Company Registration No. 10829496 (England and Wales)
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
COMPANY INFORMATION
(Appointed 29 October 2020)
(Resigned 30 September 2020)
Directors
Jeremy Martin
Cherif Rifaat
Anton du Plessis
Graham Brown
Peter Secker
Jeremy Taylor-Firth
Secretary
Cherif Rifaat
Company number
10829496
Registered office
Independent Auditor
Business address
UK Brokers
Solicitors
29-31 Castle Street
High Wycombe
Bucks
HP13 6RU
United Kingdom
PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London
E14 4HD
United Kingdom
The Clubhouse
8 St James's Square
London
SW1Y 4JU
United Kingdom
Turner Pope Investments (TPI) Ltd
36 Old Jewry
London
EC2R 8DD
United Kingdom
DWF LLP
Bridgewater Place
Water Lane
Leeds
LS11 5DY
United Kingdom
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
COMPANY INFORMATION
Nominated Adviser
Registrar
Competent Person
Public Relations
Allenby Capital Ltd
5th Floor
5 St Helen's Place
London
EC3A 6AB
United Kingdom
Share Registrars Ltd
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
United Kingdom
Addison Mining Services Ltd
64 Addison Road
Wanstead
London
E11 2RG
United Kingdom
St Brides Partners Ltd
51 Eastcheap
London
EC3M 1JP
United Kingdom
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CONTENTS
Chairman's statement
Strategic report
Directors' responsibilities statement
Directors' report
Corporate Governance Statement
Independent auditor's report
Group statement of comprehensive income
Group statement of financial position
Company statement of financial position
Group statement of changes in equity
Company statement of changes in equity
Group statement of cash flows
Company statement of cash flows
Page
1 - 2
3 - 11
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23 - 28
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Notes to the financial statements
36 - 66
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Chairman's Statement
Despite the unprecedented challenges posed by the ongoing Covid-19 pandemic, 2020 has been a year of significant
activity for Zinnwald Lithium Plc (the 'Company'). The assessment of the COVID-19 situation will need continued
attention and will evolve over time. Undoubtedly, this will have some implications for the operations of the Group in
the future, for example through restricting travel movements internationally and domestically and therefore delaying
exploration activities. Due to the nature of present activities, the impact has been minimal. A core part of our
articulated strategy has always been the identification and acquisition of a suitable asset meeting our criteria of being
sufficiently advanced and located in a suitable, low-risk jurisdiction. We fulfilled this objective through the acquisition
of a 50% interest in Deutsche Lithium, which is developing the Zinnwald Lithium Project in Germany. This transaction
has transformed the Company and has resulted in a revised strategy focused on becoming an important supplier to
Europe’s fast-growing lithium sector.
The transaction was completed at the end of October 2020 and was achieved through a Reverse Takeover ('RTO')
of Bacanora Lithium Plc’s interest in Deutsche Lithium. Simultaneously, the Loch Tay Gold Project was spun out to
existing shareholders and the Company’s name was changed from Erris Resources Plc to Zinnwald Lithium Plc,
reflecting the new focus. We also welcomed Bacanora Lithium Plc as a new major shareholder with a 44% stake.
Central to the Company, as it is now constituted, is the development of the Zinnwald Lithium Project (the 'Project’) in
south eastern Germany. With attractive economics, this late-stage lithium project located in the heart of Europe’s
chemical and automotive industries is one of Europe’s more advanced battery-grade lithium projects. It therefore
represents a compelling opportunity for investors to gain exposure to the European lithium market, which is growing
rapidly thanks to long term structural drivers.
You will no doubt already have a clear understanding of the rapid change in emphasis underway within the energy
sector, as countries and governments worldwide have taken on the challenge to switch from a reliance on fossil fuels
to sustainable energy systems as part of the drive to combat climate change. Underpinning this shift to a
decarbonised future is the delivery of clean electricity, which extends to the automotive industry as individuals try to
reduce their own carbon footprints; this has resulted in the rapid rise in number of electric vehicles (‘EVs’) and
research in/implementation of new battery technologies.
There are numerous smart technologies being developed in the automotive space. However, the lithium-ion battery
is currently the most suitable energy storage device and therefore the most likely to lead the transition given it fulfils
many criteria that meet consumer demands, such as high power and high-energy density, long life, low cost and
excellent safety, with minimal negative environmental impact.
Europe has embarked on the same energy transition as the rest of the world and has set a target of becoming carbon
neutral by 2050. However, a shortage of elements needed to make these batteries and other renewable energy
equipment could threaten this target. As a result, in September 2020, the European Commission announced that it
was prioritising the securing of critical metals through exploration, investment, and improved recycling. Its report
stated:
“For electric vehicle batteries and energy storage, the EU would need up to 18 times more lithium and five times more
cobalt in 2030, and almost 60 times more lithium and 15 times more cobalt in 2050, compared to the current supply
to the whole EU economy. If not addressed, this increase in demand may lead to supply issues.”
Accordingly, having spent many months searching for the right project, we were delighted to be given the opportunity
to play a role in the EV revolution through developing the Zinnwald Lithium Project. This project ticked many boxes
for us:
•
Compelling market: lithium is an important component of battery chemistry and demand for batteries is
anticipated to grow due to factors including a transition to EVs.
Flexible strategy: opportunity to produce several high-value, battery-grade lithium products including LiF,
Li2CO3 and LiOH*H2O.
Strategic location: situated in Germany, which is host to both a major automotive industry and several major
chemical producers.
•
•
• World class attributes: a September 2020 Feasibility Study on the Project estimated a pre-tax, NPV of
approximately €428 million (discounted at 8%); an Internal Rate of Return of 27.4%; and an average life of
mine annual EBITDA of €58.5 million.
- 1 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CHAIRMAN'S STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
•
•
Robust mine plan: a 30-year Feasibility Study mine plan equating to the extraction of less than 50% of the
currently identified resource and mining licence in place.
Available expertise: technical expertise in Germany at the project level consisting of world-leading scientists,
engineers and geologists.
Our aim now is to advance the Project to production. Accordingly, key work streams have been planned for 2021 to
position Zinnwald Lithium to make the transition from developer to producer. These include engaging with potential
off-take partners; advancing discussions with potential financing partners; performing the necessary testwork to
assess the commercial viability of producing a broader range of lithium compounds; undertaking front-end
engineering design work; finalising the selection of the optimal chemical processing site location and completing the
final steps in the permitting process for the construction and operation of the mine. We have already made steps
towards achieving several of these targets.
With regard to the other assets that remain within the Zinnwald Lithium Plc group of companies (the “Group”), in
Ireland, the Company maintains five prospecting licences ('PLs') over the 100%-owned Abbeytown Project, including
the historic Abbeytown mine, in County Sligo and renewed those PLs in August 2019 for a further six years to August
2025. The Abbeytown Project is an attractive asset but given the revised focus of the Group on the Zinnwald Lithium
Project and also challenging market conditions in the zinc sector at the time, no work was carried out on the project
during 2020. While we continue to regard Abbeytown as a sound, viable project, the focus in the near term is to seek
either a partner or purchaser for the asset.
In Sweden, the Company maintains the Brännberg gold project, which consists of three core exploration permits in
the Skellefte Mining District. Gold mineralisation has been confirmed by drilling which returned positive results.
Mineralisation is open at depth and extends from surface with best results including 17.2m @ 1.93g/t Au and 0.26%
Cu from 160.90m-178.10m in drill hole BB004. These Swedish assets are available for acquisition or joint venture.
Board and Corporate
As part of the Acquisition of Zinnwald, the Board was restructured to reflect the ongoing requirements of the Project.
Jeremy Taylor-Firth stepped down as a Director and the Board would like to thank him for all his assistance over
recent years, as well as his fundraising expertise during the original IPO and, after he stepped down, as part of the
Zinnwald related fundraise. Peter Secker was appointed a Director as a representative for our new largest
shareholder, Bacanora Lithium and brings with him invaluable experience and expertise in the lithium sector as we
continue to develop the Zinnwald Project towards construction. Jeremy Martin returned to his previous role of Non-
Executive Chairman as Anton du Plessis retuned to the role of Executive Director and CEO.
Financial Overview
The Company maintains a disciplined approach to expenditure and, as such, is well funded for 2021 with a €4.8
million cash position at today's date.
Outlook
Thanks to low capital costs, attractive economics and access to strategic markets, Zinnwald has the potential to
become a key European lithium project. With Bacanora Lithium becoming a major shareholder following the RTO,
the addition of its CEO, Peter Secker, who has a deep understanding of the Project, to the Board as a Non-Executive
Director, and with a healthy balance sheet having raised over £3 million from new and existing investors, the Company
is well placed to realise this potential.
In closing, I would like to thank our shareholders for their support and wish you all a very happy, sustainable and
prosperous 2021.
Jeremy Martin
Non-Executive Chairman
25 February 2021
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ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
The Directors present the strategic report for the year ended 31 December 2020.
1
Highlights – 12 months to 31 December 2020
Zinnwald Lithium Project
•
•
•
In October 2020, the Company acquired 50% of the issued share capital of Deutsche Lithium GmbH
from Bacanora Lithium Plc, the principal activity of which is the development of the Zinnwald Lithium
Project (‘Zinnwald’) in south-eastern Germany. Zinnwald, which already has a published Feasibility
Study and a mining licence, presents an excellent opportunity to create value for shareholders.
As part of the acquisition process, Bacanora Lithium Plc became a major shareholder and the
Company raised a further £3.75m (equivalent to €4.15m) in new equity from new investors for working
capital for the newly enlarged Group.
The Company also renamed itself Zinnwald Lithium Plc to reflect its new focus.
Scotland
•
•
•
•
In January 2020, the Company exercised its option to earn-in to 80% of the Loch Tay Project.
During the year, the Company completed preliminary sampling and testwork, which identified
promising results and potential drill targets.
In August 2020, the Company formed Erris Gold Resources Ltd and transferred all assets, licences,
contracts, employees relating to Loch Tay and €400,000 in cash to that company.
In October 2020, as part of the refocussing of the Group towards the Zinnwald Project, the Company
distributed its shares in Erris Gold Resources to the Company’s shareholders.
Existing Other Assets
•
•
Ireland – the Company renewed its five licences at the Abbeytown Project for a further six years in
2019 but did not undertake any new drilling in 2020.
Sweden – the Company renewed its three core licences at the Brännberg project but did not
undertake any new drilling in 2020.
2
Zinnwald Lithium – Strategic Review
2.1 Company Overview - Background
The Group was established in 2012 as a mineral exploration and development company. Its Ordinary Shares
were admitted to trading on AIM in December 2017. Its focus has been to create shareholder value through
the process of discovering new ore deposits, with a focus on European jurisdictions. Osisko Gold Royalties,
a TSX and NYSE intermediate precious metal royalty company with a market capitalisation of approximately
C$2.6 billion was one of the cornerstone investors in the IPO and retains its shareholding. The Company was
also supported at the project level by Centerra, a wholly owned subsidiary of Centerra Gold Inc., a TSX listed
gold mining and exploration company with a market capitalisation of approximately C$4.56 billion, which
funded a number of generative exploration programmes in Scandinavia over a four-year period to 2019.
In Ireland, the Group holds five prospecting licences at its 100 per cent. owned brownfield lead-zinc
Abbeytown Project covering a total of 136km2 and including the historic Abbeytown mine in County Sligo,
Ireland. These licences have been held since 2013 and were successfully renewed in the third quarter of 2019
for a further six years to August 2025. Of the five prospecting licences, PL 3735, containing the historically
operated Abbeytown Pb-Zn mine, is the licence of most importance for the Group.
In Sweden, the Group currently has five permits of which three make up the Brännberg Gold Project in the
Skellefte Mining District of north Sweden. The Board considers that three of these five permits are core and
where drilling was focussed as part of the Group’s previous strategic alliance with Centerra. The combined
area of the Brännberg Gold Project is now 2,097 ha. The Group’s other two Swedish permits are Enåsen and
Storkullen in Central Sweden. All the permits are 100 per cent. owned by the Group. The Brännberg Gold
Project and the two Swedish permits are not material assets for the Group.
- 3 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
2.2 Company Overview – the Zinnwald Lithium Project
The Company now has a 50 per cent. interest in, and joint operational control of, Deutsche Lithium, the
principal asset of which is the Zinnwald Lithium Project covering 256.5 ha and with a 30-year mining licence
to 31 December 2047. The Project is located in southeast Germany, some 35 km from Dresden and adjacent
to the border of the Czech Republic.
The Zinnwald Lithium Project is located in a granite hosted Sn/W/Li belt that has been mined historically for
tin, tungsten, and lithium at different times over the past 300 years. With an abundant supply of
fluorspar/hydrofluoric acid available in the immediate vicinity, Deutsche Lithium has chosen to focus on LiF
(Lithium Fluoride) which is used in the lithium-ion battery supply chain. LiF is a high value downstream lithium
product and one of the two key components in the manufacturing process of LiPF6, which is the most
important conducting salt in lithium electrolytes and serves as the “shuttle” in the lithium battery electrolyte
which “ships” the lithium ion between the cathode and the anode. Approximately 95 per cent. of all lithium
battery electrolytes use LiPF6, and the percentage used in each cathode is increasing in some of the newer
battery types. The strategic location of the Project allows access to the German automotive and downstream
chemical industries.
While the NI 43-101 Feasibility Study for the Project is based solely on the production of LiF, Deutsche Lithium
has established the possibility of also producing battery-grade lithium carbonate directly from the lithium mica
concentrate with only minimal modifications to the chemical plant circuits. Deutsche Lithium is also
undertaking testwork to determine if the same applies to possible lithium hydroxide production.
In May 2019, Deutsche Lithium first announced the results of the NI 43-101 Feasibility Study for the Project,
which confirmed the positive economics and favourable operating costs for the production of 5,112 tpa (~7,285
tpa LCE) of battery grade lithium fluoride (LiF). With a long-life project of 30 years, the Feasibility Study
estimated a pre-tax project NPV of €428 million (8 per cent. discount rate); an IRR of 27.4 per cent.; and
favourable LOM operating costs resulting in a 46 per cent. EBITDA operating profit margin. The NPV is not a
valuation for the purposes of Rule 29 of the Takeover Code and should not be relied upon as such.
The 30-year Feasibility Study mine plan equates to the extraction of less than 50 per cent. of the currently
identified resource.
• Measured plus Indicated Mineral Resource estimate containing 35.51 Mt at a grade of 3,519 ppm
•
•
containing 124,974 t Li at cut-off grade of 2,500 ppm Li
Represents approximately 665,000 tonnes of lithium carbonate equivalent (‘LCE’), comprising
approximately 357,500 tonnes of LCE in Measured Resources and approximately 307,500 tonnes of
LCE in Indicated Resources
Estimated Inferred Mineral Resources of 4.87 Mt at a grade of 3,549 ppm containing 17,266 t Li metal
(approximately 92,000 tonnes LCE)
In addition to the mining licence in relation to the Project, Deutsche Lithium holds two other exploration
licences; the Falkenhain licence (covering 295.7 ha and with a five-year term to 31 December 2022); and the
Altenberg licence (covering 4,225.3 ha and with an approximately five-year term to 15 February 2024). These
exploration licences for lithium deposits may have the potential to significantly increase Zinnwald’s resource
base and Project life.
The mining operation for the Project is planned as an underground mine development using a single decline
ramp for access to the mine and for ore transportation from the mine to the surface. The mine technology will
be a commonly used load-haul-dump room and pillar technology with subsequent backfill using self- hardening
material. The processing operation will be based on a conventional processing flow sheet using established
sulphate route processing technology. The proposed integrated plant is designed to process approximately
570,000 tonnes of ore per year (assuming a 30-year mine plan, which equates to approximately 50 per cent.
of the total resource identified to date). However, in order to make the Project more viable and to reduce the
payback time for the investment, the average mined tonnage of the first five years of production is 522,000
tonnes at a grade of 3,400 ppm Li. The Project has a capital cost estimate of approximately €160 million which
includes mining, processing plant, infrastructure, tailings management and general administration costs and
government grants as well as the requisite contingencies.
- 4 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
At the present time a risk assessment has been undertaken to identify risks that would inhibit the development
of the mine. Any technical risks due to historic mine workings and water drainage pathways should be avoided
by detailed technical planning. Further, public acceptance of the planned mine seems to be sufficient and
risks are being evaluated.
It is anticipated that in addition to returns generated by the sale of LiF, the Project also has the potential to
produce up to 32,000 tpa of potassium sulphate (‘SOP’, ‘K2SO4’) for sale to the European fertiliser industry.
Further, it is expected that a significant portion of the mined tailings may be sold for use as an aggregate filler
to local building companies.
The other 50% owner of Deutsche Lithium is SolarWorld AG, a company which has been in administration
since 1 August 2017. The Company has a deed of adherence to the Deutsche Lithium JV Agreement with
SolarWorld AG which forms the basis on which the parties work together in relation to the Project. The
experience of Bacanora Lithium Plc in its dealings with the administrator of SolarWorld AG is that operational
matters in relation to Deutsche Lithium and the Zinnwald Lithium Project have been unaffected by the status
of SolarWorld AG being in administration.
The Deutsche Lithium JV Agreement sets out the rights and obligations of Deutsche Lithium’s shareholders.
It restricts shareholders in relation to (i) establishing a competing business whilst they remain a shareholder
of Deutsche Lithium and 12 months thereafter; (ii) transferring their shares; and/or (iii) granting encumbrances
over their shares. The shareholders also agree to abide by deadlock provisions in the instances of any
disputes as to how Deutsche Lithium is operated and managed. Each shareholder has the right to appoint
an appointee to the management board and advisory board of Deutsche Lithium.
Under the terms of the second supplement agreement to the Deutsche Lithium JV Agreement, the Company
is obliged to provide further additional funding to Deutsche Lithium to February 2022. At the end of 2020, the
amount outstanding under that commitment was €770,000. In addition, the Company has undertaken to
provide further funding of €650,000 to Deutsche Lithium in conjunction with the preparation of a lithium
hydroxide (LiOH) NI 43-101 compliant technical report and additional detailed capital expenditure design work.
Each shareholder in the Deutsche Lithium joint venture has pre-emption rights and rights of first refusal in
relation to any proposed transfer or disposal of the other shareholder’s share in Deutsche Lithium. As a result,
SolarWorld AG cannot transfer its share in Deutsche Lithium without first offering these to the Company (and
vice versa). In the event that the Company subsequently acquires the remaining shares in Deutsche Lithium
from SolarWorld AG, then the Deutsche Lithium JV Agreement will terminate.
2.3 Company Strategy
The Zinnwald Lithium Project now forms the core of the Company and is the primary focus of the Board and
its strategy. The Company, working with the management team at Deutsche Lithium, will seek to advance the
Zinnwald Lithium Project in a number of areas, including:
•
•
•
•
•
•
Identification of and negotiation with off-take partners that could include battery manufacturers,
chemical producers or commodity traders;
Identification of and negotiation with potential financing partners that could include banks, national
and trans-national development organisations;
Expansion of the scope of the NI 43-101 Feasibility Study to assess the commercial viability of
producing a broader range of lithium compounds, specifically lithium carbonate and lithium hydroxide;
Front end engineering design work;
Finalisation of the selection of the optimal chemical processing site location; and
Completion of the final steps in the permitting process for the construction and operation of the mine.
Part of this strategy with regard to the Zinnwald Lithium Project will be to gain operational control of Deutsche
Lithium. The Company's board and management team is engaging with the administrator of SolarWorld AG
to advance these discussions.
- 5 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
The Board has put the Abbeytown Project on care and maintenance due to the current challenging zinc and
lead market conditions. Planned spending on the Abbeytown Project by the Group in 2021 is expected to total
€30,000, all of which will be focussed on maintaining the core licence PL 3735. The Group will also be looking
for partners to advance or acquire this project. The Company will also only spend the minimum required to
maintain its licences at the Brännberg Gold Project, whilst it looks for funding partners or an acquiror.
2.4 Business Plan
The Board will continue to run the Group with an efficient cost base in order to maximise the amount that is
spent on the Zinnwald Lithium Project.
The Group historically financed its activities through capital raisings as a private company, the sale of royalties
and through its joint venture agreements with established industry players. The Company's public listing has
enabled the Group to target a wider pool of investors, as demonstrated by the two successful fund raises it
completed in 2020.
2.5 Principal Risks and Uncertainties
Set out below are the principal risks and uncertainties facing the Group, any of which could have a material
adverse effect on the Group’s business, financial condition, results of operations and prospects. For a full list
please refer to the Admission Document published in October 2020.
● Ongoing Capital requirements
Additional funding will be required in order to complete the proposed future exploration and development plans
on the projects. There is no assurance that any such funds will be available. Failure to obtain additional
financing, on a timely basis, could cause the Group to reduce or delay its proposed operations. The majority
of sources of funds currently available to the Group for its projects are in a large portion derived from the
issuance of equity. While the Group has been successful in the past in obtaining equity financing, there is no
assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms
advantageous to the Company and its shareholders. Any debt-based funding, should it be obtainable, may
bind the Group to restrictive covenants and curb its operating activities and ability to pay potential future
dividends even when profitable.
● Mining, Exploration and Development Risks.
There is no certainty that the expenditure to be made in the exploration and development of the Group’s
properties in which it has an interest will result in profitable commercial operations. Most exploration projects
do not result in the discovery of commercially mineable deposits. The successful exploration and development
of mineral properties is speculative and subject to a number of uncertainties and hazards, which even a
combination of careful evaluation, experience and knowledge may not eliminate.
● Competition in the Lithium Industry
The Group’s battery-grade lithium products are expected to compete primarily for market share with existing
lithium producers and spodumene concentrate producers. The Group is expecting to compete based on the
quality of its end product, consistent and fast production and price per tonne. The Group’s competitors, some
of which are large multinational corporations, may have substantial strategic advantages over the Group,
including existing infrastructure, greater financial resources, strategic relationships with customers and
logistical advantages in certain markets and could enhance their competitive position through acquiring, or
consolidating interests in, other lithium producers. In addition, new competitors could obtain access to
reserves of lithium through new discoveries or to the extent existing or greenfield projects become more
economically viable. Any of the foregoing advantages and potential advantages of the Group’s competitors
over the Group could materially impact its ability to successfully sell its lithium products, which could ultimately
have a material adverse effect on the Group’s business, results of operations and financial condition.
- 6 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
● Further licences and permits required
The Group’s concessions for its projects will need to obtain further licences and permits prior to commencing
commercial operations. The Group will also be required to obtain further environmental and technical permits
for the construction and development of its commercial operations. There is a risk that these further permits,
concessions and licences may not be granted which would have a significant material adverse effect on the
Group. In addition, the granting of such approvals and consents may be withheld for lengthy periods or granted
subject to satisfaction of certain conditions which the Group cannot or may consider impractical or uneconomic
to meet. As a result of any such delays or inability to exploit such discoveries, the Group may incur additional
costs or losses.
● Risks associated with the Deutsche Lithium JV Agreement
SolarWorld AG filed for bankruptcy in Germany in May 2017 due to ongoing pricing pressures in its core solar
markets. The Company believes that the SolarWorld AG insolvency process will have no material impact on
the Company's interest in Deutsche Lithium and the Zinnwald Lithium Project, nor its agreement with
SolarWorld AG, however there is no guarantee that this will be the case. The Company has a right of first
refusal to acquire the outstanding 50 per cent. of Deutsche Lithium that it does not own.
● Personnel retention and recruitment
The Group’s ability to compete in the competitive resource sector depends upon its ability to retain and attract
highly qualified management, geological, technical and industry experienced personnel. Such personnel are
expected to play an important role in the development and growth of the Group, in particular by maintaining
good business relationships with regulatory and governmental departments and essential partners,
contractors and suppliers.
● Environmental laws and regulations
The Group’s operations are subject to various state and foreign environmental laws concerning, among other
things, water discharges, air emissions, waste management, toxic use reduction and environmental clean-up.
Environmental laws and regulations continue to evolve, and it is likely the environmental laws and standards
that regulate the operations will continue to be increasingly stringent in the future. Any violation or litigation
relating to or liabilities under these laws and regulations could have a material adverse effect on the Group.
● Market perception
Market perception of exploration and extraction companies may change in a way which could impact adversely
the value of investors’ holdings and the ability of the Company to raise further funds through the issue of
further Ordinary Shares or otherwise.
● Economic risk and world commodity price volatility
Commodity prices are subject to fluctuations. These fluctuations could adversely affect the Group’s operations
and financial condition once it commences production.
3
Operational review & outlook
Germany
During 2020, Deutsche Lithium has continued to progress the project on both a corporate and operational
level.
On a corporate level, in February 2020, Bacanora Lithium Plc and the administrator for SolarWorld AG (the
“Administrator”) agreed to a second amendment to the Deutsche Lithium JV Agreement that removed the right
of the Administrator to buy back Bacanora Lithium Plc’s stake for €1 in return for Bacanora Lithium Plc
committing to fund Deutsche Lithium for a further two years in the amount of €1.35 million on a non-dilutionary
basis. Deutsche Lithium continues to have discussions with potential funding partners in relation to future
construction funding needs
On an operational level, Deutsche Lithium has been working on advancing the permitting status of the
Zinnwald Lithium Project. Deutsche Lithium obtained its mining licence for Zinnwald in 2017, which is valid
until 2047, but comes with the standard requirements to apply for further permits for environmental and
construction aspects of the Project. Deutsche Lithium is currently undertaking detailed environmental and
community studies to continue to develop the overall Zinnwald sustainability framework. Environmental
monitoring programmes are ongoing as well as the permitting process for Zinnwald’s mining and mineral
processing plant. Deutsche Lithium has also continued to evaluate the potential of the exploration licences
held over the adjacent areas in Falkenhain and Altenberg.
- 7 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
In relation to the technical aspects already identified in the Feasibility Study, Deutsche Lithium has continued
to refine and develop its operational plan. Deutsche Lithium is currently undertaking testwork to evaluate the
addition of lithium hydroxide to its suite of potential end-products, which will require further optimisation of the
processing plant flow sheet design. Deutsche Lithium has been working with engineering groups to finalise
the capital costs for the processing plant. It is optimising the scope for the supply contracts for critical long-
term contracts of both a capital and operating cost nature. Deutsche Lithium has undertaken further testwork
for the usage of both the mining tailings and also the potential chemical co-products. Deutsche Lithium is also
developing the required logistics framework to develop the Project as a whole.
Scotland
On 15 January 2020, the Company announced that it had concluded due diligence and issued an option notice
to GreenOre Gold Plc to acquire 80% of the Loch Tay Licence in Perthshire, Central Scotland. This gave the
Company the option to earn 80% of the project by defining a minimum inferred resource of 250,000 ounces
gold, to be defined by an independent competent person, within four years of the date of the option notice,
since extended to 15 March 2024. The Project area comprises 237 sq. km of highly prospective ground within
the Grampian Gold Belt, located 43km east of the new Cononish high-grade gold mine.
Early prospecting and mapping during the due diligence period at the Lead Trial, where historic small-scale
workings for lead are located, yielded good grades of gold associated with lead and zinc. In February and
March 2020, the team commenced further prospecting and a batch of 121 rock samples were submitted to
the ALS laboratory in Loughrea, Ireland prior to the commencement of the COVID-19 lockdown on 25 March.
The results from the samples submitted yielded some excellent grades of gold including the two highest grade
samples with 17.15g/t Au and 14.8g/t Au respectively. These high-grade samples were taken up to 2.9km
east of the workings and defined a new high-grade target area called Lead Trial – Dunan.
The team continued to review and compile large amounts of historic data from home during the lockdown
period and identified new target areas for subsequent ground truthing and prospecting. On 30 June 2020, the
Company announced that it was resuming fieldwork in July 2020 and that GreenOre Gold and the Company
had agreed to extend the option period by 98 days due to lost time caused by the COVID-19 restrictions.
Based on work done, the Lead Trial target now consists of a 3km mineralised trend of boulders and outcrop
with the highest-grade boulders located at the east end. Detailed mapping, soil geochemical surveys and
ground magnetic surveys to define the mineralised system and identify drill targets has been planned.
Several other targets are present within the large licence area such as in Glen Almond where alluvial gold and
narrow high-grade veins have been located, the Corrie Buidhe mine where high-grade silver was mined
historically, and gold has been sampled and Invergeldie where gold-bearing arsenopyrite mineralisation was
drilled historically but where there are also stream geochemical anomalies associated with felsites. The next
step is to systematically review these target areas and other gold occurrences within the licence area to
prioritise and upgrade prospective targets.
In August 2020, the Company established a new subsidiary, Erris Gold Resources and transferred all assets,
licenses, contracts, employees relating to Loch Tay and €400,000 in cash to that company. As part of the
Zinnwald Acquisition process, the Company’s shareholders approved the spin out of Erris Gold to the
Company’s existing shareholders that had funded Loch Tay to date. Going forward, the Company has no
involvement or commitments to this project.
- 8 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Ireland
The Group maintains five prospecting licences ("PLs") over the 100%-owned Abbeytown Project, including
the historic Abbeytown mine, in County Sligo following the renewal of those PLs in August 2019 for a further
six years to August 2025. Surface and underground drilling in 2017-2018 intersected significant mineralisation
around the Abbeytown mine and high-grade mineralisation is open along strike to the south of the mine. In
addition, soil sampling has identified high-tenor anomalies in a structurally favourable setting up to 1.2km
south of the mine. These targets remain to be tested and are a priority for future work. No drilling work was
carried out on the project in 2020 and minimum expenditures for the next two-year review period are due to
be met by August 2021. Due to the current challenging market conditions, the Company will be looking for
joint venture partners to advance this project.
The Group did not carry out any fieldwork on the Galway Project during H1 2020. The current challenging
market conditions for zinc, especially early-stage zinc-lead projects, combined with the Covid-19 restrictions
and the current focus on gold led the Group to surrender the PLs at the end of the first review period. The
team submitted surrender reports in July 2020 and no longer owns the licences. The carrying value of those
PLs has been impaired through profit or loss during the year.
Sweden and Finland
The Company announced on 2 December 2019 that Centerra Gold had terminated its strategic alliance with
Erris Resources and Centerra would not maintain any further interest in the permits in Sweden and Finland.
In early 2020, Erris Resources took the decision to surrender the Finland permits, close its Finnish subsidiary
and retain only key permits in Sweden. The Group has no ongoing commitments in Finland.
The Group maintains the Brännberg gold project in the Skellefte Mining District of North Sweden. The project
now consists of three core exploration permits, Brännberg nr.1, Brännberg nr.5 and Grundträsk nr.7 where
drilling was focussed as part of the fully funded strategic alliance with Centerra Gold. Erris carried out
significant exploration works with an investment by Centerra Gold of US$670,000 in 2017-2018. Gold
mineralisation has been confirmed by drilling which returned positive results. Mineralisation is open at depth
and extends from surface with best results including 17.2m @ 1.93g/t Au and 0.26% Cu from 160.90m-
178.10m in drill hole BB004. These Swedish assets are available for acquisition or joint venture. Given the
current market interest in gold, the Company believes that it may be able to attract a JV partner as gold
projects such as this in good jurisdictions are not readily available.
Norway
The Group had two gold +/- base metal projects in Northern Norway for a total of 50sq.km in five permits.
Gautelis (20sq.km) is a carbonate hosted gold project with historic drilling including 3m at 6.6g/t Au and 26m
at 0.58g/t Au. A second project, Varden, consisting of three permits for 30sq.km was applied for and granted
in Q1 2020. The project has shear zone hosted Cu-Au-As mineralisation, quartz vein hosted Cu-Au
mineralisation and stratiform Fe and Zn-Pb mineralisation. The mineralisation style is compared with the
Cobar Ore field of WA in a detailed report by Dave Coller, a renowned and highly experienced geologist. Due
to Covid-19 restrictions, no fieldwork was carried out in Norway in 2020 and the Group transferred the permits
to Erris Gold Resources and these formed part of the spin out in October 2020. The Group has no ongoing
commitments in Norway.
- 9 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
4
Financial Review
Notwithstanding that the Company is a UK Plc admitted to trading on AIM, the Company presents its accounts
in its functional currency of Euros, since the majority of its expenditure, including funding provided to Deutsche
Lithium, is denominated in this currency.
The Group is still at an exploration stage and not yet producing minerals, which would generate commercial
income. Under the terms of the Centerra Strategic Alliance Agreement, which came to an end after four years
in December 2019, the Group earned a 10% Management Fee on all committed expenditures, which
amounted to €nil in the year compared with €0.02m in the year ended 31 December 2019. Zinnwald continues
with this type of consultancy partnership with other mining partners having demonstrated its expertise in
delivering cost-effective exploration. The Group is now focussed primarily on developing the Zinnwald Lithium
project from its current status with a Bankable Feasibility Study and a Mining Licence through to construction
and ultimately production. However, the Group does not expect to report overall profits until it disposes of or
is able to profitably commercialise its projects.
During the year, the Group made an operating loss of €2.2m compared with a loss of €0.5m for the 12 months
to 31 December 2019. This is primarily due to the €0.84m costs incurred in association with the Reverse
Takeover (RTO) together with project impairment charges of €0.47m for Abbeytown and €0.11m for
Brännberg taken in 2020 to reflect the Company's primary focus on the Zinnwald Lithium project.
Total Net assets of the Group increased to €10.36m at 31 December 2020 from €3.5m at 31 December 2019
due to the Company's acquisition of the stake in Deutsche Lithium and the raising of funds for that project.
Intangible assets decreased to €1.55m from €2.0m due to impairment provisions. Other current liabilities
increased from €0.04m to €0.06m and relate primarily to accrued audit fees at the year end.
The closing cash balance for the Group at the end of the period was €4.85m, an increase from €3.35m at last
year end. The Group’s latest cash balance as at the date of this report was €4.8m.
5
Section 172(1) Statement - Promotion of the Company for the benefit of the members as a whole
The Directors believe they have acted in the way most likely to promote the success of the Company for the
benefit of its members as a whole, as required by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
Consider the likely consequences of any decision in the long term,
Act fairly between the members of the Company,
•
•
• Maintain a reputation for high standards of business conduct,
•
•
•
Consider the interests of the Company’s employees,
Foster the Company’s relationships with suppliers, customers and others, and
Consider the impact of the Company’s operations on the community and the environment.
Since the completion of the Zinnwald RTO in October 2020, the Company now primarily operates as a lithium
exploration and mining company, rather than its historic gold and base metals exploration business. Its
primary investment, the Zinnwald Lithium Project, has completed its Bankable Feasibility Study and has a
mining licence. It is currently undertaking additional work to further develop the Project towards approval of
the construction phase of the project. As such, the Project is at pre-revenue stage and inherently speculative
in nature and, without regular income, is dependent upon fund-raising for its continued operation. The pre-
revenue nature of the business is important to the understanding of the Company by its members, employees
and suppliers, and the Directors seek to provide transparency about the Company's cash position and funding
requirements as is allowed under applicable regulations.
- 10 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
The application of the s172 requirements can be demonstrated in relation to the some of the key decisions
made during 2020:
•
•
•
•
Zinnwald Acquisition – the Directors have been looking for some time for a suitable asset meeting
the Board’s criteria of being sufficiently advanced and located in a suitable, low risk jurisdiction. The
Directors identified the Zinnwald Lithium Project as meeting all these criteria and being suitable for
ownership on a standalone basis in a public company. This transaction has transformed the
Company and has resulted in a revised strategy focused on becoming an important supplier to
Europe’s fast-growing lithium sector.
Exercise of option with GreenOre – In early 2020, the Company was focussed on exploiting its
expertise in early-stage gold exploration activities and the Loch Tay project met the criteria the
Directors were looking for. Once the initial sampling and review process had taken place in late
2019/early 2020, the Directors believed that the project was worth exploring further. The equity
markets responded favourably to this decision and the Company raised further funds for the project
in May 2020.
Divestment of Erris Gold – the Directors concluded that the Loch Tay project, whilst already
generating promising results and potential drill targets, was too early an exploration stage project on
its own to support the costs of being a listed company. The Board believed that the Loch Tay project,
on a standalone basis, would be better developed in a private company that can more efficiently
utilise its financial resources to advance the project. Accordingly, the project was spun out to its
shareholders at the same time as the Zinnwald acquisition.
Not undertaking further drilling campaigns in Ireland and Sweden - having completed extensive
drilling and metallurgical work in both countries in 2018 and 2019, the Directors elected not to proceed
with further drilling in 2020 to preserve cash for the benefit of the Company's shareholders and
employees. The Company has renewed its core licenses and the Directors are currently looking for
joint venture partners to finance further development at both projects. The Group no longer has any
employees in the regions but has always maintained good relations with local mining authorities and
the communities in which it operates.
As a mining exploration Company operating in Germany, Ireland and Sweden, the Board takes seriously its
ethical responsibilities to the communities and environment in which it works. It abides by local and relevant
UK laws on anti-corruption & bribery. Wherever possible, local communities are engaged in the geological
operations and support functions required for field operations, providing much needed employment and wider
economic benefits to the local communities. In addition, the Company follows international best practice on
environmental aspects of its work. The Board's goal is to meet or exceed the required standards, in order to
ensure the Company obtains and maintains its social licence to operate from the communities with which it
interacts. The interests of the Company's employees are a primary consideration for the Board. An inclusive
share-option programme allows them to share in the future success of the Company, personal development
opportunities are supported, and a health and security support network is in place to assist with any issues
that may arise on field expeditions.
On behalf of the board
..............................
Anton du Plessis
Director
25 February 2021
- 11 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the group and parent company financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006. Under company law
the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs of the group and company, and of the profit or loss of the group and company for that period. In
preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether applicable IFRS, as adopted by the European Union have been followed, 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
group and company will continue in business.
•
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group and parent company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The Company is compliant with AIM rule 26 regarding the Company's website.
- 12 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
The directors present their annual report and audited financial statements for the year ended 31 December 2020.
Principal activities
The principal activity of the Company and Group is that of developing the Zinnwald Lithium Project to become the
next lithium producer at the heart of Europe. Details of future developments are included in the Strategic Report.
Results and dividends
The results for the year are set out on page 29.
The Company distributed its shares in Erris Gold Resources Ltd to the Company’s shareholders on the register
immediately prior to the Zinnwald acquisition via a dividend in the amount of €490,888. No ordinary cash dividends
were paid. The directors do not recommend payment of a further dividend.
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as
follows:
Jeremy Martin
Cherif Rifaat
Anton du Plessis
Graham Brown
Peter Secker
Jeremy Taylor-Firth
(Appointed 29 October 2020)
(Resigned 30 September 2020)
Directors' interests
The directors' interests in the shares of the company were as stated below:
% of issued share
capital
0.01%
0.06%
-
-
-
% of issued share
capital
0.09%
0.39%
-
0.13%
-
Share Options
350,000
800,000
-
200,000
-
Share Options
250,000
800,000
-
100,000
100,000
As at 31 December 2020
No of shares
Jeremy Martin
Cherif Rifaat
Anton du Plessis
Graham Brown
Peter Secker
27,000
120,000
-
-
-
As at 31 December 2019
No of shares
Jeremy Martin
Cherif Rifaat
Anton du Plessis
Jeremy Taylor-Firth
Graham Brown
27,000
120,000
-
40,000
-
- 13 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Substantial shareholdings
The directors are aware of the following substantial interests or holdings in 3% or more of the Company's ordinary
issued share capital as at 24 February 2021:
Major shareholder
Bacanora Lithium Plc
Henry Maxey
David Hall
No of shares
90,619,170
30,000,000
6,827,000
% of issued share
capital
44.32%
14.67%
3.34%
Directors' insurance
The Group has made qualifying third-party indemnity provisions for the benefit of its directors, which were made
during the period and remain in force at the reporting date.
EIS Status
On 18 September 2018, the Company announced that it had received notice from HMRC that its Enterprise
Investment Scheme (“EIS”) status had been confirmed and that any individual investors who had participated in the
IPO and who wished to take advantage of the EIS tax relief benefits should contact the Company. Since that date,
the Company has issued certificates to 65 shareholders who acquired a total of 3,743,000 shares in the IPO.
Supplier payment policy
The Group's current policy concerning the payment of trade creditors is to follow the CBI's Prompt Payers Code
(copies are available from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU).
The Group's current policy concerning the payment of trade creditors is to:
•
•
•
settle the terms of payment with suppliers when agreeing the terms of each transaction;
ensure that suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts;
and
pay in accordance with the Group's contractual and other legal obligations.
Working capital and liquidity risk
Cashflow and working capital forecasting is performed in the operating entities of the Group and consolidated at a
Group level basis for monthly reporting to the Board. The Directors monitor these reports and rolling forecasts to
ensure the Group has sufficient cash to meet its operational needs. The Board has a policy of maintaining at least a
GBP 0.5m cash reserve headroom. Aside from its commitments under the Deutsche Lithium Joint Venture, the
Group has no other material fixed cost overheads other than Director costs and the costs of being a listed company.
Foreign currency risk
The Company operates internationally and is exposed to foreign exchange risk arising from one main currency
exposure, namely GBP for its Head Office costs and the value of its shares for fund-raising and Euros for a material
part of its operating expenditure. The Group’s Treasury risk management policy is currently to hold most of its cash
reserves in GBPs and to match as promptly as possible its Euro expenditures on its commitments in Germany.
Credit and Interest Rate Risk
The Company has no borrowings and a low level of trade creditors and has minimal credit or interest rate risk
exposure.
Auditor
PKF Littlejohn LLP has expressed its willingness to continue in office and a resolution proposing that they be re-
appointed will be put at a General Meeting.
- 14 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit
information of which the auditor of the Company is unaware. Additionally, the directors individually have taken all the
necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit
information and to establish that the auditor of the Company is aware of that information.
Streamlined Energy and Carbon Reporting
As per the Streamlined Energy and Carbon Reporting (“SECR”) Regulations published in 2018 quoted companies
and large unquoted companies that have consumed more than 40,000 kilowatt-hours (kWh) of energy in the reporting
period must include energy and carbon information within their directors' report. Zinnwald Lithium Plc and the Group
do not qualify as a quoted company or a large unquoted company and therefore are presently exempt from the SECR
reporting requirements. The Company intends to publish energy emissions data in line with the SECR regulations
as the Zinnwald Lithium Project develops.
On behalf of the board
..............................
Jeremy Martin
Director
25 February 2021
- 15 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2020
Zinnwald Lithium Plc (The "Company") adheres to the Quoted Company Alliance’s (“QCA”) Corporate Governance
Code for Small and Mid-Size Quoted Companies (revised in April 2018) to meet the requirements of AIM Rule 26.
The Company includes below the material disclosures required under these QCA guidelines. The Company also
publishes a more detailed QCA Statement on its website, which is updated annually and last updated in October
2020. This statement includes more comprehensive disclosures considered to be more appropriate in that format.
Board Composition
As at 31 December 2020, the Board comprised two Executive Directors, a Non-Executive Chairman and two other
Non-executive Directors. Details of the current Directors are set out within the List of Directors below. The Board
will continue to review its structure in order to provide what it considers to be an appropriate balance of executive
and non-executive experience and skills.
The Board considers the following Non-Executive Directors to be independent – Jeremy Martin and Graham
Brown. Neither of these directors have been employees, have a significant business relationship or close family
ties with related parties or represent significant shareholders. Whilst both of these directors have received options
under the company’s Share Option Scheme, these are non-material in nature and do not compromise their
independence. Peter Secker is the appointee of Bacanora Lithium plc under the terms of the relationship
agreement entered into as part of the acquisition process in October 2020. Under the terms of this agreement,
Bacanora shall be entitled to appoint one director to the Company's Board, whilst it holds between 25% and 45%
of the shares of the Company.
Board Terms of Reference and Powers
The Board sets the Company’s strategic aims and ensures that necessary resources are in place in order for the
Company to meet its objectives. All members of the Board take collective responsibility for the performance of the
Company and all decisions are taken in the interests of the Company.
The Board has adopted a ‘Charter’ that sets out the role and responsibility of the Board and the manner in which
it will exercise and discharge these duties. The role of the Board is to determine the strategic direction of the
Company, regularly review the appropriateness of it and oversee its implementation. It is not the role of the Board
to manage the Company itself but rather to monitor the management and performance of the business. It does this
in the following areas:
•
•
•
•
•
•
Board composition and organisation
Strategy, financial and operational matters
Financial expenditure
Shareholder engagement and communications
Governance and general sustainability (ESG) matters
Designated positions of responsibility. The roles of management are covered in relation to their interaction
with the Board rather than their day-to-day operational tasks.
The Non-Executive Directors have a particular responsibility to challenge constructively the strategy proposed by
the Chairman and the Executive Directors; to scrutinise and challenge performance; to ensure appropriate
remuneration and that succession planning arrangements are in place in relation to the Executive Directors and
other senior members of the management team. The Executive Directors enjoy open access to the Non-Executive
Directors with or without the Chairman being present.
Director Commitments
The Executive Directors, Anton du Plessis and Cherif Rifaat, were employed on new contracts as part of the
October 2020 re-admission process and full details of these contracts are set out in the October 2020 Admission
Document, which is published on the Company’s website.
All Non-Executive Directors acknowledge in their letter of appointment that the nature of the role makes it
impossible to be specific on maximum time commitment and that at certain times of increased activity, then
preparation for and attendance at meetings will increase. All Directors are expected to attend all Board meetings
(either in person or by phone), the AGM and committee meetings.
- 16 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Board Meetings
The Board looks to meet in a formal manner on a quarterly basis, with additional meetings held as required to
review the corporate and operational performance of the Group. Each Board Committee has compiled a schedule
of work, to ensure that all areas for which the Board has responsibility are addressed and reviewed during the
course of the year.
The Chairman, aided by the Company Secretary, is responsible for ensuring that the Directors receive accurate
and timely information. The Company Secretary compiles the Board and Committee papers which are circulated
to Directors well in advance of all meetings. The Company Secretary provides minutes of each meeting and every
Director is aware of the right to have any concerns minuted.
A summary of Board meetings attended in the 12 months to 31 December 2020 is set out below:
Jeremy Martin
Cherif Rifaat
Anton Du Plessis
Graham Brown
Jeremy Taylor-Firth
Peter Secker
23 Jan
✓
✓
✓
✓
✓
n/a
2 Apr
✓
✓
✓
✓
✓
n/a
14 Apr
✓
✓
✓
✓
✓
n/a
29 Apr
✓
✓
✓
✓
✓
n/a
19 Aug
✓
✓
✓
✓
X
n/a
9 Sep
✓
✓
✓
✓
✓
n/a
7 Oct
✓
✓
✓
✓
n/a
n/a
8 Dec
✓
✓
✓
X
n/a
✓
Board Committees
The Board has delegated specific responsibilities to the Audit and Remuneration Committees, details of which are
set out below. Each Committee has written terms of reference setting out its duties, authority and reporting
responsibilities. It is intended that these will be kept under continuous review to ensure they remain appropriate
and reflect any changes in legislation, regulation or best- practice.
There is currently no internal audit function, given the size of the Group, although the Audit Committee keeps this
under annual review.
The Board considers that, at this stage in the Company's development, it is not necessary to establish either a
formal nominations or corporate governance committee and that these processes shall be carried out by the Board.
This decision will be kept under review by the Directors on an on-going basis.
Audit Committee
The Audit Committee’s overall goal is to ensure that the Group adopts and follows a policy of proper and timely
disclosure of material financial information and reviews all material matters affecting the risks and financial position
of the Group.
The Committee is responsible for overseeing for the Company, major subsidiaries and the Group as a whole, in
relation to the following matters:
Financial reporting;
Internal control and risk management systems;
Internal audit function;
External audit and the relationship with the external auditors; and
•
•
•
•
• Whistleblower and fraud programme
The Audit Committee meets at least twice a year and comprises independent non-executive Directors only, with
the Chief Financial Officer in attendance and not a member. The external auditors may attend all meetings. The
Audit Committee currently comprises Graham Brown as Chairman and Jeremy Martin.
- 17 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Remuneration Committee
The Remuneration Committee assumes general responsibility for assisting the Board in respect of remuneration
policies and strategies for the Company and ensuring they are designed to support strategy and promote long-
term sustainable success. It ensures that the Company offers competitive remuneration that is aligned to company
purpose and values, and clearly linked to the successful delivery of the Group’s long-term strategy, whilst remaining
financially responsible. It also ensures formal and transparent procedure for developing policy on executive
remuneration and determining director and senior management remuneration.
•
•
•
•
•
•
Remuneration policies, including long and short-term incentives;
Review of executive management performance and recommendations for incentive awards;
Annual reporting of the Company’s remuneration activities;
Administration of the New Share Incentive Schemes;
Company policies regarding pension and other benefits; and
The engagement and independence of external remuneration advisers.
The Remuneration Committee meets as and when necessary. The Remuneration Committee is comprised
exclusively of independent non-executive Directors and currently comprises Graham Brown and Jeremy Martin as
Chairman. No Director is permitted to participate in discussions or decisions concerning his own remuneration.
Board as a whole
The skills and experience of the Board are set out in their biographical details below. The experience and
knowledge of each of the Directors gives them the ability to constructively challenge strategy and to scrutinise
performance. The Board believes it has a mix of technical skills (e.g., geologists), sector experience (exploration
through to production with resources companies), public company experience and financial expertise to enable it
to deliver on its strategy. Whilst there is not currently a balance of genders on the Board, the Company’s directors
look to appoint individuals with complementary skills and experience to fulfil the Company’s strategy, regardless
of gender.
The Board does not believe that any of the Directors have too many directorship roles at other listed companies
and are hence at risk of “over-boarding” as defined by ISS voting guidelines but will continue to monitor this on an
ongoing basis. The Board is satisfied that the Chairman and each of the non-executive Directors is able to devote
sufficient time to the Group’s business.
Jeremy Taylor-Firth resigned from the Board and Peter Secker was appointed to the Board during the period to 31
December 2020.
The directors keep their skillsets up to date by attending industry and qualification relevant seminars and training
sessions.
List of Directors in 2020
Jeremy Martin. Non-Executive Chairman
Mr Martin was one of the original founders of the Company in 2012 and has performed both non-executive director
and non-executive chairman roles. He has significant experience in companies involved in mining exploration. He
has worked in South America, Central America and Europe, where he was responsible for grassroots regional
metalliferous exploration programmes through to resources definition and mine development. Mr Martin has been
involved in the formation of a number of publicly listed mineral resource companies. He is currently Chief Executive
Officer of Horizonte Minerals Plc, which is at the post feasibility study stage of its nickel project in Brazil. Mr Martin
holds a BSc (Hons), MSc, ACSM and MSEG.
- 18 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Anton du Plessis. Chief Executive Officer
Mr du Plessis joined the Company, originally as Chief Executive Officer, in October 2018. He has over 20 years’
experience in the finance sector. During this time, he has held senior positions at several international investment
banks including CIBC, Bank of America Merrill Lynch and Morgan Stanley with a focus on advising natural
resources companies on the execution of strategic and financing transactions. He has worked on transactions
across a range of commodities and for a number of leading global companies including AngloGold Ashanti, Rio
Tinto, and BHP Billiton. Prior to embarking on his investment banking career, Mr du Plessis worked for the Anglo
American group in a corporate finance and business development capacity.
Cherif Rifaat. Chief Financial Officer
Mr Rifaat has been Chief Financial Officer of the Company since 2017. He is a UK chartered accountant who has
more than 20 years of venture capital, corporate finance, operational turnaround and investor relations experience
since his qualification with KPMG. He has primarily worked with technology, mining and real estate companies,
with an emphasis on those in a start-up, pre-IPO or restructuring phase. He has been a corporate and financial
adviser to the lithium mining company, Bacanora, since it listed on AIM in 2014, and is currently its company
secretary. Mr Rifaat has been a member of the ICAEW since 1998.
Graham Brown. Non-Executive Director
Mr Brown has served as a non-executive director of the Company since 2017. He has been a Fellow of the Society
of Economic Geologists (“SEG”) since 1999, participated in the Colombia Senior Executives programme in 2004
and the Duke Business Leaders programme in 2007. He is a past councillor of the SEG and current British
Geological Survey industry adviser and Natural History Museum honorary research fellow. In 2011, he was the co-
recipient of the PDAC Thayer Lindsley Award and from 2013 attained both Chartered Geologist and European
Geologist professional status. Mr. Brown joined Amax as an exploration geologist in 1980 and worked on a variety
of exploration and mining operations in the Circum-Pacific region. For almost a decade Mr. Brown worked as a
consultant involved with the exploration and evaluation of a number of major discoveries in both Asia and Europe.
In 1994, he joined Minorco as Chief Geologist. Subsequently, he became the Europe-Asia region’s Vice President
Exploration and following the Minorco-Anglo American plc merger in 1999, he served as Vice President Geology.
In 2003 he was appointed Senior Vice President Exploration and managed geosciences, technical services, and
R&D programs. In 2005 he was promoted to Head of Base Metals Exploration and in 2010 he took up the position
of Group Head of Geosciences for the Anglo American Group. He is currently a senior adviser to Appian Capital,
a prominent private equity fund focussed on mining. Mr Brown holds a BSc. from the University of Strathclyde,
Glasgow.
Peter Secker. Non-Executive Director (appointed 29 October 2020)
Mr Secker is Chief Executive of Bacanora. He is a mining engineer with over 35 years’ experience in the resources
industry. During his career, he has built and operated a number of mines and metallurgical processing facilities in
Africa, Australia, China and Canada. His operating and project experience spans a number of commodities,
including titanium, copper, iron ore, gold and lithium. For the past 15 years, Mr Secker has been Chief Executive
of a number of publicly listed companies in Canada, the UK and Australia.
Jeremy Taylor-Firth. Non-Executive Director (resigned 30 September 2020)
Mr Taylor-Firth has worked in investment management since 1996. He initially worked at Matheson Securities,
which was acquired by Prudential-Bache Ltd and subsequently renamed Dryden Wealth Management. In June
2006, he joined Singer & Friedlander Investment Management as an Investment Director. This business was then
acquired by Williams de Broe where he worked until October 2010. Jeremy is currently an Investment Manager
with Hanson Investment Management, where he has worked for the last six years. Jeremy holds CISI Level 6
PCIAM.
Board Advice during the year
During the year, the Board did not commission any external advice for its own matters.
- 19 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Internal Advisory roles
Senior Independent Director
Due to the size of the company, the Board does not feel it necessary to appoint a Senior Independent Director.
Company Secretary
The CFO undertakes the joint role of company secretary, as the Board does not feel the size of the company
warrants an independent person.
Annual Board appraisal
In accordance with current best practice and the Code, the Board conducts an annual formal evaluation of its
performance and effectiveness and that of each Director and its Committees. This is conducted during the year
by way of interviews with the Chairman. In addition, the Non-Executive Directors will meet, informally, without the
Chairman present and evaluate his performance. The Board currently considers that the use of external
consultants to facilitate the Board evaluation process is unlikely to be of significant benefit to the process, although
the option of doing so is kept under review.
Ongoing Board Development
The Executive Directors are subject to the Company’s annual review process through which their performance
against predetermined objectives is reviewed, as part of the new incentive scheme review, as well as their personal
and professional development needs considered.
Non-executive Directors are encouraged to raise any personal development or training needs with the Chairman
or through the Board evaluation process.
The Company Secretary ensures that all Directors are kept abreast of changes in relevant legislation and
regulations, with the assistance of the Company’s advisers where appropriate.
Succession Planning
The Board has a minuted emergency succession plan for the Senior Management Team. On an ongoing basis,
board members maintain a watching brief to identify relevant internal and external candidates who may be suitable
additions to or backup for current board members.
Audit Committee Report
During 2020, the Audit Committee’s agenda has continued to be built around the usual key recommendations to
the Board being the Annual Budget, Review and Approval of the Audited Annual Financial Statements and the
review of the half year results. As well as the reporting requirements, the Audit Committee has also paid close
attention to the cash flow requirements of the Group to ensure that the Company maintains a tight control on
expenditure and remains well financed.
The Audit Committee is responsible for assuring accountability and effective corporate governance over the
Company’s financial reporting, including the adequacy of related disclosures, the internal financial control
environment and the processes in place to monitor this.
In respect of financial reporting activities, the Audit Committee reviews and recommends to the Board for its
approval all half-year and full-year financial results announcements. In considering the financial results contained
in the 2020 Annual Report and Financial Statements, the Audit Committee reviewed the significant issues and
judgements made by management in determining those results. A key element of the work going forward will be
the continued development of the control of risk within the business.
Graham Brown
Audit Committee Chairman
25 February 2021
- 20 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Remuneration Committee report
For details of Directors’ emoluments, please refer to note 34 of the Consolidated Financial Statements. As part of
the Acquisition and Re-Admission process, the Remuneration Committee met to consider and recommended
changes to the levels of Executive and Director remuneration. The new contracts were detailed in full in the
Admission Document. Furthermore, the Committee recommended the introduction of new incentive schemes
linked to future performance. These new schemes were approved by shareholders at the General Meeting in
October 2020.
The purpose of the Schemes is to assist the Company in attracting and retaining individuals with experience and
exceptional skill, to allow selected executives, key employees and directors of the Company to participate in the
long-term success of the Company and to promote a greater alignment of interests between the participants
designated under the Schemes and the Shareholders. The terms of these new schemes were detailed in full in
the Admission Document, but the key terms are as follows:
Short-Term Restricted Stock Unit (“RSU”) Scheme:
•
•
•
•
Awards granted under the RSU Scheme will be subject to annual performance criteria set by the
Remuneration Committee each financial year, relating to each eligible employee’s performance against
personal, financial, strategic and ‘Environmental, Social, and Corporate Governance’ (“ESG”) metrics.
Any awards will be based on a percentage of base salary as recommended by the Remuneration
Committee at the start of each performance period, being 60% for the initial period. The number of RSUs
issued will be based on the share price of the Company on expiry of the RSU Initial Performance Period.
Any RSUs issued will be subject to a further 2-year vesting period.
Each eligible person will be set a (i) minimum performance threshold which must be satisfied in order to
trigger any issuance of RSUs to them (“Threshold”). In addition, a base target (“Target”) and maximum
amount (“Maximum”) will also be set.
The first performance period will run with an effective date from 1 October 2020 until 31 December 2021,
with subsequent performance periods running annually from 1 January 2022 onwards.
Long-Term Performance Share Unit (“PSU”) Scheme:
•
•
•
•
•
•
Awards granted under the PSU Scheme will be subject to three-year performance criteria set by the
Remuneration Committee each financial year, relating to objective corporate metrics as follows:
‘Relative Total Shareholder Return (“RTSR”)’ against the peer group; and
a significant corporate strategic goal set by the Company. During the PSU initial performance period, this
goal shall be the Company gaining control of 100 per cent. of Deutsche Lithium.
The Company will calculate any awards under the PSU Scheme based on a percentage of base salary
as recommended by the Remuneration Committee at the start of each performance period and the share
price at the start of the period. For the initial performance period this shall be 100% and the RTO Price of
5p per share. Any PSUs issued will be subject to a further 2-year vesting period.
Performance criteria shall be assessed 50:50 between these two corporate metrics. The assessment
relating to RTSR shall be calculated as Maximum being in the top quartile, Target being in the top half
and Threshold being in the third quartile. The assessment relating to the corporate goal shall generally be
binary Yes or No, but with the Board or Remuneration Committee having sole discretion to assess partial
achievement.
The first performance period will be with an effective date from 1 October 2020 to 31 December 2023 with
subsequent three-year performance periods starting from 1 January 2022.
Peer Group
The peer group for the ‘Relative Total Shareholder Return’ metric comprises all of the listed lithium companies that
meet the criteria of most or all of being European focussed or listed, pre-production and either hard or soft rock in
nature. These peer group companies are Bacanora Lithium Plc (AIM:BCN), European Metals Holdings (AIM:
EMH), Savannah Resources (AIM:SAV), Kodal Minerals (AIM:KOD), Infinity Lithium (ASX:INF), Vulcan Energy
Resources (ASX:VUL), European Lithium (ASX:EUR), and Critical Elements (TSX:CRE).
Jeremy Martin
Remuneration Committee Chairman
25 February 2021
- 21 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
Engagement with all shareholders
The Board attaches great importance to providing shareholders with clear and transparent information on the
Group's activities, strategy and financial position. General communication with shareholders is co-ordinated by
the Chairman, CEO and CFO.
The Company publishes on its website the following information, which the Board believes plays an important part
in presenting all shareholders with an assessment of the Group’s position and prospects:
•
•
•
•
•
•
•
•
The Company’s latest Investor presentation
The Company’s most up to date technical reports on each of its projects;
Annual and Half-Yearly Financial Statements;
All company press releases issued under the RNS service;
Notice of any General Meetings will be posted on the website as well as announced via RNS;
Details on the results of all resolutions put to a vote at the most recent AGM;
Contact details including a dedicated email address (info@zinnwaldlithium.com) through which investors
can contact the Company; and
The results of voting on all resolutions in future general meetings will be posted to the Group’s website,
including any actions to be taken as a result of resolutions for which votes against have been received
from at least 20 per cent. of independent shareholders'
The Company’s Annual General Meeting (AGM) will generally be held in London in June following the publication
of its annual results and all shareholders are ordinarily invited to attend. In 2020, due to the COVID-19 pandemic,
the AGM was unfortunately closed to external shareholders.
Institutional Investors
In general, the Board maintains a regular dialogue with its institutional investors, providing them with such
information on the Company’s progress as is permitted within the guidelines of the AIM rules, MAR and
requirements of the relevant legislation. The Company typically holds meetings with institutional investors and
other large shareholders following the release of interim and financial results.
Private Investors
The Company is committed to engaging with all shareholders and not just institutional shareholders. As the
Company is too small to have a dedicated investor relations department, the Chief Executive Officer is responsible
for reviewing all communications received from shareholders and determining the most appropriate response. The
Chief Executive Officer works in conjunction with the Company’s public relations advisers to facilitate engagement
with its shareholders
Board review
The Board as a whole is kept informed of the views and concerns of major shareholders by briefings from the CEO,
Chairman and the Company’s Broker.
- 22 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ZINNWALD LITHIUM PLC
Opinion
We have audited the financial statements of Zinnwald Lithium Plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 31 December 2020 which comprise the Group Statement of Comprehensive Income, the
Group and Company Statements of Financial Position, the Group and Company Statements of Changes in Equity, the
Group and Company Statements of Cash Flows and notes to the financial statements, including significant accounting
policies. The financial reporting framework that has been applied in their preparation is applicable law and international
accounting standards in conformity with the requirements of the Companies Act 2006 and as regards the parent
company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group's and the parent company's affairs
as at 31 December 2020 and of the group's and parent company's loss for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the
financial statements section of our report. We are independent of the group and parent company in accordance with
the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard, as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s
and parent company’s ability to continue to adopt the going concern basis of accounting included an evaluation of
management’s assessment and a review of management’s budget and cash flow forecasts prepared up to 31 December
2022. This included an analysis of qualitative and quantitative aspects within management’s assessments.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group's or parent company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
- 23 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ZINNWALD LITHIUM PLC
Our application of materiality
The scope of our audit was influenced by our application of materiality. The quantitative and qualitative thresholds for
materiality determine the scope of our audit and the nature, timing and extent of our audit procedures. Group and parent
company materiality was €220,000 (2019: €70,000) and €195,000 (2019: €44,000) respectively, based on 2% of gross
assets for the group and 10% of loss before tax for the period for the parent company. The increase from the prior
period reflects the investment in the Deutsche Lithium project for the group and the RTO transaction costs incurred by
the parent company. From a group perspective the key benchmark is gross assets, given that current and potential
investors will be most interested in the recoverability of the exploration and evaluation assets and the investment in joint
venture. From a parent company perspective, the key benchmark is the loss for the year when demonstrating effective
working capital and cost management.
Component materiality for all entities within the group was set lower than our overall group materiality and ranged from
€32,500 to €46,000. Performance materiality for the group, and all significant components, was set at 60% of overall
materiality.
We agreed with the audit committee that we would report all audit differences identified during the course of our audit
in excess of €11,000 (2019: €3,500). There were no misstatements identified during the course of our audit that were
individually, or in aggregate, considered to be material.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at greatest risk of material misstatement,
aspects subject to significant management judgement as well as greatest complexity, risk and size.
In designing our audit, we determined materiality and assessed the risk of material misstatement in the financial
statements. The recoverability of intangible assets and investment in joint venture and the valuation of share-based
payments were assessed as areas which involved significant accounting estimates and judgements by management.
We also addressed the risk of management override of internal controls, including evaluating whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud. All significant and / or
material components were audited directly without the use of component auditors.
- 24 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ZINNWALD LITHIUM PLC
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matters
How our scope addressed this matter
Valuation and recoverability of intangible assets
(refer note 14)
There is a risk that intangible fixed assets may be
to expenditure being
materially misstated due
incorrectly capitalised in the year (for example, not in
accordance with IFRS 6), or due to the carrying value
of the intangible assets exceeding their recoverable
amount.
The former joint venture partner Centerra Gold
elected to terminate the Strategic Alliance with the
group in December 2019. In addition, the group has
elected to seek a joint venture partner on its Ireland
project, and does not intend to progress its exploration
activities in Sweden, indicating potential impairment.
With the exception of the newly acquired joint venture
lithium project, all of the Group’s exploration projects
are at an early stage of development therefore
independently prepared resource estimates are not
available to enable value in use calculations. The
group is therefore reliant on the consideration of
impairment indicators per IFRS 6 which requires
estimation and judgement.
Management has outlined their key judgements and
sources of estimation uncertainty in note 2 of the
financial statements.
Accounting for the acquisition of 50% joint
venture in Deutsche Lithium GmbH (refer note 16)
Our work in this area included:
•
•
•
•
•
the
year
to
Agreeing additions during
invoice/supporting documentation; ensuring that
the expenditure is eligible to be capitalised in
accordance with IFRS 6;
Assessing management's impairment review,
taking into account both internal and external
indicators and impairment indicators per IFRS 6;
Verifying title to project licenses and compliance
with the terms therein;
Assessing progress on the exploration projects
during the year; and
Ensuring licenses are still valid and that any
performance conditions / minimum expenditure
requirements were met during the year. We
consider that management’s estimation and
judgement in this area was reasonable, and no
additional impairment is required in addition to
that currently recognised.
During the year, the Group purchased Bacanora
Lithium plc's 50% share in a lithium project held by
Deutsche Lithium Gmbh. There is a risk that the
transaction has not been appropriately accounted for
and disclosed in accordance with IAS 28 ‘Investments
in associates and joint ventures’, together with the sale
and purchase agreement and the subsequent joint
venture agreement.
Management has set out their analysis of the
accounting for the investment in note 1.1, 1.2 and note
2, which outlines their judgements and key areas of
estimation uncertainty.
Our work in this area included:
•
•
•
•
•
the
the share
terms within
Reviewing
purchase and joint venture agreements;
Undertaking audit testing on the acquisition
date net asset position of Deutsche Lithium
Gmbh, together with the year-end position.
Recalculating the group’s share of the joint
venture’s loss post acquisition;
Assessing the recoverability of the equity
accounted joint venture by reference to the
underlying lithium project;
Reviewing management’s
end
impairment review and agreeing inputs to
supporting documentation; and
Assessing any material differences between
German GAAP and EU endorsed IFRSs.
year
We are satisfied that management has correctly
accounted for the joint venture.
- 25 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ZINNWALD LITHIUM PLC
Other information
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the group and parent company financial statements does not cover the other information 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 information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors' report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
•
•
adequate accounting 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 financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors' responsibilities statement, the directors are responsible for the preparation of
the group and parent company financial statements and for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the group's
and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the
parent company or to cease operations, or have no realistic alternative but to do so.
- 26 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ZINNWALD LITHIUM PLC
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial 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 influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the group and parent company and the sector in which they operate to identify
laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We
obtained our understanding in this regard through discussions with management, as well as the application of
cumulative audit knowledge and experience of the sector.
• We determined the principal laws and regulations relevant to the group and parent company in this regard to
be those arising from the Companies Act 2006, IFRS accounting standards, AIM regulations and the operating
terms set out in the exploration licenses and joint venture agreement.
• We designed our audit procedures to ensure the audit team considered whether there were any indications of
noncompliance by the group and parent company with those laws and regulations. These procedures included,
but were not limited to specific enquiries of management, reviewing board minutes and any legal or regulatory
compliance correspondence.
• We also identified the risks of material misstatement of the financial statements due to fraud at both the group
and parent company level. We considered, in addition to the non-rebuttable presumption of a risk of fraud
arising from management override of controls, whether key accounting estimates and judgements could include
management bias. We addressed these risks by challenging the assumptions and judgements made by
management when auditing significant accounting estimates.
As in all of our audits, we addressed the risk of fraud arising from management override of controls by
performing audit procedures which included, but were not limited to: the testing of journals and evaluating the
business rationale of any significant transactions that are unusual or outside the normal course of business, as
well as discussions with management where relevant.
•
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those
leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases
the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding
irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion,
omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
- 27 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF ZINNWALD LITHIUM PLC
Use of our report
This report is made solely to the 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 company’s members those
matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
David Thompson (Senior Statutory Auditor)
for and on behalf of PKF Littlejohn LLP
Statutory Auditor
15 Westferry Circus
Canary Wharf
London
E14 4HD
Date: 25 February 2021
- 28 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
Continuing operations
Revenue
Cost of sales
Gross loss
Exploration projects impairment
Administrative expenses
RTO costs
Share based payments charge
Operating loss
Share of results of joint ventures
Finance income
Loss before taxation
Tax on loss
Loss for the financial year
Other comprehensive income
Total comprehensive loss for the year
Earnings per share from continuing
operations attributable to the owners of the
parent company
Basic (cents per share)
Diluted (cents per share)
Notes
4
26
6
10
9
12
32
13
31 December
2020
€
31 December
2019
€
-
(56,540)
(56,540)
(592,465)
(690,356)
(839,940)
(3,725)
(2,183,026)
(32,579)
367
(2,215,238)
-
(2,215,238)
-
17,527
(104,102)
(86,575)
-
(475,592)
-
-
(562,167)
-
-
(562,167)
30,648
(531,519)
-
(2,215,238)
(531,519)
(3.50)
(3.50)
(1.81)
(1.81)
Total loss and comprehensive loss for the year is attributable to the owners of the parent company.
- 29 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
GROUP STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Notes
31 December
2020
€
31 December
2019
€
Non-current assets
Intangible assets
Property, plant and equipment
Investments using equity method
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Net current assets
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity
14
15
16
21
20
22
27
29
30
32
1,546,111
3,662
3,852,083
5,401,856
170,926
4,846,527
5,017,453
10,419,309
58,833
58,833
4,958,620
58,833
10,360,476
2,278,155
7,362,699
814,821
(95,199)
10,360,476
2,002,334
-
-
2,002,334
36,030
1,497,277
1,533,307
3,535,641
43,130
43,130
1,490,177
43,130
3,492,511
351,133
4,151,045
811,077
(1,820,744)
3,492,511
The financial statements were approved by the board of directors and authorised for issue on 25 February 2021 and
are signed on its behalf by:
Jeremy Martin
Director
Cherif Rifaat
Director
Company Registration No. 10829496
- 30 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Notes
31 December
2020
€
31 December
2019
€
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Net current assets
Total liabilities
Net assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity
14
15
16
21
22
27
29
32
-
3,662
4,021,173
4,024,835
1,941,736
4,842,854
6,784,590
10,809,425
53,021
53,021
6,731,569
53,021
10,756,404
2,278,155
7,362,699
126,089
989,461
10,756,404
134,378
-
169,090
303,468
1,457,929
1,453,687
2,911,616
3,215,084
38,404
38,404
2,873,212
38,404
3,176,680
351,133
4,151,045
122,345
(1,447,843)
3,176,680
As permitted by s408 Companies Act 2006, the company has not presented its own income statement. The
company’s loss for the period was €1,503,479 (2019: €437,578).
The financial statements were approved by the board of directors and authorised for issue on 25 February 2021
and are signed on its behalf by:
Jeremy Martin
Director
Company Registration No. 10829496
Cherif Rifaat
Director
- 31 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Share
capital
Notes
€
Share
premium
account
€
Other
reserves
Retained
earnings
Total
€
€
€
Balance at 1 January 2019
351,133
4,151,045
827,376
(1,305,524) 4,024,030
Year ended 31 December 2019:
Loss and total comprehensive income
for the year
Total comprehensive income for the year
Transfer of lapsed share options
Total transactions with owners
recognised directly in equity
Balance at 31 December 2019 and 1
January 2020
Year ended 31 December 2020:
Loss for the year
Other comprehensive income:
Currency translation differences
Total comprehensive income for the year
-
-
-
-
-
-
-
-
-
-
(531,519)
(531,519)
(531,519)
(531,519)
(16,299)
16,299
16,299
16,299
-
-
351,133
4,151,045
811,077
(1,820,744) 3,492,511
-
-
-
-
-
-
-
(2,215,238)
(2,215,238)
19
-
19
19
(2,215,238)
(2,215,219)
Conversion of share premium to retained
profits
Issue of share capital
Dividends in specie
Credit to equity for equity settled
share-based payments
27
26
Total transactions with owners recognised
directly in equity
-
1,927,022
-
(4,431,671)
7,643,325
-
-
-
-
4,431,671
-
(490,888)
-
9,570,347
(490,888)
-
-
3,725
-
3,725
1,927,022
3,211,654
3,725
3,940,783
9,083,184
Balance at 31 December 2020
2,278,155
7,362,699
814,821
(95,199) 10,360,476
- 32 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Share
capital
€
Share
premium
€
Other
reserves
€
Retained
earnings
€
Total
€
Notes
Balance at 1 January 2019
351,133
4,151,045
138,644
(1,026,564) 3,614,258
Year ended 31 December 2019:
Loss and total other comprehensive
income for the year
Total comprehensive income for the year
Transfer of lapsed share options
Total transactions with owners
recognised directly in equity
Balance at 31 December 2019 and
1 January 2020
Year ended 31 December 2020:
Loss for the year
Other comprehensive income:
Currency translation differences
Total comprehensive income for the year
-
-
-
-
-
-
-
-
-
-
(437,578)
(437,578)
(437,578)
(437,578)
(16,299)
16,299
16,299
16,299
-
-
351,133
4,151,045
122,345
(1,447,843) 3,176,680
-
-
-
-
-
-
-
(1,503,479)
(1,503,479)
19
-
19
19
(1,503,479)
(1,503,460)
Conversion of share premium to
retained profits
Issue of share capital
Dividends in specie
Credit to equity for equity settled
share-based payments
Total transactions with owners
recognised directly in equity
Balance at 31 December 2020
27
26
-
1,927,022
-
(4,431,671)
7,643,325
-
-
-
-
4,431,671
-
(490,888)
-
9,570,347
(490,888)
-
-
3,725
-
3,725
1,927,022
3,211,654
3,725
3,940,783
9,083,184
2,278,155
7,362,699
126,089
989,461 10,756,404
- 33 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Year ended
31 December
2020
€
€
Year ended 31
December
2019
€
€
Notes
Cash flows from operating activities
Cash used in operations
35
Net cash outflow from operating activities
Cash flows from investing activities
Investment in Joint Ventures
Exploration expenditure
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and
equipment
Exploration expenditure utilising funds from
Strategic Alliance Agreement
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Funds received from Strategic Alliance Agreements
Equity subscription in Erris Gold Resources
Net cash generated from financing
activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(199,000)
(227,130)
(3,885)
5,300
-
367
5,884,685
-
(400,000)
(1,711,087)
(1,711,087)
(607,875)
(607,875)
-
(257,214)
-
-
(222,154)
-
(424,348)
(479,368)
-
217,627
-
5,484,685
217,627
3,349,250
1,497,277
4,846,527
(869,616)
2,366,893
1,497,277
- 34 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Year ended 31
December
2020
€
€
Year ended 31
December
2019
€
€
Notes
Cash flows from operating activities
Cash used in operations
36
Net cash used in operating activities
Cash flows from investing activities
Investment in joint ventures
Exploration expenditure
Purchase of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Equity subscription in Erris Gold Resources
Net cash generated from/(used in)
financing activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(199,000)
-
(3,885)
367
5,884,685
(400,000)
(1,893,000)
(1,893,000)
(614,233)
(614,233)
-
(41,393)
-
-
(202,518)
(41,393)
-
-
-
(655,626)
2,109,313
1,453,687
5,484,685
3,389,167
1,453,687
4,842,854
- 35 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1
Accounting policies
Company information
Zinnwald Lithium Plc (“the Company”) is a public limited company which is listed on the AIM Market of the
London Stock Exchange domiciled and incorporated in England and Wales. The registered office address is
29-31 Castle Street, High Wycombe, Buckinghamshire, United Kingdom, HP13 6RU.
The Company name was changed from Erris Resources Plc to Zinnwald Lithium Plc by a special resolution
approved by shareholders at the General Meeting held on 26 October 2020.
The group consists of Zinnwald Lithium Plc and its subsidiaries as detailed in Note 16.
1.1 Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) and IFRIC interpretations as adopted for use in the European Union and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS (except as otherwise stated).
The financial statements are prepared in euros, which is the functional currency of the Company and the
Group's presentation currency, since the majority of its expenditure, including funding provided to Deutsche
Lithium, is denominated in this currency. Monetary amounts in these financial statements are rounded to the
nearest €.
The consolidated financial statements have been prepared under the historical cost convention. The principal
accounting policies adopted are set out below.
1.2 Basis of consolidation
The consolidated financial statements incorporate those of Zinnwald Lithium Plc and all of its subsidiaries (i.e.,
entities that the group controls when the group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity).
The Board has concluded that whilst it has significant influence over Deutsche Lithium (50% shareholding, 1 of
the 2 co-managing directors and a casting vote on operational matters), it does not have control over the
company and consequently the investment is accounted for using equity accounting rather than consolidated.
Zinnwald Lithium Plc was incorporated on 21 June 2017. On 1 December 2017, Zinnwald Lithium Plc acquired
the entire issued share capital of Erris Resources (Exploration) Ltd by way of a share for share exchange. This
transaction was treated as a group reconstruction and accounted for using the reverse merger accounting
method.
All financial statements are made up to 31 December 2020. Where necessary, adjustments are made to the
financial statements of subsidiaries to bring the accounting policies used into line with those used by other
members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are
eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred.
Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are
deconsolidated from the date on which control ceases.
- 36 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
1
Accounting policies
1.3 Going concern
At the time of approving the financial statements, the directors have a reasonable expectation that the group
and company have adequate resources to continue in operational existence for the foreseeable future. The
Company had a cash balance of €4.85m at the year end and keeps a tight control over all expenditure. In
relation to Deutsche Lithium, the total outstanding commitments entered into by the Company amounts to
€1.386m at the end of 2020. Thus, the going concern basis of accounting in preparing the Financial Statements
continues to be adopted.
The Directors have reviewed the ongoing situation with COVID-19 and do not consider its effects to have a
material impact on the Group’s and Company’s going concern.
1.4 Revenue
Revenue is recognised at the fair value of the consideration received or receivable for services provided over
time in the normal course of business and is shown net of VAT and other sales related taxes.
Recognised in revenue are charges that were invoiced to the group's former joint venture partner, Centerra
Gold. These were based upon costs together with management fees incurred in connection with exploration
programmes carried out under joint venture arrangements and in which the group acts as principal. Revenue
from providing services is recognised in the accounting period in which the services are rendered.
1.5
Intangible fixed assets other than goodwill
Capitalised Exploration and Evaluation costs
Capitalised Exploration and Evaluation Costs consist of direct costs, licence payments and fixed
salary/consultant costs, capitalised in accordance with IFRS 6 "Exploration for and Evaluation of Mineral
Resources". The Group and Company recognises expenditure in Exploration and Evaluation assets when it
determines that those assets will be successful in finding specific mineral assets. Exploration and Evaluation
assets are initially measured at cost. Exploration and Evaluation Costs are assessed for impairment when facts
and circumstances suggest that the carrying amount of an asset may exceed its recoverable amount. Any
impairment is recognised directly in profit or loss.
1.6 Property, plant and equipment
Property, plant and equipment are initially measured at cost and subsequently measured at cost, net of
depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their
useful lives on the following bases:
Plant and equipment
Fixtures and fittings
Computers
25% on cost
25% on cost
25% on cost
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds
and the carrying value of the asset and is recognised in the income statement.
- 37 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
1
Accounting policies
1.7 Non-current investments
In the parent company financial statements, investments in subsidiaries and joint ventures are initially measured
at cost and subsequently measured at cost less any accumulated impairment losses.
1.8
Impairment of non-current assets
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the
group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets not yet ready to use and not yet subject to amortisation are reviewed for impairment whenever
events or circumstances indicate that the carrying value may not be recoverable.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
1.9 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks.
1.10 Financial assets
Financial assets are recognised in the group's and company's statement of financial position when the group
and company become party to the contractual provisions of the instrument.
Financial assets are classified into specified categories at initial recognition and subsequently measured at
amortised cost, fair value through other comprehensive income, or fair value through profit or loss. The
classification of financial assets at initial recognition that are debt instruments depends on the financial assets
cash flow characteristics and the business model for managing them.
Financial assets are initially measured at fair value plus transaction costs. In order for a financial asset to be
classified and measured at amortised cost, it needs to give rise to cash flows that are "solely payments of
principal and interest SPPI" on the principal amount outstanding.
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest rate method and are
subject to impairment. The group's and company's financial assets at amortised cost comprise trade and other
receivables and cash and cash equivalents.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial. The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the
debt instrument to the net carrying amount on initial recognition.
- 38 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
1
Accounting policies
Impairment of financial assets
Financial assets are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment
have been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
Financial liabilities
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability to the net carrying amount on initial
recognition.
Derecognition of financial liabilities
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or
cancelled.
1.11 Equity instruments
Equity instruments issued by the group are recorded at the proceeds received, net of direct issue costs.
1.12 Taxation
Income tax represents the sum of current and deferred tax.
Current tax
The tax currently payable is based on taxable profit or loss for the period. Taxable profit or loss differs from net
profit or loss as reported in the income statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
group’s and company's liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting end date.
- 39 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
1
Accounting policies
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial information and the corresponding tax bases used in the computation of
taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial
recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting
profit.
Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities
are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax authority.
1.13 Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are
required to be recognised as part of the cost of non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are
received.
Termination benefits are recognised immediately as an expense when the group and company is demonstrably
committed to terminate the employment of an employee or to provide termination benefits.
1.14 Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
- 40 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
1
Accounting policies
1.15 Equity
Share capital
Ordinary shares are classified as equity.
Share premium
Share premium represents the excess of the issue price over the par value on shares issued. Incremental
costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
Merger reserve
A merger reserve was created on purchase of the entire share capital of Erris Resources (Exploration) Ltd
which was completed by way of a share for share exchange and which has been treated as a group
reconstruction and accounted for using the reverse merger accounting method.
Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of equity-settled share-based payment
transactions.
1.16 Share-based payments
Equity-settled share-based payments with employees and others providing services are measured at the fair
value of the equity instruments at the grant date. Fair value is measured by use of an appropriate pricing model.
Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods
and services, except where the fair value cannot be estimated reliably, in which case they are valued at the fair
value of the equity instrument granted.
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based
on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.
When the terms and conditions of equity-settled share-based payments at the time they were granted are
subsequently modified, the fair value of the share-based payment under the original terms and conditions and
under the modified terms and conditions are both determined at the date of the modification. Any excess of
the modified fair value over the original fair value is recognised over the remaining vesting period in addition to
the grant date fair value of the original share-based payment. The share-based payment expense is not
adjusted if the modified fair value is less than the original fair value.
Cancellations or settlements (including those resulting from employee redundancies) are treated as an
acceleration of vesting and the amount that would have been recognised over the remaining vesting period is
recognised immediately.
- 41 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
1
Accounting policies
1.17 Foreign exchange
Foreign currency transactions are translated into the functional currency using the rates of exchange prevailing
at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising
on translation are included in administrative expenses in the income statement for the period.
The financial statements are presented in the functional currency of Euros, since the majority of exploration
expenditure is denominated in this currency.
1.18 Exceptional items
Items are disclosed separately in the financial statements where it is necessary to do so to provide further
understanding of the financial performance of the group. They are items that are material, either because of
their size or nature, or that are non-recurring.
1.19 Joint Arrangements
The Group’s core activities in relation to the Zinnwald Lithium project are conducted through joint arrangements
in which two or more parties have joint control. A joint arrangement is classified as either a joint operation or a
joint venture, depending on the rights and obligations of the parties to the arrangement.
Joint operations arise when the Group has a direct ownership interest in jointly controlled assets and obligations
for liabilities. The Group does not currently hold this type of arrangement.
Joint ventures arise when the Group has rights to the net assets of the arrangement. For these arrangements,
the Group uses equity accounting and recognises initial and subsequent investments at cost, adjusting for the
Group’s share of the joint venture’s income or loss, dividends received and other comprehensive income
thereafter. When the Group’s share of losses in a joint venture equals or exceeds its interest in a joint venture
it does not recognise further losses. The transactions between the Group and the joint venture are assessed
for recognition in accordance with IFRS.
No gain on acquisition, comprising the excess of the Group’s share of the net fair value of the investee’s
identifiable assets and liabilities over the cost of investment, has been recognised in profit or loss. The net fair
value of the identifiable assets and liabilities have been adjusted to equal cost.
Joint ventures are tested for impairment whenever objective evidence indicates that the carrying amount of the
investment may not be recoverable under the equity method of accounting. The impairment amount is
measured as the difference between the carrying amount of the investment and the higher of its fair value less
costs of disposal and its value in use. Impairment losses are reversed in subsequent periods if the amount of
the loss decreases and the decrease can be related objectively to an event occurring after the impairment was
recognised.
1.20 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief
Executive Officer, who is considered to be the group's chief operating decision-maker ('CODM').
- 42 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
1
Accounting policies
1.21 New standards, amendments and interpretations not yet adopted
The following standards and amendments were adopted by the group and company during the year, none of
none of which had a material impact:
•
•
•
IFRS 16 - Leases
Amendments to IFRS 2 - Classification and Measurement of Share-based Payment Transactions; and
Annual improvements to IFRS Standards 2015-2017 Cycle
At the date of approval of these financial statements, the following standards and amendments were in issue
but not yet effective, and have not been early adopted:
•
•
•
•
IFRS 3 amendments - Business Combinations*,
IAS 1 amendments - Presentation of Financial Statements: Classification of Liabilities as Current or
Non-Current*,
IAS 1 & IAS 8 amendments - Definition of Material; and
Amendments to References to the Conceptual Framework in IFRS Standards.
*subject to EU endorsement
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a
material impact on the group or company.
2
Judgements and key sources of estimation uncertainty
In the application of the accounting policies, the directors are required to make judgements, estimates and
assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised where the revision affects only that
period, or in the period of the revision and future periods where the revision affects both current and future
periods.
Critical judgements
The following judgements and estimates have had the most significant effect on amounts recognised in the
financial statements.
Share-based payments
Estimating fair value for share based payment transactions requires determination of the most appropriate
valuation model, which depends on the terms and conditions of the grant. This estimate also requires
determination of the most appropriate inputs to the valuation model including the expected life of the share
option or appreciation right, volatility and dividend yield and making assumptions about them. For the
measurement of the fair value of equity settled transactions with employees at the grant date, the Group and
Company use the Black Scholes model.
- 43 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
2
Judgements and key sources of estimation uncertainty
Joint venture investment
The Group applies IFRS 11 to all joint arrangements and classifies them as either joint operations or joint
ventures, depending on the contractual rights and obligations of each investor. The Group holds 50% of the
voting rights of its joint arrangement with SolarWorld AG. The Group has determined to have joint control over
this arrangement as under the contractual agreements, unanimous consent is required from all parties to the
agreements for certain key strategic, operating, investing and financing policies. The Group’s joint arrangement
is structured through a limited liability entity, Deutsche Lithium GmbH, and provides the Group and SolarWorld
AG (parties to the joint venture agreement) with rights to the net assets of Deutsche Lithium under the
arrangements. Therefore, this arrangement has been classified as a joint venture.
The investment is assessed at each reporting period date for impairment. An impairment is recognised if there
is objective evidence that events after the recognition of the investment have had an impact on the estimated
future cash flows which can be reliably estimated. In addition, the assessment as to whether economically
recoverable reserves exist is itself an estimation process.
Impairment of Capitalised Exploration Costs
Group capitalised exploration costs had a carrying value as at 31 December 2020 of €1,546,111 (2019:
€2,002,334). Management tests annually whether capitalised exploration costs have a carrying value in
accordance with the accounting policy stated in note 1.5. Each exploration project is subject to an annual review
either by a consultant or senior company geologist to determine if the exploration results returned to date
warrant further exploration expenditure and have the potential to result in an economic discovery. This review
takes into consideration long-term metal prices, anticipated resource volumes and grades, permitting and
infrastructure as well as the likelihood of on-going funding from joint venture partners. In the event that a project
does not represent an economic exploration target and results indicate that there is no additional upside, or that
future funding from joint venture partners is unlikely, a decision will be made to discontinue exploration.
In Ireland, the licenses were originally granted for 6 years in 2013 and in Q3 2019, Zinnwald extended them for
a further 6 years. The exploration work has identified excellent mineralisation in its drill holes and the
metallurgical review has shown a good quality concentrate can be produced. The current Zinc market is at a
low point and Zinnwald is no longer focussed on Ireland, but the Company still intends to find a JV Partner for
at least the core license. The Board’s current intention is that it will only undertake further exploration work on
the core license (PL 3735) in 2021. Accordingly, the Board has concluded that an impairment charge should
be made in the 2020 accounts in regard to capitalized costs from the non-core licenses, which has resulted in
an impairment of €477,595.
In Sweden, the Brännberg project now comprises only 3 licenses (Brännberg 1 and 5 and Grundtrask 7)
Brännberg 1 was renewed in October 2019 and is valid from 28/10/2019 until 28/10/2022. Brännberg 5 was
renewed in May 2020 and is valid from 30/05/2020 until 30/05/2021. Grundtrask 7 was renewed in August
2018 and is valid from 05/08/2018 until 05/08/2021. The exploration work funded by Centerra showed good
gold mineralisation, but not to the minimum (1m Oz) size required by a company as large as Centerra. The
results may be of greater interest to a mid-tier Gold producer that has a lower resource size requirement. The
Board’s current intention is to try and find a JV partner for the Brännberg Project in Q1 2021 but, if
unsuccessful, will allow all 3 licenses to lapse in 2021. Accordingly, the Board have recommended a full
impairment of the carrying value of €114,870 in 2020.
- 44 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
3
Financial Risk and Capital Risk Management
The Group’s and Company's activities expose it to a variety of financial risks: market risk (primarily currency
risks), credit risk and liquidity risk. The overall risk management programme focusses on currency and working
capital management.
Foreign Exchange Risk
The Company operates internationally and is exposed to foreign exchange risk arising from one main currency
exposure, namely GBP for its Head Office costs and the value of its shares for fund-raising and Euros for a
material part of its operating expenditure. The Group’s Treasury risk management policy is currently to hold
most of its cash reserves in GBPs and to match as promptly as possible its Euro expenditures on its
commitments in Germany.
Credit and Interest Rate Risk
The Group and Company have no borrowings and a low level of trade creditors and have minimal credit or
interest rate risk exposure.
Working Capital and Liquidity Risk
Cashflow and working capital forecasting is performed in the operating entities of the Group and consolidated
at a Group level basis for monthly reporting to the Board. The Directors monitor these reports and rolling
forecasts to ensure the Group has sufficient cash to meet its operational needs. The Board has a policy of
maintaining at least a GBP 0.5m cash reserve headroom. Aside from its commitments under the Deutsche
Lithium Joint Venture, the Group has no other material fixed cost overheads other than Director costs
4
Revenue
An analysis of the Group's revenue is as follows:
Revenue analysed by class of business
Management fees
Other significant revenue
Interest income
Group
2020
€
2019
€
-
17,527
2020
€
367
2019
€
-
All the management fees are received from Centerra Gold under the terms of the Strategic Alliance Agreement,
which was terminated in December 2019. There were no unsatisfied performance obligations at 31 December
2020 (2019 : none).
- 45 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
5
Segmental reporting
The Group operates principally in the UK, Ireland, Scotland, and Scandinavia, with operations managed on a
project-by-project basis within each geographical area. Activities in the UK include the Head Office corporate
and administrative costs and the 50% investment in Deutsche Lithium in Germany, whilst the activities in Ireland
and Scandinavia relate to exploration and evaluation work. The reports used by the Board and management
are based on these geographical segments.
Revenues
Cost of sales and administrative
expenses
Share based payments charge
Project Impairment
Gain/loss on foreign exchange
Profit/(loss) from operations per
reportable segment
Ireland Scandinavia
2020
€
2020
€
Others
2020
€
UK
2020
€
-
-
-
-
Total
2020
€
-
(43,667)
-
(477,595)
(3,241)
(1,523)
-
(114,870)
(262)
(19,168)
-
-
-
(1,454,743)
-
-
(67,958)
(1,519,101)
-
(592,465)
(71,461)
(524,503)
(116,655)
(19,168)
(1,522,701)
(2,183,027)
Reportable segment assets
Reportable segment liabilities
1,564,848
-
181
-
-
-
8,854,280 10,419,309
58,833
58,833
Revenues
Cost of sales and administrative
expenses
Share based payments charge
Project Impairment
Gain/loss on foreign exchange
Profit/(loss) from operations per
reportable segment
Ireland Scandinavia
2019
€
2019
€
Others
2019
€
UK
2019
€
Total
2019
€
-
17,527
-
-
17,527
(63,326)
-
-
11,527
-
-
-
3,043
(19,698)
-
-
-
(616,940)
-
-
105,700
(699,964)
-
-
120,270
(51,799)
20,570
(19,698)
(511,240)
(562,167)
Reportable segment assets
Reportable segment liabilities
1,912,320
-
128,077
-
-
-
1,495,244
73,778
3,535,641
73,778
- 46 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
6
Operating loss
Operating loss for the year is stated after charging/(crediting):
Exchange losses/(gains)
Profit on disposal of property, plant and equipment
Exploration projects impairment
RTO costs
Share-based payments
Operating lease charges
Exploration costs expensed
7
Auditor's remuneration
Fees payable to the company's auditor and associates:
For audit services
Audit of group, parent company and subsidiary undertakings
For other services
Taxation compliance services
Reporting accountant work for the Admission Document
Group
2020
€
2019
€
71,461
(5,300)
592,465
839,940
3,725
40,942
64,358
(120,270)
-
-
-
-
36,598
83,024
2020
€
2019
€
31,164
27,913
3,799
61,205
65,004
5,292
-
5,292
8
Employees
The average monthly number of persons (including directors) employed by the group and company during the
year was:
Directors
Employees
Group
2020
Number
2019
Number
Company
2020
Number
2019
Number
5
3
8
5
3
8
5
-
5
5
-
5
- 47 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
8
Employees
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Pension costs
Group
2020
€
416,827
40,941
12,399
2019
€
403,081
45,907
6,023
Company
2020
€
283,159
27,723
12,099
2019
€
322,173
37,007
5,635
470,167
455,011
322,981
364,815
Aggregate remuneration expenses of the group include €150,583 (2019: €41,781) of costs capitalised and
included within non-current assets of the group. In 2020, €nil (2019: €89,808) aggregate remuneration
expenses of the group have been reimbursed by joint venture partners.
Aggregate remuneration expenses of the company include €3,397 (2019: €41,393) of costs capitalised and
included within non-current assets of the group.
Directors remuneration is disclosed in note 34.
9
Finance income
Interest income
Interest on bank deposits
10 Share of results in Joint Venture
Share of Loss in Joint Venture
Group
2020
€
367
2020
€
(32,579)
(32,579)
2019
€
-
Group
2019
€
-
-
- 48 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
11
Impairments
Impairment tests have been carried out where appropriate and the following impairment losses have been
recognised in profit or loss:
In respect of:
Intangible assets
Recognised in:
Administrative expenses
Notes
2020
€
2019
€
14
592,465
592,465
-
-
The impairment losses in respect of financial assets are recognised in other gains and losses in the income
statement.
12 Taxation
Current tax
Adjustments in respect of prior periods
2020
€
2019
€
-
(30,648)
The actual charge/(credit) for the year can be reconciled to the expected credit for the year based on the profit
or loss and the standard rate of tax as follows:
Loss before taxation
Expected tax credit based on the standard rate of corporation tax in the UK of
19.00% (2019: 19.00%)
Unutilised tax losses carried forward
Disallowable expenses
Adjustments in respect of prior years
Taxation charge/(credit) for the year
Group
2020
€
2019
€
(2,215,238)
(562,167)
(420,895)
254,409
166,486
-
(106,812)
106,812
-
(30,648)
-
(30,648)
Losses available to carry forward amount to €2,315,896 (2019: €1,434,000). No deferred tax asset has been
recognised on these losses, as the probability of available future taxable profits is not currently quantifiable.
- 49 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
13 Earnings per share
Weighted average number of ordinary shares for basic earnings per share
Effect of dilutive potential ordinary shares:
- Weighted average number of outstanding share options
Weighted average number of ordinary shares for diluted earnings per share
Earnings
Continuing operations
Loss for the period from continuing operations
2020
Number
2019
Number
63,203,583
31,069,430
3,183,333
3,416,667
66,386,916
34,486,097
€
€
(2,215,238)
(562,167)
Earnings for basic and diluted earnings per share attributable to equity
shareholders of the company
(2,215,238)
(562,167)
Earnings per share for continuing operations
Basic and diluted earnings per share
Basic earnings per share
Diluted earnings per share
-
-
(3.50)
(1.81)
(3.50)
(1.81)
There is no difference between the basic and diluted earnings per share for the period ended 31 December
2020 or 2019 as the effect of the exercise of options would be anti-dilutive.
- 50 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
14
Intangible fixed assets
Group
Cost
At 1 January 2019
Additions - group funded
At 31 December 2019
Additions - group funded
At 31 December 2020
Amortisation and impairment
At 1 January 2020
Project impairment
At 31 December 2020
Carrying amount
At 31 December 2020
At 31 December 2019
Ireland
Exploration
and Evaluation
costs
€
Sweden
Exploration
and Evaluation
costs
€
Total
€
1,645,118
250,214
100,000
7,002
1,745,118
257,216
1,895,332
128,374
107,002
7,868
2,002,334
136,242
2,023,706
114,870
2,138,576
-
477,595
-
114,870
-
592,465
477,595
114,870
592,465
1,546,111
-
1,546,111
1,895,332
107,002
2,002,334
Intangible assets comprise capitalised exploration and evaluation costs (direct costs, licence fees and fixed
salary / consultant costs) of the Ireland Zinc Projects and the Sweden Gold Projects (excluding the amounts
recovered from Centerra Gold as per note 21).
More information on impairment movements in the year is given in note 11.
Company
Cost
A 1 January 2019
Additions - group funded
At 31 December 2019
Transfers to subsidiaries
At 31 December 2020
Amortisation and impairment
At 1 January 2020 and 31 December 2020
Ireland
Exploration
and Evaluation
costs
€
Sweden
Exploration
and Evaluation
costs
€
92,985
23,902
-
17,491
Total
€
92,985
41,393
116,887
(116,887)
17,491
(17,491)
134,378
(134,378)
-
-
-
-
-
-
- 51 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
14
Intangible fixed assets
Carrying amount
At 31 December 2020
At 31 December 2019
15 Property, plant and equipment
Group
Cost
At 1 January 2020
Additions
At 31 December 2020
Depreciation and impairment
At 1 January 2020
Depreciation
At 31 December 2020
Carrying amount
At 31 December 2020
Company
Cost
At 1 January 2020
Additions
At 31 December 2020
Depreciation and impairment
At 1 January 2020
Depreciation charged in the year
At 31 December 2020
Carrying amount
At 31 December 2020
-
-
-
116,887
17,491
134,378
Plant and
equipment
€
Fixtures and
fittings
€
2,605
-
3,307
-
Computers
€
4,951
3,906
Total
€
10,863
3,906
2,605
3,307
8,857
14,769
2,605
-
3,307
-
4,951
244
10,863
244
2,605
3,307
5,195
11,107
-
-
3,662
3,662
Computers
€
-
3,906
3,906
-
244
244
3,662
- 52 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
16 Fixed asset investments
Investments in subsidiaries
Investments in joint ventures
Notes
17
Group
2020
€
-
3,852,083
3,852,083
2019
€
Company
2020
€
2019
€
-
-
-
169,090
3,852,083
169,090
-
4,021,173
169,090
Investments in subsidiaries are recorded at cost, which is the fair value of the consideration paid.
Movements in non-current investments
Group
Cost
At 1 January 2020
Additions
Share of loss
At 31 December 2020
Carrying amount
At 31 December 2020
At 31 December 2019
Movements in non-current investments
Company
Cost
At 1 January 2020 and 31 December 2020
Additions
At 31 December 2020
Carrying amount
At 31 December 2020
At 31 December 2019
Shares in group
undertakings
and
participating
interests
€
-
3,884,662
(32,579)
3,852,083
3,852,083
-
Shares in
group
undertakings
€
Other
investments
Total
€
€
169,090
-
-
3,852,083
169,090
3,852,083
169,090
3,852,083
4,021,173
169,090
3,852,083
4,021,173
169,090
-
169,090
- 53 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
16 Fixed asset investments
16.1 Investment in Deutsche Lithium
On 29 October 2020, the Company completed the acquisition of Bacanora Lithium Plc’s ("Bacanora") 50%
shareholding in Deutsche Lithium Gmbh ("DL”). Bacanora contributed its share in DL and €1.35m in Cash in
exchange for 90,619,170 new shares in the Company at a price of 5p per share and a 2% Net Profits Royalty.
The Company thereafter took over the obligations due under the Joint Venture Agreement and has made all
payments due on a monthly basis since October 2020.
The Table below shows the split of shares received by Bacanora in return for its 50% shares in DL and the cash
contributed by Bacanora as part of the RTO process:
Bacanora - Split of shareholding
Shares received for 50% shareholding in DL
Shares received for cash subscription
Total
% of Total No of Shares
€ 3,685,662
€ 1,350,000
€ 5,035,662
73.2%
26.8%
66,325,267
24,293,902
90,619,170
The Company holds one of the 2 Managing Director positions and a 50% shareholding in DL, but only has a
casting vote on purely operational development matters. Therefore, management have concluded that the
Company has significant influence over DL and not control.
Management reviewed the opening balance sheet as part of the acquisition process and are comfortable with the
completeness and accuracy of the balance sheet. DL’s accounting policies are in line with the Company’s policies
and no adjustments have been made.
The Company follows the requirements of IAS 28 in applying the equity method and increase or decrease the
investment by recognising its share of the profit or loss and other comprehensive income from DL. The Company
will ensure DL’s accounting policies are in line with its own and where material differences occur, make
appropriate adjustments. The Company management will review the investment for indicators of impairment at
least at each reporting date.
The Table below shows the movements during the year and the balances at year end:
Value of 50% share in DL acquired from Bacanora on 29 October 2020
Funds provided under the terms of the Joint Venture Agreement
Additional committed funds for further testwork
Share of DL Loss for the period November to December 2020
Carrying Value as at 31 December 2020
€ 3,685,662
€ 165,000
€ 34,000
(€ 32,579)
€ 3,852,083
16.2 Commitments under the Deutsche Lithium JV Agreement
The Company signed a Deed of Adherence to abide by the terms of the Joint Venture Agreement. The only
outstanding financial commitment was the 2nd Amendment entered into by Bacanora in February 2020 by which
it committed to fund DL with €1.35m in monthly instalments over 2 years. At the date of completion of the
Acquisition by the Company, the amount outstanding was €0.935m and at 31 December 2020 it was €0.770m.
Zinnwald also agreed with the Administrator to pay an additional non-dilutionary amount of €0.65m for additional
testwork over 2021. As at 31 December 2020 the amount outstanding was €0.616m.
- 54 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
17 Subsidiaries
Details of the company's subsidiaries as at 31 December 2020 are as follows:
Name of undertaking
Registered
office
Nature of
business
% Held
Direct
Indirect
Class of
shares
held
Erris Resources (Exploration) Ltd United Kingdom Exploration
Exploration
Erris Zinc Limited
Ireland
Ordinary
Ordinary
100.00
100.00
-
-
On 1 December 2017, Zinnwald Lithium Plc acquired the entire issued share capital of Erris Resources
(Exploration) Ltd ("ERL") by way of a share for share exchange. This transaction has been treated as a group
reconstruction and accounted for using the reverse merger accounting method. Its registered office address
is 29-31 Castle Street, High Wycombe, Bucks, HP13 6RU.
On 26 February 2018, Erris Resources Plc acquired the entire issued share capital of Erris Zinc Limited on
incorporation. Erris Zinc Limited is a company registered in Ireland. Its registered office address is The
Bungalow, Newport Road, Castlebar, Co. Mayo. F23YF24.
On 12 December 2018, Erris Resources (Exploration) Ltd acquired the entire issued share capital of Tulivuori
Exploration OY shortly after incorporation. Tulivuori Exploration OY is a company registered in Finland and
was renamed Erris Finland. In January 2020, the directors of Zinnwald decided to cease exploration in Finland
and started the process of winding up this company. The process was completed in November 2020.
On 10 August 2020, the Company incorporated a wholly owned subsidiary, Erris Gold Resources Ltd and
transferred all capitalised expenses, contracts and permits for the Loch Tay Project and Norway projects to
that company. On 29 October 2020, the shares in Erris Gold Resources Ltd were distributed to the Company’s
shareholders via a dividend in specie. Accordingly, Erris Gold Resources Ltd does not form part of the
consolidation at the year end.
18 Trade and other receivables - credit risk
Fair value of trade and other receivables
The directors consider that the carrying amount of trade and other receivables is equal to their fair value.
No significant balances are impaired at the reporting end date.
- 55 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
19 Financial instruments
Financial assets at amortised cost
Trade and other receivables
Cash and bank balances
Financial liabilities at amortised cost
Trade and other payables
20 Security held over cash
Group
2020
€
2019
€
Company
2020
€
2019
€
133,459
4,846,527
14,340
1,497,277
1,904,269
4,842,854
1,436,239
1,453,687
4,979,986
1,511,617
6,747,123
2,889,926
58,833
43,130
53,021
38,404
58,833
43,130
53,021
38,404
Under the terms of the Deed of Adherence with Bacanora Lithium Plc, entered into on 29 October 2020,
Bacanora holds a secured charge over a cash amount equal to the amount outstanding under the Deutsche
Lithium JV Agreement. As at 31 December 2020, this secured amount was €770,000, which forms a part of
the total cash balance of the Group of €4,846,527.
21 Trade and other receivables
Amounts falling due within one year:
Amounts owed by group undertakings
Other receivables
Prepayments and accrued income
Group
2020
€
-
133,459
37,467
2019
€
-
14,340
21,690
Company
2020
€
2019
€
1,792,292
111,977
37,467
1,430,110
6,129
21,690
170,926
36,030
1,941,736
1,457,929
Other receivables primarily comprise VAT recoverable, which were received following the year end.
The carrying amounts of the Group and Company's trade and other receivables are denominated in the
following currencies:
Euros
British Pounds
Group
2020
19,672
151,254
2019
6,903
29,127
Company
2020
-
1,941,736
2019
-
1,457,929
170,926
36,030
1,941,736
1,457,929
- 56 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
22 Trade and other payables
Trade payables
Accruals and deferred income
Group
2020
€
14,108
44,725
2019
€
2,666
40,464
Company
2020
€
12,767
40,254
2019
€
2,666
35,738
58,833
43,130
53,021
38,404
All Trade payables have been settled since the year end. As with previous periods, the majority of the accruals
relate to audit and accounting fees relating to the period.
The carrying amounts of the Group and Company's current liabilities are denominated in the following
currencies:
Euros
British Pounds
Group
2020
914
57,919
2019
200
42,930
Company
2020
914
52,107
2019
-
38,404
58,833
43,130
53,021
38,404
- 57 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
23 Amounts owed to Strategic Alliance partner
Amounts owing to Centerra Gold Inc
Group
2020
€
-
2019
€
-
Company
2020
€
-
2019
€
-
On 1 January 2016, the company entered into a strategic alliance with Centerra Gold to explore for gold in
Sweden and subsequently expanded into Finland in 2019. Under the terms of this agreement, Centerra had
the right to make an election ("Election") in respect of any or all of the designated project areas ("DPA" or
"DPAs") in the AOI and on any rights subsequently acquired by Zinnwald during the first two years after initial
grant of the permit. Over the course of the agreement, Centerra funded generative exploration on more than
30 exploration permits and drilling on three DPAs at Brännberg, Klippen and Karingberget. During this time,
the total expenditure on Centerra Gold projects was approximately US$3.4M on which Erris earned consultancy
fees of 10% for managing this exploration work. In the year to 31 December 2018, Centerra made the decision
not to proceed further with any of the three DPAs. In the year to 31 December 2019, Centerra continued with
its generative exploration in Sweden and Finland. In December 2019, Centerra decided to terminate this
Strategic Alliance and both parties agreed that no amounts remain outstanding by either side. All rights and
information relating to this exploration work remains the property of Erris.
During the period, Centerra has spent a total of €nil (2019: €222,155), comprising reimbursed costs of €nil
(2019: €204,628) and paid management fees of €nil (2019: €17,527).
A summary of the funding received from and costs incurred on behalf of Centerra is analysed as follows:
Year ended 31 December 2020
Funding from
Centerra
Exploration
expenditure
Generative Sweden
Generative Finland
€
-
-
-
€
-
-
-
Year ended 31 December 2019
Funding from
Centerra
Exploration
expenditure
Generative Sweden
Generative Finland
€
42,245
175,382
€
40,813
163,081
Management
and
consultancy
fees
€
-
-
-
Management
and
consultancy
fees
€
2,728
14,799
Net
€
-
-
-
Net
€
(1,296)
(2,498)
217,627
203,894
17,527
(3,794)
- 58 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
24 Retirement benefit schemes
Defined contribution schemes
2020
€
2019
€
Charge to profit or loss in respect of defined contribution schemes
12,099
6,268
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are
held separately from those of the group in an independently administered fund.
25 Share Options
25.1 Company Incentive schemes
The Directors believe that the success of the Group will depend to a significant degree on the performance of
the Group's senior management team. The Directors also recognise the importance of ensuring that the
management team are well motivated and identify closely with the success of the Group. The Company adopted
an initial Share Option Plan at the date of its original IPO in December 2017 and will continue to issue options to
certain Directors and key personnel. As part of the RTO process in October 2020, the Company’s shareholders
approved two additional new incentive schemes for certain executives. The key terms of each of these schemes
are as follows
Share Option Plan (2017)
•
•
•
Options vest 1/3 on date of issuance, 1/3 after 6 months and 1/3 after 12 months;
Options remain valid for five years; and
No subsequent performance criteria after issuance.
Short-Term Restricted Stock Unit (“RSU”) Scheme:
•
•
•
•
Awards granted under the RSU Scheme will be subject to annual performance criteria set by the
Remuneration Committee each financial year, relating to each eligible employee’s performance against
personal, financial, strategic and ‘Environmental, Social, and Corporate Governance’ (“ESG”) metrics.
Any awards will be based on a percentage of base salary as recommended by the Remuneration
Committee at the start of each performance period, being 60% for the initial period. The number of RSUs
issued will be based on the share price of the Company on expiry of the RSU Initial Performance Period.
Any RSUs issued will be subject to a further 2-year vesting period.
Each eligible person will be set a (i) minimum performance threshold which must be satisfied in order to
trigger any issuance of RSUs to them (“Threshold”). In addition, a base target (“Target”) and maximum
amount (“Maximum”) will also be set.
The first performance period will run with an effective date from 1 October 2020 until 31 December 2021,
with subsequent performance periods running annually from 1 January 2022 onwards.
Long-Term Performance Share Unit (“PSU”) Scheme:
•
•
•
•
•
•
Awards granted under the PSU Scheme will be subject to three-year performance criteria set by the
Remuneration Committee each financial year, relating to objective corporate metrics as follows:
‘Relative Total Shareholder Return (“RTSR”)’ against the peer group; and
a significant corporate strategic goal set by the Company. During the PSU initial performance period,
this goal shall be the Company gaining control of 100 per cent. of Deutsche Lithium.
The Company will calculate any awards under the PSU Scheme based on a percentage of base salary
as recommended by the Remuneration Committee at the start of each performance period and the share
price at the start of the period. For the initial performance period this shall be 100% and the RTO Price
of 5p per share. Any PSUs issued will be subject to a further 2-year vesting period.
Performance criteria shall be assessed 50:50 between these two corporate metrics. The assessment
relating to RTSR shall be calculated as Maximum being in the top quartile, Target being in the top half
and Threshold being in the third quartile. The assessment relating to the corporate goal shall generally
be binary Yes or No, but with the Board or Remuneration Committee having sole discretion to assess
partial achievement.
The first performance period will be with an effective date from 1 October 2020 to 31 December 2023
with subsequent three-year performance periods starting from 1 January 2022.
- 59 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
25.2 Share Option Plan (2017)
Movements in the number of share options, under the Share Option Plan (2017), outstanding and their related
weighted average exercise prices are as follows:
Year ended 31 December 2020 Year ended 31 December 2019
Average
Exercise Price
in £ per Share
Options
Number
Average
Exercise Price
in £ per Share
Options
Number
At beginning of the period
Granted
Lapsed
£0.094
£0.05
-
3,150,000
200,000
-
£0.094
-
£0.085
3,550,000
-
(400,000)
At end of period
£0.091
3,350,000
£0.094
3,150,000
Exercisable at the period end
Weighted average remaining exercise period, years
3,350,000
1.96
3,150,000
2.96
Option Classification
Issue Date No of Options Exercise Price
£0.08
1 Mar 2014
18 May 2015
£0.10
1 Feb 2017
£0.10
21 Dec 2017
£0.10
29 Oct 2020
£0.05
950,000
300,000
800,000
1,100,000
200,000
Expiry Date
20/12/2022
20/12/2022
20/12/2022
20/12/2022
28/10/2025
3,350,000
£0.913
25.3 RSU Scheme (2020)
The first awards of RSUs under the new scheme are expected to be issued in Q1 2022, based on the initial
performance period from 1 October 2020 to 31 December 2021
25.4 – PSU Scheme (2020)
The first awards of PSUs under the new scheme are expected to be issued in Q1 2024, based on the initial
performance period from 1 October 2020 to 31 December 2023.
- 60 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
26 Share-based payment transactions
Expenses recognised in the year
Options issued under the Share Option Plan
(2017)
Group
2020
€
2019
€
Company
2020
€
2019
€
3,725
-
3,725
-
Awards made under the new RSU and PSU scheme will be expensed over the relevant vesting periods for
each scheme. The first awards are only expected in 2022 and expenses will commence thereafter.
27 Share capital
Ordinary share capital
Issued and fully paid
204,455,957 ordinary shares of 1p each
Group and company
2019
€
2020
€
2,278,155
351,133
2,278,155
351,133
The Group's share capital is issued in GBP £ but is converted into the functional currency of the Group (Euros)
at the date of issue of the shares.
Reconciliation of movements during the year:
Ordinary shares of 1p each
At 1 January 2020
Issue of fully paid shares (cash subscription)
Issue of fully paid shares (consideration for shares in DL)
At 31 December 2020
28 Disposals
Ordinary
Number
31,069,430
107,061,260
66,325,267
Ordinary
€
351,133
1,189,890
737,132
204,455,957
2,278,155
On 31 October 2020 the group disposed of its 100% holding in Tulivuori Exploration OY. Included in these
financial statements are profits of €158 arising from the company's interests in Tulivuori Exploration OY up to
the date of its disposal.
- 61 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
29 Share Premium
Group
At 1 January 2019
Additions
At 31 December 2019
Additions
Issue of shares May 2020
Cancellation of share premium
Issue of shares October 2020
At 31 December 2020
Share Premium Account
€
4,151,045
-
4,151,045
-
280,626
(4,431,671)
7,362,699
7,362,699
The Company's share premium account was cancelled by Special Resolution and by Court Order on 15
September 2020 and the funds were converted to retained earnings.
30 Other reserves
Group
At 1 January 2019
Transfer of lapsed share options
Merger
reserve
€
Share based
payment
reserve
€
688,732
-
138,644
(16,299)
At 31 December 2019
688,732
122,345
Additions
-
3,725
At 31 December 2020
688,732
126,070
Translation
reserve
€
-
-
19
19
Total
€
827,376
(16,299)
-
811,077
3,744
814,821
A merger reserve was created on purchase of the entire share capital of Erris Resources (Exploration) Ltd which
was completed by way of a share for share exchange and which has been treated as a group reconstruction and
accounted for using the reverse merger accounting method.
- 62 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
31 Financial commitments, guarantees and contingent liabilities
Bacanora Royalty Agreement
The Company and Bacanora entered into on completion of the Acquisition a royalty agreement which provides,
conditional on, inter alia, completion of the Acquisition, that the Company agrees to pay Bacanora a royalty of
2 per cent. of the net profit received by the Company pursuant to its 50 per cent. shareholding in Deutsche
Lithium and earned in relation to the sale of lithium products or minerals by Deutsche Lithium’s projects on the
Zinnwald and Falkenhain licence areas. The royalty fee shall be paid in Euros and paid by Deutsche Lithium
half yearly. The agreement is for an initial term of 40 years and shall automatically extend for additional 20-
year terms until mining and processing operations cease at Deutsche Lithium’s projects at the Zinnwald and
Falkenhain licence areas. The Company has undertaken to Bacanora to abide by certain obligations in relation
to Deutsche Lithium’s projects at the Zinnwald and Falkenhain licence areas such as complying with applicable
laws and ensure that these projects are operated in accordance with the underlying licences and concessions
granted to Deutsche Lithium. The Company shall have the right, but not the obligation, to extinguish at any
time its right to pay a royalty fee to Bacanora prior to the expiry of the term by paying a one-off payment of
€2,000,000. Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that
the outcome can be considered probable or reasonably estimable and hence no provision has been made in
the financial statements.
Osisko Royalty Agreements
Erris Resources (Exploration) Ltd (“ERL”) entered into Osisko Royalty Agreement 1 with Osisko on 16
September 2016 pursuant to which it granted a royalty to Osisko for a 1 per cent. net smelter return on the sale
or disposition of all minerals provided from the Abbeytown Project. The royalty is based on published spot prices
in relation to minerals delivered for processing and actual amounts received where raw ore or concentrates are
sold. Osisko shall be entitled to elect to receive the royalty on precious metals in kind rather than cash. This
royalty was granted to Osisko in consideration of Osisko’s payment of C$500,000 to ERL. The royalty is
perpetual and as such the agreement (and obligation on ERL to pay the royalty) shall continue indefinitely.
Whilst the Directors acknowledge this contingent liability, at this stage, it is not considered that the outcome can
be considered probable or reasonably estimable and hence no provision has been made in the financial
statements.
ERL entered into Osisko Royalty Agreement 2 with Osisko on 16 September 2016 pursuant to which it granted
a royalty to Osisko for a 1 per cent. net smelter return on the sale or disposition of all minerals provided from the
Swedish properties (originally including Käringberget, Klippen, Nottjärn and Vaikijaur but, as at the date of this
document, only Brännberg) licensed by ERL. The royalty also extends to any other mining rights ERL acquires
or holds (or from time to time comes to acquire or hold) in Sweden and so applies to all exploration permits
currently held in Sweden by ERL. The royalty is based on published spot prices in relation to minerals delivered
for processing and actual amounts received where raw ore or concentrates are sold. Osisko shall be entitled to
elect to receive the royalty on precious metals in kind rather than cash. This royalty was granted to Osisko in
consideration of Osisko’s payment of C$250,000 to Erris Resources UK. The royalty is perpetual and as such
the agreement (and obligation on ERL to pay the royalty) shall continue indefinitely. Whilst the Directors
acknowledge this contingent liability, at this stage, it is not considered that the outcome can be considered
probable or reasonably estimable and hence no provision has been made in the financial statements.
Neither of the Osisko royalties apply to the Zinnwald Lithium project.
Grundtrask Acquisition Agreement
On 13 October 2016, the Company entered into an asset purchase agreement with Beowulf Mining Sweden AB
(“Beowulf”) pursuant to which the Company purchased exploration rights for the areas known as Grundsträsk nr
6 and Grundträsk nr 7 (together with all information relating thereto) from Beowulf. The consideration of
US$200,000 will become payable subject to the Company announcing JORC indicated resource of 100,000 troy
ounces of gold, together with a further amount of $2 per troy ounce on the announcement of indicated resource
subject to a JORC indicated resource of at least 1 million troy ounces. Pursuant to this agreement, the Company
is obliged to grant to Beowulf a royalty under which it is paid 1 per cent. of the net smelting revenue generated
by the Company on any gold produced from the property. This royalty shall continue indefinitely unless the
Company “buys out” the royalty by payment of US$2,000,000 to Beowulf. Whilst the Directors acknowledge this
contingent liability, at this stage, it is not considered that the outcome can be considered probable or reasonably
estimable and hence no provision has been made in the financial statements.
- 63 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
31 Financial commitments, guarantees and contingent liabilities
In addition, the Company was obliged to abide by the terms of the “2003 Data Access Agreement” which was
entered into between Beowulf, the Scanex Group (“Scanex”) and Mirab Mineral Resources AB (“Mirab”) on 14
November 2003 for a period of 15 years. Pursuant to the terms of this agreement, Scanex and Mirab provided
Beowulf with data relating to past mining exploration in return for the granting by Beowulf of a royalty to Scanex
and Mirab for 1 per cent. of the net smelting revenue generated by Beowulf in relation to the area known as
Grundträsk. Since the 15 years of this agreement has now expired, the Company considers that its requirement
to honour this royalty has also expired.
Neither of the Beowulf, Scanex or Mirab royalties apply to the Zinnwald Lithium project.
32 Retained earnings
Group
2020
€
2019
€
Company
2020
€
2019
€
At the beginning of the year
Conversion of share premium
Loss for the year
Dividends in specie
Share based payment transactions (net)
(1,820,744)
4,431,671
(2,215,238)
(490,888)
-
(1,305,524)
-
(531,519)
-
16,299
(1,447,843)
4,431,671
(1,503,479)
(490,888)
-
(1,026,564)
-
(437,578)
-
16,299
At the end of the year
(95,199)
(1,820,744)
989,461
(1,447,843)
33 Events after the reporting date
The assessment of the COVID-19 situation continues to evolve, as the changes to the COVID-19 virus and lock-
down impacts continue. The success of the long-term vaccination programme still makes it difficult to predict
the ultimate impact at this stage. This will continue to have some implications for the operations of the Group in
the future, for example through restricting travel movements internationally and domestically and therefore
delaying development activities. Due to the nature of present activities, the impact has been minimal to date.
Management will continue to assess the impact of COVID-19 on the Group and Company, however, it is not
possible to quantify the impact, if any, at this stage.
- 64 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
34 Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel is as follows.
Anton du Plessis
Cherif Rifaat
Jeremy Martin
Graham Brown
Jeremy Taylor-Firth
Andrew Partington
Peter Secker
2020
Remuneration Share Option
Charge
€
€
2019
Remuneration Share Option
Charge
€
€
118,453
78,969
36,664
28,767
20,306
-
-
1,863
1,862
-
-
-
-
-
152,688
68,710
41,226
27,484
27,484
4,581
-
283,159
3,725
322,173
-
-
-
-
-
-
-
-
Transactions with related parties
During the year the group entered into the following transactions with related parties:
Group
Strategic Alliance partner
Key management personnel
Company
Key management personnel
Consultancy and expenses
2019
€
2020
€
Management fees
2019
€
2020
€
-
50,648
-
71,690
15,585
40,289
-
-
-
17,256
-
-
Aggregate consultancy and expenses include €26,123 (2019: €4,640) of costs capitalised and included within
non-current assets and €nil (2019: €24,435) of costs reimbursed by joint venture partners. There were no
amounts outstanding at the year end.
Strategic Alliance arrangements with Centerra Gold are disclosed in note 11. During the period, Centerra
reimbursed costs of €nil (2019: €222,155) and paid management fees of €nil (2019: €17,527). As at 31
December 2020 and 2019, there were no outstanding debtor or creditor balances with Centerra Gold as the
joint venture relationship has terminated.
- 65 -
ZINNWALD LITHIUM PLC
(FORMERLY KNOWN AS ERRIS RESOURCES PLC)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2020
35 Cash (used in)/generated from group operations
Loss for the year after tax
Adjustments for:
Taxation charged/(credited)
Investment income
Gain on disposal of property, plant and equipment
Impairment of intangible assets
Depreciation and impairment of property, plant and equipment
Share of loss of Joint Venture
Equity-settled share-based payment expense
Movements in working capital:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash used in operations
36 Cash (used in) / generated from operations - company
Loss for the year after tax
Adjustments for:
Investment income
Depreciation and impairment of property, plant and equipment
Share of loss of Joint Venture
Equity-settled share-based payment expense
Movements in working capital:
(Increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Cash used in operations
2020
€
2019
€
(2,215,238)
(531,519)
-
(367)
(5,300)
592,465
243
32,579
3,725
(30,648)
-
-
-
-
-
-
(135,629)
16,435
24,035
(69,743)
(1,711,087)
(607,875)
2020
€
2019
€
(1,503,479)
(437,578)
(367)
243
32,579
3,725
-
-
-
-
(507,137)
81,436
(163,611)
(13,044)
(1,893,000)
(614,233)
- 66 -