (‘RECAPE’). The Directors believe that following the gran(cid:72)ng of the DIA the Group’s Barroso Lithium Project would be a(cid:13)rac(cid:72)ve to investors and are con(cid:12)dent that funding for the DFS and RECAPE would be obtained through op(cid:72)ons which may include equity, strategic partnership or o(cid:3)ake, in what are currently buoyant market condi(cid:72)ons in the lithium market. In the event that the DIA is not granted, a review of op(cid:72)ons would be undertaken to determine the most appropriate course of ac(cid:72)on. In this circumstance, the Group and Company has su(cid:4)cient funding to cover its corporate overhead for at least 12 months from the date of approval of the Financial Statements. While the Company has been successful at raising equity (cid:12)nance in the past, and while the Directors are con(cid:12)dent of raising addi(cid:72)onal funding should it be required, their ability to do this is not completely within their control and the lack of a binding agreement means there can be no certainty that the addi(cid:72)onal funding required by the Group and the Company will be secured within the necessary (cid:72)mescale. These condi(cid:72)ons indicate the existence of a material uncertainty which may cast signi(cid:12)cant doubt about the Group and the Company’s ability to con(cid:72)nue as a Going Concern, and its ability to realise its assets and discharge its liabili(cid:72)es in the normal course of business. The Financial Statements do not include any adjustments that would result if the Group and Company were unable to con(cid:72)nue as a going concern. Basis of Consolida(cid:27)on Where the company has control over an investee, it is classi(cid:12)ed as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to a(cid:22)ect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The Group accounts consolidate the accounts of Savannah Resources Plc and its domes(cid:72)c and foreign subsidiaries, refer to Note 10. The foreign subsidiaries have been consolidated in accordance with IFRS 10 ‘Consolidated Financial Statements’ and IAS 21 ‘The e(cid:22)ects of Foreign Exchange Rates’. The consolidated Financial Statements present the results of the Company and its subsidiaries (‘the Group’) as if they formed a single en(cid:72)ty. Intercompany transac(cid:72)ons and balances between group companies are therefore eliminated in full. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 75 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 1. ACCOUNTING POLICIES con(cid:72)nued Equity Investments Equity Investments, excluding subsidiaries, are classi(cid:12)ed at fair value through other comprehensive income (FVTOCI). They are carried at fair value with changes in fair value recognised in Other Comprehensive Income and accumulated in the Fair Value Through Other Comprehensive Income Reserve. Upon disposal any balance within Fair Value Through Other Comprehensive Income Reserve is reclassi(cid:12)ed directly to Retained Earnings and is not reclassi(cid:12)ed to the Statement of Comprehensive Income. All equity investments, excluding subsidiaries, held are quoted and traded in an ac(cid:72)ve market. The change in market value represents the fair value of shares held at the repor(cid:72)ng date less the cost or fair value at the start of the (cid:12)nancial year. An impairment is recognised for equity investments where there is a signi(cid:12)cant and sustained decrease in the market value of the investment. Investments in Subsidiaries and Associates Investments in subsidiaries, associates and jointly controlled en(cid:72)(cid:72)es are accounted for at cost within the individual accounts of the parent company. These investments are classi(cid:12)ed as Non(cid:31)Current Assets on the Statement of Financial Posi(cid:72)on of the parent company. Foreign Currencies Transac(cid:72)ons in foreign currencies are ini(cid:72)ally recorded in the func(cid:72)onal currency by applying spot exchange rate ruling at the date of transac(cid:72)on. Monetary assets and liabili(cid:72)es denominated in foreign currencies are retranslated at the func(cid:72)onal currency rate of exchange ruling at the repor(cid:72)ng date. Exchange di(cid:22)erences arising on the retransla(cid:72)on of unse(cid:13)led monetary assets and liabili(cid:72)es are recognised immediately in pro(cid:12)t or loss. The income statements of individual group companies with func(cid:72)onal currencies other than Pound Sterling are translated into Pound Sterling at the average rate for the period, on the basis the average rate is a reasonable approxima(cid:72)on of the spot rates throughout the year, and the Statement of Financial Posi(cid:72)on translated at the rate of exchange ruling on the repor(cid:72)ng date. Exchange di(cid:22)erences which arise from retransla(cid:72)on of the opening net assets and results of such subsidiary undertakings are taken to equity (‘Foreign Currency Reserve’). On disposal of such en(cid:72)(cid:72)es, the deferred cumula(cid:72)ve amount recognised in equity rela(cid:72)ng to that par(cid:72)cular opera(cid:72)on is transferred to the Consolidated Statement of Comprehensive Income as part of the pro(cid:12)t or loss on disposal. Intangible Assets Explora(cid:34)on and Evalua(cid:34)on Assets Once an explora(cid:72)on / mining licence or an op(cid:72)on to acquire an explora(cid:72)on / mining licence has been obtained, all costs associated with mineral property development and investments are capitalised on a project(cid:31)by(cid:31)project basis pending determina(cid:72)on of the feasibility of the project. Costs incurred include appropriate technical and administra(cid:72)ve expenses, but not general overheads. Where a licence is relinquished, a project is abandoned, or is considered to be of no further commercial value to the Group, the related costs will be wri(cid:13)en o(cid:22). Unevaluated mineral proper(cid:72)es are assessed annually at repor(cid:72)ng date for indicators of impairment in accordance with IFRS 6. For the purposes of assessing indicators of impairment, assets are grouped at the lowest level for which there are separately iden(cid:72)(cid:12)able cash (cid:10)ows (cash genera(cid:72)ng units) as disclosed in Note 8. If commercial reserves are developed, the related deferred development and explora(cid:72)on costs are then reclassi(cid:12)ed as development and produc(cid:72)on assets within Property, Plant and Equipment, and subsequently amor(cid:72)sed over the es(cid:72)mated life of the commercial ore reserves on a unit of produc(cid:72)on basis. 76 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 1. ACCOUNTING POLICIES con(cid:72)nued Acquisi(cid:34)ons of Mineral Explora(cid:34)on Licences Acquisi(cid:72)ons of Mineral Explora(cid:72)on Licences through acquisi(cid:72)on of non(cid:31)opera(cid:72)onal corporate structures that do not represent a business, and therefore do not meet the de(cid:12)ni(cid:72)on of a business combina(cid:72)on, are accounted for as the acquisi(cid:72)on of an asset. Related future cash considera(cid:72)on is con(cid:72)ngent and is not recognised as an asset or liability. Property, Plant and Equipment Tangible Non(cid:31)Current Assets used in explora(cid:72)on and evalua(cid:72)on and land are classi(cid:12)ed within Tangible Non(cid:31)Current Assets as Property, Plant and Equipment and are ini(cid:72)ally recognised at cost. To the extent that such tangible assets are consumed in explora(cid:72)on and evalua(cid:72)on the amount re(cid:10)ec(cid:72)ng that consump(cid:72)on is recorded as part of the cost of the intangible asset. Deprecia(cid:72)on is provided on all items of Property, Plant and Equipment, except land, in order to write o(cid:22) the cost less es(cid:72)mated residual value of each asset over its es(cid:72)mated useful life. Plant & Machinery 4 – 10 years O(cid:4)ce Equipment 1 – 4 years Motor Vehicles 4 years Financial Instruments Financial Assets and Financial Liabili(cid:72)es are recognised in the Group’s Statement of Financial Posi(cid:72)on when the Group becomes a party to the contractual provisions of the instrument. Financial Assets Trade and Other Receivables These assets arise principally from the provision of goods and services to customers (e.g., trade receivables), but also incorporate other types of Financial Assets where the objec(cid:72)ve is to hold these assets in order to collect contractual cash (cid:10)ows and the contractual cash (cid:10)ows are solely payments of principal and interest. They are ini(cid:72)ally recognised at fair value plus transac(cid:72)on costs that are directly a(cid:13)ributable to their acquisi(cid:72)on or issue and are subsequently carried at amor(cid:72)sed cost using the e(cid:22)ec(cid:72)ve interest rate method, less provision for impairment. Under IFRS 9, impairment provisions are recognised based on a forward(cid:31)looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a signi(cid:12)cant increase in credit risk since ini(cid:72)al recogni(cid:72)on of the Financial Asset. For those where the credit risk has not increased signi(cid:12)cantly since ini(cid:72)al recogni(cid:72)on of the Financial Asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased signi(cid:12)cantly, life(cid:72)me expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, life(cid:72)me expected credit losses along with interest income on a net basis are recognised. The Group derecognises a Financial Asset only when the contractual rights to the cash (cid:10)ows from the asset expires or it transfers the Financial Asset and substan(cid:72)ally all the risks and rewards of ownership of the asset to another en(cid:72)ty. There is no signi(cid:12)cant di(cid:22)erence between carrying value and fair value of Trade and Other Receivables. Cash and Cash Equivalents Cash and Cash Equivalents comprise cash in hand and balances held with banks. Cash equivalents are short term, highly liquid accounts that are readily converted to known amounts of cash. Bank Deposits Bank Deposits represents deposits that are not expected to be converted into cash within less than a year and therefore are classi(cid:12)ed as Non(cid:31)Current Assets. Bank Deposits are measured at cost, less any impairment. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 77 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 1. ACCOUNTING POLICIES con(cid:72)nued Guarantees Guarantees represents deposits held as security required by the local mining / environmental authori(cid:72)es in rela(cid:72)on to explora(cid:72)on / mining licences and applica(cid:72)ons thereof. They are not expected to be converted into cash within less than a year and therefore are classi(cid:12)ed as Other Non(cid:31)Current Assets and considered restricted assets. Guarantees are measured at cost, less any impairment. Financial Liabili(cid:27)es Other Liabili(cid:34)es Other Liabili(cid:72)es consist of trade and other payables, which are ini(cid:72)ally recognised at fair value and subsequently carried at amor(cid:72)sed cost, using the e(cid:22)ec(cid:72)ve interest method. Financial Liabili(cid:72)es are derecognised when they are ex(cid:72)nguished, that is when the obliga(cid:72)on is discharged, cancelled or has expired. When a Financial Liability is derecognised, the cumula(cid:72)ve gain or loss in equity (if any) is transferred to the Consolidated Statement of Comprehensive Income. There is no signi(cid:12)cant di(cid:22)erence between the carrying value and fair value of Other Liabili(cid:72)es. Taxa(cid:27)on Current taxes are based on the results shown in the Financial Statements and are calculated according to local tax rules, using tax rates enacted or substan(cid:72)vely enacted by the repor(cid:72)ng date. Deferred Tax is recognised in respect of all temporary di(cid:22)erences that have originated but not reversed at the repor(cid:72)ng date. A Deferred Tax Asset is recognised to the extent that it is probable that future taxable pro(cid:12)ts will be available against which (cid:72)ming di(cid:22)erences can be u(cid:72)lised. Leases All leases are accounted for by recognising a Right(cid:31)of(cid:31)Use Asset and a Lease Liability except for: • • Leases of low value assets; and Leases with a dura(cid:72)on of 12 months or less. Lease Liabili(cid:72)es 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. On ini(cid:72)al recogni(cid:72)on, 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 op(cid:72)on granted in favour of the Group if it is reasonably certain to exercise that op(cid:72)on; and any penal(cid:72)es payable for termina(cid:72)ng the lease, if the term of the lease has been es(cid:72)mated on the basis of termina(cid:72)on op(cid:72)on being exercised. Right of Use Assets are ini(cid:72)ally measured at the amount of the Lease Liability, reduced for any lease incen(cid:72)ves received, and increased for: • • • lease payments made at or before commencement of the lease; ini(cid:72)al direct costs incurred; and the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset. 78 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 1. ACCOUNTING POLICIES con(cid:72)nued Subsequent to ini(cid:72)al measurement Lease Liabili(cid:72)es increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right(cid:31)of(cid:31)Use Assets are amor(cid:72)sed on a straight(cid:31)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. Amounts payable for leases covered by the short(cid:31)term exemp(cid:72)on are charged to the income statement on a straight(cid:31)line basis over the term of the relevant lease. Share(cid:9)Based Payments Where equity se(cid:13)led share op(cid:72)ons are awarded to Directors and employees, the fair value of the op(cid:72)ons at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the ves(cid:72)ng period. Non(cid:31)market ves(cid:72)ng condi(cid:72)ons are taken into account by adjus(cid:72)ng the number of equity instruments expected to vest at each repor(cid:72)ng date so that, ul(cid:72)mately, the cumula(cid:72)ve amount recognised over the ves(cid:72)ng period is based on the number of op(cid:72)ons that eventually vest. Market ves(cid:72)ng condi(cid:72)ons are factored into the fair value of the op(cid:72)ons granted. As long as all other ves(cid:72)ng condi(cid:72)ons are sa(cid:72)s(cid:12)ed, a charge is made irrespec(cid:72)ve of whether the market ves(cid:72)ng condi(cid:72)ons are sa(cid:72)s(cid:12)ed. The cumula(cid:72)ve expense is not adjusted for failure to achieve a market ves(cid:72)ng condi(cid:72)on. Where the terms and condi(cid:72)ons of op(cid:72)ons are modi(cid:12)ed before they vest, the change in the fair value of the op(cid:72)ons, measured immediately before and a(cid:6)er the modi(cid:12)ca(cid:72)on, is also charged to the Consolidated Statement of Comprehensive Income over the remaining ves(cid:72)ng period. Where equity instruments are granted to persons other than employees for goods and services received, the fair value of goods and services received is recognised in either the Statement of Comprehensive Income or the Statement of Financial Posi(cid:72)on in accordance with the Group’s relevant accoun(cid:72)ng policies. Where it is not possible to reliably value the goods or services received, the fair value is measured by valuing the equity instruments granted using an op(cid:72)on pricing model. The probability of non(cid:31)ves(cid:72)ng condi(cid:72)ons being sa(cid:72)s(cid:12)ed are included in the fair value recognised at the measurement date. On lapse of the share op(cid:72)ons and warrants the cumula(cid:72)ve fair value registered in the Share Based Payment Reserve and Warrant Reserve respec(cid:72)vely is transferred to Retained Earnings. Non(cid:9)Current Assets Held for Sale and Discon(cid:27)nued Opera(cid:27)ons Non(cid:1)Current Assets Held for Sale Non(cid:31)Current Assets and disposal groups are classi(cid:12)ed as held for sale if their carrying amount will be recovered principally through a sale transac(cid:72)on rather than through con(cid:72)nuing use. This condi(cid:72)on is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condi(cid:72)on subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be commi(cid:13)ed to the sale, which should be expected to qualify for recogni(cid:72)on as a completed sale within one year from the date of classi(cid:12)ca(cid:72)on. When the Group is commi(cid:13)ed to a sale plan involving loss of control of a subsidiary, all the assets and liabili(cid:72)es of that subsidiary are classi(cid:12)ed as held for sale when the criteria described above are met, regardless of whether the Group will retain a non(cid:31)controlling interest in its former subsidiary a(cid:6)er the sale. Non(cid:31)Current Assets (and disposal groups) classi(cid:12)ed as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Discon(cid:34)nued Opera(cid:34)ons The results of opera(cid:72)ons disposed during the year are included in the Consolidated Statement of Comprehensive Income up to the date of disposal. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 79 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 1. ACCOUNTING POLICIES con(cid:72)nued A discon(cid:72)nued opera(cid:72)on is a component of the Group’s business that represents a separate major line of business that has been disposed of, has been abandoned or that meets the criteria to be classi(cid:12)ed as held for sale. Discon(cid:72)nued opera(cid:72)ons are presented in the Consolidated Statement of Comprehensive Income as a single line which comprises the Post(cid:31)Tax Pro(cid:12)t or Loss of the discon(cid:72)nued opera(cid:72)on along with the Post(cid:31)Tax Gain or Loss recognised on the re(cid:31)measurement to fair value less costs to sell or on disposal of the assets or disposal groups cons(cid:72)tu(cid:72)ng discon(cid:72)nued opera(cid:72)ons. Con(cid:27)ngent Considera(cid:27)on The Group measures Con(cid:72)ngent Considera(cid:72)on at the date of disposal at fair value and recognises the relevant Financial Asset. The Group measures the Con(cid:72)ngent Considera(cid:72)on at fair value at each repor(cid:72)ng date and changes in fair value are recognised in pro(cid:12)t and loss. Key Accoun(cid:27)ng Es(cid:27)mates and Judgements The prepara(cid:72)on of (cid:12)nancial informa(cid:72)on in conformity with IFRS requires the use of es(cid:72)mates and assump(cid:72)ons that a(cid:22)ect the reported amounts of assets and liabili(cid:72)es at the date of (cid:12)nancial informa(cid:72)on and the reported amounts of expenses during the repor(cid:72)ng periods. Although these es(cid:72)mates are based on Management’s best knowledge of the amounts, event or ac(cid:72)ons, actual results ul(cid:72)mately may di(cid:22)er from those es(cid:72)mates. The key judgements are set out below: (a) Going concern In determining the Group’s ability to con(cid:72)nue as a going concern the Directors consider a number of factors including cash(cid:10)ow forecasts prepared by Management. The detail of these factors are set out in Note 1 Going Concern heading. (b) Explora(cid:34)on and evalua(cid:34)on costs The Group has to apply judgement in determining whether explora(cid:72)on and evalua(cid:72)on expenditure should be capitalised within Intangible Assets as explora(cid:72)on and evalua(cid:72)on costs or expensed. The Group has a policy of capitalising all costs which relate directly to explora(cid:72)on and evalua(cid:72)on costs (as set out above). The total value of explora(cid:72)on and evalua(cid:72)on costs capitalised as at each of the repor(cid:72)ng dates is set out in Note 8. When the Group has applied for explora(cid:72)on and mining licences and these have not been granted at the repor(cid:72)ng date the Management apply judgement in determining if this should be considered as an impairment indicator. Management takes into account historic informa(cid:72)on about the (cid:72)ming of gran(cid:72)ng licences by the relevant ministers and governments, and the informa(cid:72)on provided by the Group’s local teams based on communica(cid:72)ons with these bodies. (c) Carrying value of Explora(cid:34)on and Evalua(cid:34)on Assets The Group assesses at each repor(cid:72)ng period whether there is any indica(cid:72)on that these assets may be impaired. If such indica(cid:72)on exists, the Group es(cid:72)mates the recoverable amount of the asset. In the early stages of explora(cid:72)on an indica(cid:72)on of impairment may arise from drilling and assay results or from Management’s decision to terminate the project. Further details are set out in Note 8. (d) Impairment of Amounts due from Subsidiaries When applying the expected credit loss model under IFRS 9 Management apply judgement to evaluate if there was a signi(cid:12)cant increase in the credit risk of the loans since ini(cid:72)al recogni(cid:72)on to determine the stage of these loans to conclude if need to be calculated the 12(cid:31)months expected credit losses or the life(cid:72)me expected credit losses. To calculate the expected credit losses Management apply judgement to de(cid:12)ne several scenarios and their likelihood with the expected cash (cid:10)ows associated to the recovery of the loans, which are compared with the present value of the loans to calculate the expected credit losses. 80 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 1. ACCOUNTING POLICIES con(cid:72)nued (e) Fair Value Considera(cid:34)on of Disposed Opera(cid:34)ons The Management applied judgement in the calcula(cid:72)on of the fair value of the con(cid:72)ngent considera(cid:72)on received on disposal of the Omani Opera(cid:72)ons in 2020. The Management de(cid:12)ned several scenarios and their likelihoods with the expected cash (cid:10)ows associated to the recovery of the third(cid:31)party loan and amounts receivable from the royalty rights. This evalua(cid:72)on is reviewed in a yearly basis. There has not been changes during 2022 a(cid:22)ec(cid:72)ng the conclusion from prior year and the fair value is s(cid:72)ll nil. Accoun(cid:27)ng Developments During 2022 The accoun(cid:72)ng policies adopted are consistent with those of the previous (cid:12)nancial year. New standards and amendments to IFRS e(cid:22)ec(cid:72)ve as of 1 January 2022 have been reviewed by the Group and there has been no material impact on the Financial Statements as a result of these standards and amendments. Accoun(cid:27)ng Developments Not Yet E(cid:11)ec(cid:27)ve There are a number of standards and interpreta(cid:72)ons which have been issued by the Interna(cid:72)onal Accoun(cid:72)ng Standards Board that are e(cid:22)ec(cid:72)ve in future accoun(cid:72)ng periods that the Group has decided not to adopt early. The Group is currently assessing the impact of these new accoun(cid:72)ng standards and amendments and does not expect a material impact on the Group Financial Statements. 2. SEGMENTAL REPORTING The Group complies with IFRS 8 Opera(cid:72)ng Segments, which requires opera(cid:72)ng segments to be iden(cid:72)(cid:12)ed on the basis of internal reports about components of the Group that are regularly reviewed by the chief opera(cid:72)ng decision maker, which the Company considers to be the Board of Directors. In the opinion of the Directors, the opera(cid:72)ons of the Group comprise of explora(cid:72)on and development in Portugal, headquarter and corporate costs, the Company’s third party investments and the discon(cid:72)nued opera(cid:72)on in Mozambique. Based on the Group’s current stage of development there are no external revenues associated to the segments detailed below. For explora(cid:72)on and development in Portugal and the discon(cid:72)nued opera(cid:72)on in Mozambique the segments are calculated by the summa(cid:72)on of the balances in the legal en(cid:72)(cid:72)es which are readily iden(cid:72)(cid:12)able to each of the segmental ac(cid:72)vi(cid:72)es. In the case of the Investments, this is calculated by analysis of the speci(cid:12)c related investment instruments. Recharges between segments are at cost (although a transfer pricing markup is required) and included in each segment below. Intercompany loans are eliminated to zero and not included in each segment below. Discon(cid:27)nued Opera(cid:27)on Mozambique Portugal HQ and Mineral Sands Lithium corporate Investments Elimina(cid:27)on £ £ £ £ £ 2022 Revenue1 – 1,908,6372 971,582 – (2,880,219) – Finance Costs – (265) – – – (265) 34,695 Interest Income – – 34,695 – – Share based payments – – 242,832 – – 242,832 Gain/(Loss) for the year (176,396) (1,661,876) (1,021,120) – – (2,859,392) Total Assets 607,124 18,575,420 7,174,374 11,977 – 26,368,895 Total Non(cid:31)Current Assets 456,490 18,130,222 6,776 – – 18,593,488 Addi(cid:72)ons to Non(cid:31)Current Assets 454,651 2,667,514 – – – 3,122,165 Total Current Assets 150,635 445,197 7,167,598 11,977 – 7,775,407 Total Liabili(cid:72)es (111,567) (326,564) (675,223) – – (1,113,354) Total £ 1 Revenues included the intercompany recharges within the Group which are eliminated. 2 Included in the Portugal Lithium segment is £1,908,637 (2021: £1,654,567) rela(cid:72)ng to intercompany recharges within this segment and therefore eliminated in Elimina(cid:72)on column. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 81 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 2. SEGMENTAL REPORTING con(cid:72)nued Discon(cid:72)nued Opera(cid:72)on Mozambique Mineral Portugal HQ and Sands Lithium corporate Investments Elimina(cid:72)on £ £ £ £ £ Total £ 2021 Revenue1 – 1,654,5672 1,032,274 – (2,686,841) – (5,948) Impairment of Other Assets – – (5,948) – – (139) Finance Costs – (139) – – – 671 Interest Income – – 671 – – (200,800) Share based payments – – (200,800) – – Gain/(Loss) for the year 2,371 (1,643,426) (1,874,779) – – (3,515,834) Total Assets 676,357 15,487,686 12,708,684 31,575 – 28,904,302 Total Non(cid:31)Current Assets 1,483 14,881,026 6,776 – – 14,889,285 Addi(cid:72)ons to Non(cid:31)Current Assets – 1,891,109 – – – 1,891,109 Total Current Assets 674,874 606,660 12,701,908 31,575 – 14,015,017 (1,678,259) Total Liabili(cid:72)es (130,940) (299,648) (1,247,671) – – 1 Revenues included the intercompany recharges within the Group which are eliminated. 2 Included in the Portugal Lithium segment is £1,908,637 (2021: £1,654,567) rela(cid:72)ng to intercompany recharges within this segment and therefore eliminated in Elimina(cid:72)on column. 3. EMPLOYEES AND DIRECTORS The average monthly number of employees (including Directors that receive remunera(cid:72)on) during the year was as follows: Opera(cid:72)onal Non(cid:31)opera(cid:72)onal Group Company 2022 No 4 13 17 2021 No 28 18 46 2022 No 1 6 7 2021 No 1 7 8 The reduc(cid:72)on in the number of employees from 2021 to 2022 relates mainly to the transfer of employees to Rio Tinto as part of the termina(cid:72)on of the Consor(cid:72)um Agreement in December 2021 (Note 24). Sta(cid:11) Costs (excluding Directors) Salaries Bonus Social security and other employee expenses Pension Share based payment expense (Note 23) Group Company 2022 £ 990,123 80,6631 136,784 54,372 124,804 2021 £ 1,248,268 245,5491 179,784 58,056 93,195 1,386,746 1,824,852 2022 £ 494,875 49,3051 69,235 54,372 124,804 792,591 2021 £ 484,426 112,1961 74,545 58,056 93,195 822,418 1 Bonuses unpaid as at 31 December 2022 and 31 December 2021 The Group numbers in the above table includes £165,311 (2021: £245,799) which was capitalised as an explora(cid:72)on and evalua(cid:72)on asset. 82 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 3. EMPLOYEES AND DIRECTORS con(cid:72)nued Directors’ Remunera(cid:27)on Salaries Bonus Social security and taxes Pension Share based payment expense 2022 £ 556,633 16,2741 38,717 16,525 94,629 722,778 2021 £ 564,837 206,5561 70,484 43,400 86,854 972,131 1 Bonuses unpaid as at 31 December 2022 and 31 December 2021 The numbers in the above table include £144,462 (2021: £181,854) of Directors’ Remunera(cid:72)on which was capitalised as an Intangible Asset in rela(cid:72)on to the provision of speci(cid:12)c technical services. The Directors’ remunera(cid:72)on is paid by the Company. Details of the Director’s remunera(cid:72)ons are disclosed in the Remunera(cid:72)on Report. The Directors are considered to be the key management of the Group. No share op(cid:72)ons were exercised during the (cid:12)nancial year ended 31 December 2022 or 31 December 2021. The highest paid director received remunera(cid:72)on of £257,716 and non(cid:31)cash payments of £41,413. 4. LOSS BEFORE INCOME TAX The Group loss before income tax is stated a(cid:6)er charging: Deprecia(cid:72)on and amor(cid:72)sa(cid:72)on Auditors’ remunera(cid:72)on: – Statutory audit of the Group Financial Statements – Non(cid:31)audit services – tax services – Non(cid:31)audit services – liquida(cid:72)on and research services Fees payable to associated (cid:12)rms of the auditor for audit of subsidiaries Fees payable to associated (cid:12)rms of the auditor for non(cid:31)audit services of subsidiaries – tax services Fees payable to associated (cid:12)rms of the auditor for non(cid:31)audit services of subsidiaries – research services Professional fees Foreign Exchange (Gain)/Loss Short term lease payments (Note 21) Share based payments (Note 23) 2022 £ 2021 £ 23,456 35,369 76,115 26,314 15,643 20,312 65,178 24,348 – 19,473 8,409 9,021 5,455 1,085,326 (814,468) 76,505 242,832 5,503 1,044,713 213,088 11,593 200,800 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 83 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 4. LOSS BEFORE INCOME TAX con(cid:72)nued The Company pro(cid:12)t/(loss) before income tax is stated a(cid:6)er charging: Auditors’ remunera(cid:72)on: – Statutory audit of the Group Financial Statements – Non(cid:31)audit services – tax services – Non(cid:31)audit services – liquida(cid:72)on and research services Foreign Exchange (Gain)/Loss Short term lease payments Share based payments Dividends from subsidiaries 2022 £ 2021 £ 76,115 26,314 15,643 (2,274,357) 59,000 242,832 (811,572) 65,178 24,348 – 1,756,702 – 200,800 – 5. INCOME TAX Analysis of the Tax Charge No liability to UK corpora(cid:72)on tax arose on ordinary ac(cid:72)vi(cid:72)es for the year ended 31 December 2022 (2021: £25,7171). 1 In the previous year the compara(cid:72)ve (cid:12)gure was stated as nil and following submission of de(cid:12)ni(cid:72)ve tax computa(cid:72)ons in 2022 for the year ended 31 December 2021 this has been updated. Factors A(cid:11)ec(cid:27)ng the Tax Charge The reasons for the di(cid:22)erence between the actual tax charge for the year and the standard rate of corpora(cid:72)on tax in the United Kingdom applied to the result for the year are as follows: 2022 £ 2021 £ Loss on ordinary ac(cid:72)vi(cid:72)es before tax (2,859,392) (3,515,834) Loss on ordinary ac(cid:72)vi(cid:72)es mul(cid:72)plied by the standard rate of corpora(cid:72)on tax in the UK of 19% (2021: 19%) E(cid:22)ects of: Expenses not deduc(cid:72)ble for tax purposes Di(cid:22)erent tax rates applied in overseas jurisdic(cid:72)ons Tax losses carried forward Corpora(cid:72)on tax related to prior year Total Income Tax (543,284) (668,009) 164,020 (39,277) 392,824 25,717 – 1,280,750 173,218 (785,959) – – Deferred Tax The Group has carried forward losses amoun(cid:72)ng to £14,559,034 as at 31 December 2022 (2021: £13,040,6602). As the (cid:72)ming and extent of taxable pro(cid:12)ts are uncertain, the Deferred Tax Asset arising on these losses has not been recognised in the Financial Statements. 2 In the previous year the compara(cid:72)ve (cid:12)gure was stated as £12,111,229 and following submission of de(cid:12)ni(cid:72)ve tax computa(cid:72)ons for the year ended 31 December 2021 has been updated. 84 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 5. INCOME TAX con(cid:72)nued Tax losses related to the subsidiaries in Mozambique can be carried forward for a 5 year period. Tax losses related to the subsidiaries in Portugal can be carried forward for a 14 year period for losses related to the 2017(cid:31)2019 tax years and for a 12 year period for losses related to the 2020(cid:31)2022 tax years. There is no expiry date for tax losses carried forward in the UK. The aging of the tax losses carried forward in Portugal and Mozambique is as follows: Valid un(cid:27)l 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2032 2033 2034 No expiry date Total 2022 £ 2021 £ – 73,602 333,945 252,905 1,655,049 – – – 22,733 140,923 469,772 948,040 1,118,598 1,556,120 1,666,189 6,321,159 388,564 148,404 298,979 226,425 1,481,760 – – – 21,562 133,665 445,575 899,209 1,060,981 1,475,909 – 6,459,628 14,559,035 13,040,661 6. LOSS OF PARENT COMPANY As permi(cid:13)ed by Sec(cid:72)on 408 of the Companies Act 2006, the pro(cid:12)t and loss account of the parent company is not presented as part of these Financial Statements. The parent company’s Total Comprehensive Income for the (cid:12)nancial year was £1,101,220 (2021: loss £7,851,723). 7. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the earnings a(cid:13)ributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilu(cid:72)ve poten(cid:72)al ordinary shares. In accordance with IAS 33 as the Group is repor(cid:72)ng a loss for both this and the preceding year the Share Op(cid:72)ons and Investor Warrant are not considered dilu(cid:72)ve because the exercise of these would have the e(cid:22)ect of reducing the loss per share. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 85 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 7. EARNINGS PER SHARE con(cid:72)nued Reconcilia(cid:72)ons are set out below: Basic Loss Per Share Losses a(cid:13)ributable to ordinary shareholders: Total loss for the year Total loss for the year from con(cid:72)nuing opera(cid:72)ons Total gain/ (loss) for the year from discon(cid:72)nued opera(cid:72)ons Weighted average number of shares Loss per share – total loss for the year Loss per share – total loss for the year from con(cid:72)nuing opera(cid:72)ons Gain/(Loss) per share – total loss for the year from discon(cid:72)nued opera(cid:72)ons 8. INTANGIBLE ASSETS Cost At 1 January 2021 Addi(cid:72)ons Disposal assets on relinquishment of rights and obliga(cid:72)ons Foreign exchange movements At 31 December 2021 Addi(cid:72)ons Foreign exchange movements At 31 December 2022 Amor(cid:27)sa(cid:27)on and impairment At 1 January 2021 At 31 December 2021 At 31 December 2022 Net Book Value At 1 January 2021 At 31 December 2021 At 31 December 2022 2022 £ 2021 £ (2,859,392) (2,682,996) (176,396) (3,515,834) (3,518,205) 2,371 1,688,959,820 1,609,019,120 (0.00219) (0.00219) 0.00000 (0.00169) (0.00159) (0.00010) Explora(cid:27)on and Evalua(cid:27)on £ 17,246,222 1,817,570 (4,702,323) (223,652) 14,137,817 1,731,323 590,459 16,459,599 – – – 17,246,222 14,137,817 16,459,599 In December 2021 a Deed of Termina(cid:72)on was signed with Rio Tinto in rela(cid:72)on to the Consor(cid:72)um Agreement signed in October 2016. Under this Deed of Termina(cid:72)on, the rights and obliga(cid:72)ons provided to Savannah Group on Rio Tinto’s licences under the Consor(cid:72)um Agreement were relinquished, and agreed that no explora(cid:72)on or development ac(cid:72)vi(cid:72)es should be undertaken by any Savannah Group en(cid:72)ty. Therefore, all Explora(cid:72)on and Evalua(cid:72)on Assets related to the Mozambique licences were registered as disposed. The Explora(cid:72)on and Evalua(cid:72)on Assets referred to in the table above comprise expenditure in rela(cid:72)on to explora(cid:72)on licences in Portugal. The Directors consider that for the purposes of assessing impairment, the above explora(cid:72)on and evalua(cid:72)on expenditure is allocated to the Portugal Lithium licences area, represen(cid:72)ng the Group’s Cash Genera(cid:72)ng Units (‘CGUs’). The Directors have reviewed the carrying value of the CGU and have not iden(cid:72)(cid:12)ed any indicators of impairment for the assets allocated to the licences in Portugal, and therefore there is no impairment charge in 2022 or 2021 for Portugal opera(cid:72)ons. 86 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 9. PROPERTY, PLANT AND EQUIPMENT Motor Vehicles £ Cost At 1 January 2021 58,226 Addi(cid:72)ons – Disposal assets on relinquishment of rights and obliga(cid:72)ons – Foreign exchange movements (3,825) At 31 December 2021 54,401 Addi(cid:72)ons – Foreign exchange movements 2,954 At 31 December 2022 57,355 Deprecia(cid:27)on At 1 January 2021 35,868 Charge for year 11,959 Disposal assets on relinquishment of rights and obliga(cid:72)ons – Foreign exchange movements (1,494) At 31 December 2021 46,333 Charge for year 8,192 Foreign exchange movements 2,830 At 31 December 2022 57355 Net Book Value At 1 January 2021 22,358 At 31 December 2021 8,068 At 31 December 2022 – O(cid:7)ce Equipment £ Plant and Machinery £ Land £ Total £ 32,414 22,126 991,887 – 56,337 610,964 1,138,864 633,090 (16,784) (8) (1,182,880) 190,993 – (18,121) 649,180 843,032 67,604 (1,199,664) 169,039 741,329 852,127 72,923 1,559,816 1,666,379 – – – – – – – – 165,336 126,454 (242,657) 15,660 64,793 13,636 4,006 82,435 – – – – 99,189 107,136 (224,012) 17,687 – – – – 892,698 – 56,337 649,180 973,528 676,536 – 1,559,816 1,583,944 37,748 9,095 2,365 49,208 30,279 7,359 (18,645) (533) 18,460 5,444 1,176 25,080 2,135 19,288 24,128 As consequence of the signature of the Deed of Termina(cid:72)on with Rio Tinto in rela(cid:72)on to the Consor(cid:72)um Agreement signed in October 2016 all property, plant and equipment related to the Mozambique licences were registered as disposed. The addi(cid:72)ons in land re(cid:10)ect the land acquisi(cid:72)on program that Savannah has in place in Portugal to acquire the land required for the future development of the Barroso Lithium project. The above Property, Plant and Equipment is allocated to the Portugal Lithium opera(cid:72)ons, represen(cid:72)ng the Group’s CGUs. Management has evaluated the existence of impairment indicators of the Property, Plant and Equipment allocated to the licences area together with the impairment review performed for the Explora(cid:72)on and Evalua(cid:72)on Assets, and it has concluded that there are no indicators of impairment, and therefore there is no impairment charge in 2022 or 2021 for Portugal opera(cid:72)ons. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 87 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 10. INVESTMENT IN SUBSIDIARIES Company Non(cid:31)Current At 1 January 2021 Addi(cid:72)ons Impairment charge Disposal on relinquishment of rights and obliga(cid:72)ons At 31 December 2021 Addi(cid:72)ons Impairment charge At 31 December 2022 Investment in subsidiaries £ 621,582 – (30) (287,721) 333,831 17,730 (17,821) 333,740 The disposal on relinquishment of rights and obliga(cid:72)ons re(cid:10)ects the write(cid:31)o(cid:22) of assets associated to the historical acquisi(cid:72)on of the Mozambique project a(cid:6)er the signing of the Deed of Termina(cid:72)on with Rio Tinto. During 2022 the Company impaired its investment in Savannah Lithium BV a(cid:6)er the commencement of the liquida(cid:72)on process of this en(cid:72)ty, which is expected to be completed in 2023. The Company had the following subsidiary undertakings, either directly or indirectly, at 31 December 2022, which have been included in the Consolidated Financial Statements: Subsidiary Registered o(cid:7)ce Nature of business Class of % Holding share Savannah Advisory Services Limited1 United Kingdom5 Holding Company Ordinary 100% AME East Africa Limited1 United Kingdom5 Holding Company Ordinary 100% Ma(cid:72)lda Minerals Limitada3 Mozambique6 Mining & explora(cid:72)on Ordinary 100% Panda Recursos Limitada2 Mozambique7 Mining & explora(cid:72)on Ordinary 99.99% African Mining & Explora(cid:72)on Limited1 United Kingdom5 Dormant Ordinary 100% Savannah Resources Portugal B.V.1 Netherlands8 Holding Company Ordinary 100% AME Portugal Pty Ltd2, 12 Australia9 Holding Company Ordinary 100% Slipstream PORT Pty Ltd2, 12 Australia9 Holding Company Ordinary 100% Savannah Lithium Unipessoal Limitada2, 4 Portugal10 Mining & explora(cid:72)on Ordinary 100% Savannah Resources Lithium B.V.1, 12 Netherlands8 Holding Company Ordinary 100% Savana Ma(cid:72)nal – Mining, Unipessoal Limitada2 Portugal11 Mining & explora(cid:72)on Ordinary 100% 1 Directly held by Savannah Resources Plc 2 Indirectly held by Savannah Resources Plc 3 99.99% Indirectly held by AME East Africa Limited and 0.01% Directly held by Savannah Resources Plc. 4 Formerly Slipstream Resources Portugal Limitada, and formerly Savannah Lithium Limitada 5 Salisbury House, London Wall, London, EC2M 5PS, United Kingdom 6 Damiao de Gois, no 438, Sommerschield, Maputo, Mozambique 7 Rua 1301, Num 97, Sommerschield, Maputo, Mozambique 8 Herikerbergweg 88,1101 CM, Amsterdam, The Netherlands 9 Level 20, 16 Carrington Street, Sydney, NSW 2000, Australia 10 Rua 5 de Outubro, nº 26, Bo(cid:72)cas, Portugal, 5460(cid:31)304 11 Rua Jose Eigenmann, No 90, parish of Nogueira, municipality of Braga, Portugal, 4715(cid:31)199 12 Liquida(cid:72)on process started in 2022 and expected to be completed in 2023 88 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 11. EQUITY INSTRUMENTS AT FVTOCI Group At 1 January 2021 Reclassi(cid:12)ca(cid:72)on to Other current Assets Disposals Change in market value of investment At 31 December 2021 Change in market value of investment At 31 December 2022 Company At 1 January 2021 Disposals Change in market value of investment At 31 December 2021 Change in market value of investment At 31 December 2022 Shares in Equity Investments at FVTOCI £ 606,245 (2,109) (654,347) 81,786 31,575 (19,598) 11,977 Shares in Equity Investments at FVTOCI £ 604,136 (654,347) 81,786 31,575 (19,598) 11,977 Equity Investments are designated as Fair Value Through Other Comprehensive Income (FVTOCI). During 2021 the Company sold all the shares it held in Cri(cid:72)cal Resources (formerly Force Commodi(cid:72)es Limited). The fair value of the shares held by the Company is the quoted value at the repor(cid:72)ng date. The fair value hierarchy in 2022 and 2021 for these shares is Level 1 as the valua(cid:72)on is based wholly on quoted prices. 12. JOINT ARRANGEMENTS In December 2021 Savannah through its subsidiary AME East Africa Limited (‘AME’) signed a Deed of Termina(cid:72)on with Rio Tinto Mining and Explora(cid:72)on Limited (Rio Tinto) to terminate the unincorporated Consor(cid:72)um Agreement signed between these en(cid:72)(cid:72)es in 2016. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 89 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 13. TRADE AND OTHER RECEIVABLES Non(cid:31)Current: Other Receivables Amounts due from Subsidiaries Total Non(cid:31)Current Trade and Other Receivables Current: VAT Recoverable Other Receivables Total Current Trade and Other Receivables 2022 £ 454,651 – 454,651 155,205 404,855 560,060 Group 2021 £ Company 2022 £ 2021 £ – – – – 31,877,211 – 26,184,402 31,877,211 26,184,402 66,867 895,191 962,058 6,707 231,482 238,189 12,744 194,385 207,129 The carrying value of Trade and Other Receivables classi(cid:12)ed at amor(cid:72)sed cost approximates fair value. The Group and the Company applies the expected credit loss model to measure expected credit losses for amounts due from subsidiaries and amounts due from third par(cid:72)es. The Group and the Company considered the probability of a default. The loans to subsidiaries are interest free and are repayable on demand. The Company expects that the carrying value of the intercompany loans receivable may not be fully recoverable as the subsidiaries may not generate su(cid:4)cient future pro(cid:12)ts to se(cid:13)le the amounts owing and accordingly, these amounts have been par(cid:72)ally impaired. Repayment of the intercompany loans is subject to the Directors’ assessment of the Group’s requirements and availability of appropriate liquid resources. Among other things, the Company’s expected credit loss model includes considera(cid:72)on of various risks a(cid:22)ec(cid:72)ng the success of underlying projects of its subsidiaries. When determining the expected credit losses Management has taken into account that the intercompany loans are related to projects that are in the explora(cid:72)on stage. Management has concluded that the success of the projects is the most important factor that will drive credit losses. This will be a(cid:22)ected by the results in mineral resources, the commodity prices, the capability of the Parent company to obtain funds to develop the projects and the success in obtaining or renewing explora(cid:72)on and mining licences. Several scenarios and their likelihood have been considered to calculate the expected cash (cid:10)ows for the loans associated to each project and the expected credit losses as at the repor(cid:72)ng date. In the current period the Company es(cid:72)mates that an expected credit loss calculated of £0.02m (2021: £4.0m) arises on the receivables from the subsidiaries, increasing the expected credit loss balance to £5.1m. The Group has a receivable from Gentor Resources Limited, a subsidiary of Cri(cid:72)cal Resources, which represents con(cid:72)ngent considera(cid:72)on from the disposal of the Oman opera(cid:72)ons in 2020 and has been valued at £nil as at 31 December 2022 and 31 December 2021. The expected credit loss on other third par(cid:72)es’ receivables is £nil as at 31 December 2022 (2021: £nil). 90 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 13. TRADE AND OTHER RECEIVABLES con(cid:72)nued Movements in the impairment allowance for the year ended 31 December 2022 is as follows: Company At 1 January 2021 Impairment charge Foreign exchange movements At 31 December 2021 Impairment charge Foreign exchange movements At 31 December 2022 Impairment from Subsidiaries £ 595,155 4,047,901 (61,915) 4,581,141 16,125 467,550 5,064,816 Of the impairment charge for 2021 (cid:12)nancial year £4,008,685 was related to the exit of the Mozambique Mineral Sands project, with the amounts due from Ma(cid:72)lda Minerals fully impaired as at 31 December 2022 and 31 December 2021. The breakdown of the Amounts due from Subsidiaries as at 31 December 2022 is as follows: Company Amounts due from Subsidiaries: Outstanding amount Impairment 14. CASH AND CASH EQUIVALENTS 2022 £ 2021 £ 36,942,027 (5,064,816) 30,765,543 (4,581,141) 31,877,211 26,184,402 Group 2022 £ 2021 £ Company 2022 £ 2021 £ Cash at Bank and in Hand 7,202,334 13,002,084 6,241,356 11,085,944 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 91 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 15. OTHER CURRENT AND NON(cid:17)CURRENT ASSETS Non(cid:40)Current: Guarantees Other Total Other Non(cid:40)Current Assets Current: Other Total Other Current Assets Group Company 2022 £ 64,611 13,056 77,667 1,036 1,036 2021 £ 61,284 8,258 69,542 19,300 19,300 2022 £ – 6,776 6,776 – – 2021 £ – 6,776 6,776 – – The Non(cid:40)Current Assets (cid:40) Guarantees are deposits required by the local mining / environmental authori(cid:81)es in rela(cid:81)on to explora(cid:81)on / mining licences and applica(cid:81)ons thereof. 16. SHARE CAPITAL Allo(cid:2)ed, issued and fully paid At beginning of year Issued during year: Share placements 2022 2021 £0.01 ordinary shares number 1,688,959,820 £0.01 ordinary shares number 16,889,598 1,430,991,035 £ £ 14,309,910 – – 257,968,7851 2,579,688 At end of year 1,688,959,820 16,889,598 1,688,959,820 16,889,598 1 In respect of the Share placements in 2021 the net proceeds were £9,797,982 of which £7,218,294 has been recorded in Share Premium. The gross proceeds were £10,320,901 and the costs of the Share placements £522,919. The par value of the Company’s shares is £0.01. 17. TRADE AND OTHER PAYABLES Group Company Current: Trade Payables Other Payables Accruals Amounts due to Subsidiaries 2022 £ 618,805 56,745 410,228 – 2021 £ 866,053 79,236 731,838 – Total Current Trade and Other Payables 1,085,778 1,677,127 2022 £ 329,005 28,651 156,961 8,786 523,403 2021 £ 501,283 46,260 460,320 – 1,007,863 In 2022 and 2021 accruals represent mainly professional fees in the Group for which invoices have not been received at the repor(cid:81)ng date and to a lesser extent in 2022, sta(cid:23) bonuses. Part of Trade and other payables amounts relate to work performed in the projects which balances are capitalised and therefore these are included in Inves(cid:81)ng not Opera(cid:81)ng cash (cid:13)ows. 92 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 18. FINANCIAL INSTRUMENTS Financial Instruments (cid:17) Risk Management In common with all other businesses, the Group is exposed to risks that arise from its use of (cid:7)nancial instruments. This note describes the Group's objec(cid:81)ves, policies and processes for managing those risks and the methods used to measure them. Further quan(cid:81)ta(cid:81)ve informa(cid:81)on in respect of these risks is presented throughout these Financial Statements. There have been no substan(cid:81)ve changes in the Group's exposure to (cid:7)nancial instrument risks, its objec(cid:81)ves, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. Principal Financial Instruments The principal (cid:7)nancial instruments used by the Group, from which (cid:7)nancial instrument risk arises, are as follows: • • • • • Intercompany Loan Receivables Non(cid:40)Current Other Receivables Current Trade and Other Receivables Cash and Cash Equivalents Investments • Other Non(cid:40)Current Assets – Guarantees • Other Current Assets • • Trade and Other Payables Leases Liabili(cid:81)es Trade and other payables fall due for payment within 3 months from the repor(cid:81)ng date. Liquidity Risk At the repor(cid:81)ng date the Group’s cash balance was £7.2m (2021: £13m). This, in conjunc(cid:81)on with the raising of future cash through di(cid:23)erent op(cid:81)ons, which the Directors believe can be secured, will allow the Group to con(cid:81)nue working on its development / explora(cid:81)on ac(cid:81)vi(cid:81)es and to meet its (cid:7)nancial commitments for at least 12 months. In common with many non(cid:40)revenue genera(cid:81)ng companies, the Company rou(cid:81)nely raises funds for its development ac(cid:81)vi(cid:81)es. The Group’s policy con(cid:81)nues to be to ensure that it has adequate liquidity by careful management of its working capital. Foreign Exchange Risk The Group is exposed through its opera(cid:81)ons to foreign exchange risk which mainly arises because the Group has overseas opera(cid:81)ons located in Portugal whose func(cid:81)onal currency is Euro. Foreign exchange risk also arises when individual group en(cid:81)(cid:81)es enter into transac(cid:81)ons denominated in a currency other than their func(cid:81)onal currency. The Group’s policy is, where possible, to allow group en(cid:81)(cid:81)es to se(cid:29)le liabili(cid:81)es denominated in their func(cid:81)onal currency (Euro, MZN or Pound Sterling) with the cash remi(cid:29)ed to their own opera(cid:81)ons in that currency where prac(cid:81)cal. Where group en(cid:81)(cid:81)es have liabili(cid:81)es denominated in a currency other than their func(cid:81)onal currency (and have insu(cid:13)cient reserves of that currency to se(cid:29)le them) cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group. In addi(cid:81)on, the Group is exposed through the cash held in foreign currencies. To mi(cid:81)gate this risk the Group’s policy is to review the cash (cid:13)ow forecast iden(cid:81)fying the currencies that will be required to se(cid:29)le liabili(cid:81)es in future and hold the cash balances in the required currencies. From (cid:81)me to (cid:81)me when there is insu(cid:13)cient precision about the currencies that will be required for future expenditure the Group spreads its cash balances across globally recognised reserve currencies to mi(cid:81)gate against adverse changes in exchanges rates, and the Company monitors this regularly. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 93 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 18. FINANCIAL INSTRUMENTS con(cid:81)nued Market Risk The Group holds equity investments in companies traded on ac(cid:81)ve markets (Note 11). The Directors believe that the exposure to market price risk from this ac(cid:81)vity is acceptable in the Group's circumstances. The e(cid:23)ect of a 10% increase in the value of the equity investments held at the repor(cid:81)ng date would, all other variables held constant, have resulted in an increase in other comprehensive income and net assets of £1,198 (2021: increase in other comprehensive income and net assets of £3,157). A 10% decrease in their value would, on the same basis, have decreased other comprehensive income and net assets by the same amount. Credit Risk The Group and the Company are exposed to credit risk on its receivables from its subsidiaries and third par(cid:81)es. The subsidiaries are explora(cid:81)on and development companies with no current revenue and therefore, whilst the receivables are due on demand, they are not expected to be paid un(cid:81)l there is a successful outcome on a development project resul(cid:81)ng in revenue being generated by a subsidiary. The third(cid:40)party receivables are due within 30 days of issuing the invoices; in the case of the con(cid:81)ngent considera(cid:81)on from the disposal of the Oman opera(cid:81)ons this is due when its related mining project generate posi(cid:81)ve cash (cid:13)ow, the project is in the explora(cid:81)on phase. The Group has calculated the expected credit loss from these receivables (Note 13). The Group is exposed to credit risk in Cash and Cash Equivalents and deposits with banks and (cid:7)nancial ins(cid:81)tu(cid:81)ons. Only reputable banks and (cid:7)nancial ins(cid:81)tu(cid:81)ons which are rated by recognised ra(cid:81)ng agencies are accepted by the Company in the UK. The Group policy is to maintain the majority Cash and Cash Equivalents within the Company in the UK and funds are remi(cid:29)ed to other group en(cid:81)(cid:81)es on a monthly basis to se(cid:29)le liabili(cid:81)es as they fall due, to avoid credit risk associated to foreign jurisdic(cid:81)ons banks. The Group policy is also to operate at least with two banks in each country when possible. Financial instruments by category (Group) Financial Assets Fair Value Through Other Amor(cid:42)sed Comprehensive Cost Income Total £ £ £ As at 31 December 2022 Investments – 11,977 11,977 Non(cid:40)Current Other Receivables 454,651 – 454,651 Other Non(cid:40)Current Assets 77,667 – 77,667 Current Trade and Other Receivables 191,143 – 191,143 Other Current Assets 1,036 – 1,036 Cash and Cash Equivalents 7,202,334 – 7,202,334 Total Financial Assets 7,926,831 11,977 7,938,808 As at 31 December 2021 Investments – 31,575 31,575 Other Non(cid:40)Current Assets 69,542 – 69,542 Trade and Other Receivables 696,430 – 696,430 Other Current Assets 19,300 – 19,300 Cash and Cash Equivalents 13,002,084 – 13,002,084 Total Financial Assets 13,787,356 31,575 13,818,931 See review of the fair value hierarchy of fair value through other comprehensive income assets in Note 11. 94 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 18. FINANCIAL INSTRUMENTS con(cid:81)nued Financial Liabili(cid:42)es Financial Liabili(cid:42)es at Amor(cid:42)sed Cost Total £ £ As at 31 December 2022 Long(cid:40)term Lease Liabili(cid:81)es 12,263 12,263 Trade and Other Payables 1,085,778 1,085,778 Short(cid:40)term Lease Liabili(cid:81)es 5,364 5,364 Total Financial Liabili(cid:81)es 1,103,405 1,103,405 As at 31 December 2021 Trade and Other Payables 1,677,127 1,677,127 Lease Liabili(cid:81)es 1,132 1,132 Total Financial Liabili(cid:81)es 1,678,259 1,678,259 The Group's net exposure to foreign exchange at the repor(cid:81)ng date was as follows: Func(cid:42)onal Currency of En(cid:42)ty GBP MZN EUR Total GBP MZN EUR Total 2022 2022 2022 2022 2021 2021 2021 2021 £ £ £ £ £ £ £ £ Foreign currency (cid:8)nancial assets USD 847,872 6,089 354 854,315 7,466,462 69,649 317 7,536,428 EUR 4,132,466 – – 4,132,466 3,958,196 – – 3,958,196 AUD 581,376 – 4,388 585,764 307,035 – 4,184 311,219 OMR 8,558 – – 8,558 8,558 – – 8,558 Total 5,570,272 6,089 4,742 5,581,103 11,740,251 69,649 4,501 11,814,401 Func(cid:42)onal Currency of En(cid:42)ty GBP Total GBP Total 2022 2022 2021 2021 £ £ £ £ Foreign currency (cid:8)nancial liabili(cid:42)es USD 132,841 132,841 71,383 71,383 AUD 68,061 68,061 225,086 225,086 EUR 104,010 104,010 103,604 103,604 OMR 6,900 6,900 6,900 6,900 Total 311,812 311,812 406,973 406,973 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 95 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 18. FINANCIAL INSTRUMENTS con(cid:81)nued The e(cid:23)ect of changes in foreign currencies exchange rates against GBP at the repor(cid:81)ng date on the foreign currency denominated Cash and Cash Equivalents carried at that date would, all other variables held constant, have resulted in the following: USD EUR AUD As at 31 December 2022 £ £ £ Movement exchange rates against GBP +10% (cid:17)10% +10% (cid:17)10% +10% Pre(cid:40)tax loss for the year (44,407) 36,333 (459,163) 375,679 (63,754) Net assets 44,407 (36,333) 459,136 (375,679) 63,754 (cid:17)10% 52,162 (52,162) USD EUR AUD As at 31 December 2021 £ £ £ Movement exchange rates against GBP +10% (cid:40)10% +10% (cid:40)10% +10% Pre(cid:40)tax loss for the year (775,904) 634,831 (434,386) 355,407 (31,072) Net assets 775,904 (634,831) 434,386 (355,407) 31,072 (cid:40)10% 25,422 (25,422) Financial instruments by category (Company) Financial Assets Fair Value Through Other Amor(cid:42)sed Comprehensive Cost Income Total £ £ £ As at 31 December 2022 Other Receivables 31,877,211 – 31,877,211 Other Non(cid:40)Current Assets 6,776 – 6,776 Investments – 11,977 11,977 Trade and Other Receivables 27,215 – 27,215 Cash and Cash Equivalents 6,241,356 – 6,241,356 Total Financial Assets 38,152,558 11,977 38,164,535 As at 31 December 2021 Other Receivables 26,184,402 – 26,184,402 Other Non(cid:40)Current Assets 6,776 – 6,776 Investments – 31,575 31,575 Trade and Other Receivables 12,105 – 12,105 Cash and Cash Equivalents 11,085,944 – 11,085,944 Total Financial Assets 37,289,227 31,575 37,320,802 See review of the fair value hierarchy of fair value through other comprehensive income assets in Note 11. 96 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 18. FINANCIAL INSTRUMENTS con(cid:81)nued Financial liabili(cid:42)es Financial Liabili(cid:42)es at Amor(cid:42)sed Cost Total £ £ As at 31 December 2022 Trade and Other Payables 523,403 523,403 Total Financial Liabili(cid:81)es 523,403 523,403 As at 31 December 2021 Trade and Other Payables 1,007,863 1,007,863 Total Financial Liabili(cid:81)es 1,007,863 1,007,863 The Company’s net exposure to foreign exchange risk at the repor(cid:81)ng date was as follows: Func(cid:42)onal Currency of En(cid:42)ty GBP Total GBP Total 2022 2022 2021 2021 £ £ £ £ Foreign currency (cid:8)nancial assets USD 215,473 215,473 6,876,165 6,876,165 EUR 35,369,797 35,369,797 29,552,010 29,552,010 AUD 509,978 509,978 224,044 224,044 OMR 8,558 8,558 8,558 8,558 Total 36,103,806 36,103,806 36,660,777 36,660,777 Func(cid:42)onal Currency of En(cid:42)ty GBP Total GBP Total 2022 2022 2021 2021 £ £ £ £ Foreign currency (cid:8)nancial liabili(cid:42)es USD 8,174 8,174 – – AUD 43,178 43,178 94,825 94,825 EUR 15,696 15,696 11,134 11,134 OMR 6,900 6,900 6,900 6,900 Total 73,948 73,948 112,859 112,859 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 97 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 18. FINANCIAL INSTRUMENTS con(cid:81)nued Capital Disclosures The Group’s objec(cid:81)ves when maintaining capital are: • • to safeguard the en(cid:81)ty’s ability to con(cid:81)nue as a going concern, so that it can con(cid:81)nue to provide returns for shareholders and bene(cid:7)ts for other stakeholders; and to maintain an op(cid:81)mal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may issue new shares or seek other (cid:7)nancial structures such as grants, debt (project (cid:7)nance), royal(cid:81)es, streaming, mezzanine (cid:7)nance, or combina(cid:81)ons thereof. 19. GROUP CONTINGENT LIABILITIES Details of con(cid:81)ngent liabili(cid:81)es where the probability of future payments is not considered remote are set out below, as well as details of con(cid:81)ngent liabili(cid:81)es, which although considered remote, the Directors consider should be disclosed. The Directors are of the opinion that provisions are not required in respect of these ma(cid:29)ers, as at the repor(cid:81)ng date it is not probable that a future sacri(cid:7)ce of economic bene(cid:7)ts will be required and the amount is not capable of reliable measurement. Considera(cid:42)on payable in rela(cid:42)on to the acquisi(cid:42)on of the Aldeia Mining Lease Applica(cid:42)on for lithium, feldspar and quartz (Portugal lithium project) In June 2019 the Company exercised its op(cid:81)on to acquire a Mining Lease Applica(cid:81)on for lithium, feldspar and quartz from private Portuguese company, Aldeia & Irmão, S.A.. The total purchase price for the acquisi(cid:81)on is EUR €3,250,000 (~GBP £2,880,000), which will only become due once the Mining Lease Applica(cid:81)on has been granted and the Mining Rights transferred to an en(cid:81)ty within the Group, at which point the agreed payment schedule will consist of an ini(cid:81)al EUR €55,000 (~GBP £50,000) payment with the balance due in 71 equal monthly instalments. Upon delivery of the request for transfer of the Mining Rights to an en(cid:81)ty within the Group, the Group shall provide with a bank guarantee of EUR €3,195,000 (~GBP £2,830,000) that will be reduced in accordance with the 71 monthly instalments. As at 31 December 2022 the mining lease has not been granted. 20. RELATED PARTY DISCLOSURES Details of Directors’ remunera(cid:81)on are disclosed in the Remunera(cid:81)on Report and in Note 3. During the year £237,903 (2021: £214,413) was payable to Blue Bone Consul(cid:81)ng Pty Ltd (a company controlled by Dale Ferguson) for consultancy fees of which £41,554 (including bonus) (2021: £93,303 (including bonus)) remained unpaid. The amounts payable to Blue Bone Consul(cid:81)ng Pty Ltd have been included in the Directors’ remunera(cid:81)on in the Remunera(cid:81)on Report and in Note 3. During the year Dale Ferguson acquired in the market 900,000 shares indirectly through its investment in Slipstream Resources Investments Pty, Ltd for a considera(cid:81)on of £18,900. During the year James Leahy acquired in the market 215,889 shares for a considera(cid:81)on of £5,018. During 2021 Ma(cid:29)hew King acquired 312,500 shares as part of the April 2021 fundraise for a considera(cid:81)on of £12,500. 98 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 21. LEASES Right(cid:17)of(cid:17)Use Assets Vehicles £ Cost At 1 January 2021 68,583 Addi(cid:81)ons 798 Foreign exchange movements (4,524) At 31 December 2021 64,857 Addi(cid:81)ons 21,322 Foreign exchange movements 4,341 At 31 December 2022 90,520 Deprecia(cid:42)on At 1 January 2021 46,874 Charge for year 16,051 Foreign exchange movements (3,458) At 31 December 2021 59,467 Charge for year 9,820 Foreign exchange movements 3,606 At 31 December 2022 72,893 Net Book Value At 1 January 2021 21,709 At 31 December 2021 5,390 At 31 December 2022 17,627 Lease Liabili(cid:42)es Vehicles £ At 1 January 2021 12,738 Addi(cid:81)ons – Lease payments (11,108) Foreign exchange movements (498) At 31 December 2021 1,132 Addi(cid:81)ons 20,663 Lease payments (4,837) Foreign exchange movements 669 At 31 December 2022 17,627 Current Liabili(cid:81)es Non(cid:40)Current Liabili(cid:81)es Total lease liabili(cid:42)es 2022 £ 5,364 12,263 17,627 2021 £ 1,132 – 1,132 The Right(cid:40)of(cid:40)Use Assets and related Lease Liabili(cid:81)es are for the lease of motor vehicles. Total 2022 cash (cid:13)ow ou(cid:11)low amount is £5,287 (2021: £11,746). SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 99 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 21. LEASES con(cid:81)nued Other Leases The Group has registered £76,505 (2021: £11,593) in the Statement of Comprehensive Income related to short(cid:40)term leases. Short(cid:40)term leases meet the requirements to not be accounted for by recognising a Right(cid:40)of(cid:40) Use Asset and a Lease Liability, having a dura(cid:81)on of 12 months or less and without reasonable certainty about their renewal. At 31 December 2022 the Other Lease commitments for the next 12 months is £33,969 (2021: £12,385). These leases are for business premises in Portugal and the UK. 22. GROUP COMMITMENTS As a condi(cid:81)on of being granted with mining licence 9735C in Mozambique the Group, through Ma(cid:81)lda Minerals Lda, signed a bank guarantee of MZN 60,143,680 (GBP £778,892) to be assigned to the Ministério Dos Recursos Minerais e Energia (Ministry of Natural Resources and Energy). The guarantee is valid un(cid:81)l the 28 November 2023 and Ma(cid:81)lda Minerals Lda is obligated to maintain funds for the same amount as the guarantee in a bank account. This bank account deposit was impaired in 2021 a(cid:12)er the signing of the Deed of termina(cid:81)on with Rio Tinto (Note 24). At 31 December 2022 this bank account deposit is fully impaired. 23. SHARE OPTIONS AND INVESTOR WARRANTS Share Op(cid:81)ons and Investor Warrants to subscribe for Ordinary Shares in the Company are granted to certain employees, Directors and investors. Some of the op(cid:81)ons issued vest immediately and others over a ves(cid:81)ng period and may include performance condi(cid:81)ons. Op(cid:81)ons are forfeited if the employee leaves the Group before the op(cid:81)ons vest. 2022 2021 Weighted Weighted average Weighted average Weighted remaining exercise remaining exercise life Number price life Number price Share Op(cid:42)ons Opening Balance 67,600,000 6.0p 6.71 20,150,000 8.5p Granted – – – 58,650,000 5.5p Lapsed (23,525,620) 5.6p – (11,200,000) 7.5p 1.41 7.43 – Closing Balance 44,074,380 6.3p 5.44 67,600,000 6.0p 6.71 Investor Warrants Opening Balance – – – 343,432 11.3p Lapsed – – – (343,432) 11.3p Closing Balance – – – – – 0.62 – – 100 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 23. SHARE OPTIONS AND INVESTOR WARRANTS con(cid:81)nued Share schemes outstanding as at 31 December 2022 are as follows: Outstanding Exercisable Outstanding Exercisable 31 December 31 December 31 December 31 December Exercise 2022 2022 2021 2021 Price Share Op(cid:42)ons January 2018 – – 1,000,000 1,000,000 8.0p March 2019 7,950,000 7,950,000 7,950,000 – 10.0p June 2021 750,000 750,000 750,000 750,000 4.7p June 2021 750,000 750,000 750,000 750,000 6.2p June 2021 13,887,190 – 24,485,000 – 4.7p June 2021 13,887,190 – 24,485,000 – 6.2p October 2021 250,000 250,000 250,000 250,000 4.7p October 2021 250,000 250,000 250,000 250,000 6.3p October 2021 3,175,000 – 3,840,000 – 4.7p October 2021 3,175,000 – 3,840,000 – 6.3p 44,074,380 9,950,000 67,600,000 3,000,000 Expiry Date 25/01/22 11/03/24 30/06/26 30/06/26 30/06/29 30/06/29 01/10/26 01/10/26 01/10/29 01/10/29 All of the Share Op(cid:81)ons granted a(cid:29)ract a share based payment charge. The fair value of the Share Op(cid:81)ons and Investor Warrants at the date of grant have been measured using the Black(cid:40)Scholes pricing model that takes into account factors such as the op(cid:81)on life, share price vola(cid:81)lity and the risk free rate. Vola(cid:81)lity was calculated with reference to the Company’s historical share price vola(cid:81)lity up to the grant date to re(cid:13)ect a term approximate to the expected life of the op(cid:81)on. The range of inputs of the Share Op(cid:81)ons granted during 2021 were as follows: Share Op(cid:42)ons June 2021 June 2021 June 2021 Stock price 3.9p 3.9p 3.9p Fair value of op(cid:81)on 1.7p 1.4p 1.2p Exercise Price 4.7p 6.2p 4.7p Expected vola(cid:81)lity 55% 55% 59% Expected life 5.5 years 5.5 years 2.5 years Risk free rate 0.2% 0.2% 0.2% June 2021 3.9p 0.9p 6.2p 59% 2.5 years 0.2% Share Op(cid:42)ons October 2021 October 2021 October 2021 October 2021 4.0p Stock price 4.0p 4.0p 4.0p 0.9p Fair value of op(cid:81)on 1.7p 1.4p 1.2p 6.3p Exercise Price 4.7p 6.3p 4.7p 59% Expected vola(cid:81)lity 55% 55% 59% 2.5 years Expected life 5.5 years 5.5 years 2.5 years 0.7% Risk free rate 0.7% 0.7% 0.7% SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 101 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 23. SHARE OPTIONS AND INVESTOR WARRANTS con(cid:81)nued This fair value is the cost that is charged to the Statement of Comprehensive Income and is spread over the expected ves(cid:81)ng period which, for non(cid:40)market ves(cid:81)ng condi(cid:81)ons (as noted above), is revised at each period end. Share Op(cid:42)ons granted During the 2021 (cid:7)nancial year 56,650,000 Share Op(cid:81)ons were issued to employees to assist with the recruitment, reward and reten(cid:81)on of key employees. These Share Op(cid:81)ons vest upon the employee mee(cid:81)ng service and/or performance condi(cid:81)ons. No Share Op(cid:81)ons were granted during 2022 to employees. Addi(cid:81)onally, during the 2021 (cid:7)nancial year 2,000,000 Share Op(cid:81)ons were issued to Group advisors, which vest immediately. No Share Op(cid:81)ons were granted during 2022 to Group advisors. The detail of the LTIP Share Op(cid:81)ons granted to the Directors is disclosed in the Remunera(cid:81)on Report. Investor Warrants issued No Investor Warrants were issued in 2022 or 2021. 24. DISCONTINUED OPERATIONS In October 2016 Savannah, AME and Rio Tinto entered into a Consor(cid:81)um Agreement (‘CA’), whereby both Savannah Group and Rio Tinto combined their respec(cid:81)ve projects in Mozambique to form an unincorporated consor(cid:81)um. On the 1 December 2021 Savannah signed a Deed of Termina(cid:81)on rela(cid:81)ng to the CA. Under the Deed of Termina(cid:81)on the following was agreed: • • • the relinquishment of the rights and obliga(cid:81)ons provided under the CA, including that AME EA would not have an interest in Mutamba Rio and Rio Tinto would not have an interest in Ma(cid:81)lda Minerals Lda’s Mining Concession 9735C; the transfer of Savannah’s in country team to Rio Tinto; and termina(cid:81)on compensa(cid:81)on amoun(cid:81)ng to $9.5m cash. The post(cid:40)tax gain on relinquishment of the rights and obliga(cid:81)ons of Discon(cid:81)nued Opera(cid:81)ons at 31 December 2021 was determined as follows: £ Termina(cid:42)on Compensa(cid:42)on 6,996,875 Net assets relinquished Intangible Assets (4,702,323) Tangible Assets (957,007) Other Non(cid:40)Current Assets (710,467) (6,369,797) Pre(cid:17)tax gain on relinquishment of the rights and obliga(cid:42)ons of discon(cid:42)nued opera(cid:42)on 627,078 Related tax – Gain on relinquishment of the rights and obliga(cid:42)ons of discon(cid:42)nued opera(cid:42)ons 627,078 102 SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 31 December 2022 24. DISCONTINUED OPERATIONS con(cid:81)nued The detail of the result of discon(cid:81)nued opera(cid:81)ons is as follows: Expenses other than (cid:7)nance costs Gain on relinquishment of the rights and obliga(cid:81)ons of discon(cid:81)nued opera(cid:81)ons a(cid:12)er tax (Loss) / Pro(cid:8)t on discon(cid:42)nued opera(cid:42)ons for the year Earnings per share from discon(cid:42)nued opera(cid:42)ons Basic and diluted loss per share 2022 £ 2021 £ (176,396) (624,707) – (176,396) 627,078 2,371 (0.00010) 0.00000 The statement of cash (cid:13)ows includes the following amounts rela(cid:81)ng to discon(cid:81)nued opera(cid:81)ons: Net cash used in opera(cid:81)ng ac(cid:81)vi(cid:81)es Net cash from inves(cid:81)ng ac(cid:81)vi(cid:81)es Net cash from/(used in) (cid:7)nancing ac(cid:81)vi(cid:81)es Net cash used in discon(cid:42)nued opera(cid:42)ons 2022 £ 2021 £ (274,769) 91,807 112,265 (70,697) (438,441) 6,105,942 (5,674,201) (6,700) Savannah is in the process of dives(cid:81)ng its residual interest in Mozambique which includes Mining Concession 9735C and (cid:7)nalising administra(cid:81)ve work related to the termina(cid:81)on of the Consor(cid:81)um Agreement as required by the Mozambique laws. The costs incurred during 2022 are related to these ac(cid:81)vi(cid:81)es. The legal transfer of Ma(cid:81)lda’s employees and some supplier contracts to Rio Tinto was completed in April 2022, and a gross payment was received amoun(cid:81)ng to US$115,329 (~£91,807), which was part of the Termina(cid:81)on compensa(cid:81)on amoun(cid:81)ng to US$9.5m. 25. EVENTS SINCE THE REPORTING DATE As part of the Ar(cid:81)cle 16 phase, on 16 March 2023 the Group submi(cid:29)ed the revised Environmental Report and Mine Plan for the Barroso Lithium Project to Portugal's environmental regulator, Agência Portuguesa do Ambiente (‘APA’). Submission ini(cid:81)ates the 50(cid:40)business day assessment period available to APA. The deadline for the no(cid:81)ce of APA’s Environmental Impact Statement (DIA) is therefore 31 May 2023. SAVANNAH RESOURCES Plc – ANNUAL REPORT AND FINANCIAL STATEMENTS 2022 103 w e i v e R s s e n i s u B e c n a n r e v o G s t n e m e t a t S l a i c n a n F i COMPANY INFORMATION DIRECTORS: SECRETARIES: Ma(cid:11)hew James Wya(cid:11) King Dale John Ferguson Mary Jo Jacobi James Gerald Leahy Manohar Pundalik Shenoy Diogo da Silveira Imad Kamal Abdul Redha Sultan Chairman Execu(cid:24)ve Director Non(cid:29)Execu(cid:24)ve Director Non(cid:29)Execu(cid:24)ve Director Non(cid:29)Execu(cid:24)ve Director Non(cid:29)Execu(cid:24)ve Director Non(cid:29)Execu(cid:24)ve Director Christopher Michael McGarty c/o Salisbury House London Wall London EC2M 5PS Dominic Traynor Salisbury House London Wall London EC2M 5PS REGISTERED OFFICE: Salisbury House London Wall London EC2M 5PS REGISTERED NUMBER: 07307107 (England and Wales) AUDITORS: BANKERS: NOMINATED ADVISER: JOINT BROKERS: SOLICITORS: REGISTRARS: BDO LLP Chartered Accountants & Statutory Auditors 55 Baker Street London W1U 7EU NatWest Bank Plc St James' & Piccadilly Branch PO Box 2DG, 208 Piccadilly London W1A 2DG SP Angel Corporate Finance LLP Prince Frederick House 35(cid:29)39 Maddox Street London W1S 2PP SP Angel Corporate Finance LLP Prince Frederick House 35(cid:29)39 Maddox Street London W1S 2PP Druces LLP Salisbury House London Wall London EC2M 5PS Share Registrars Limited 3 The Millennium Centre, Crosby Way Farnham Surrey GU9 7XX RBC Capital Markets 100 Bishopsgate London EC2N 4AA WEBSITE: www.savannahresources.com Perivan.com 265729 

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