Zinnwald Lithium : Condensed Interim Financial Statements 30th June 2021

Company Registration No. 10829496 (England and Wales)

ZINNWALD LITHIUM PLC

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2021

ZINNWALD LITHIUM PLC

CONTENTS

Chairman's Report	1
Strategic Report	2 - 4
Directors' Report	5 - 6
Corporate Governance Statement	7
Interim Condensed Consolidated Statement of comprehensive	8
income
Interim Condensed Consolidated Statement of financial position	9
Interim Condensed Consolidated Statement of changes in equity	10
Interim Condensed Consolidated Statement of cash flows	11
Notes to the Interim Condensed Consolidated Financial statements	12 - 25

ZINNWALD LITHIUM PLC

CHAIRMAN'S STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2021

Chairman's Statement

The first half of 2021 has proved an extremely busy period for Zinnwald Lithium Plc (the "Company") which, just before the period end, culminated in the acquisition of the remaining 50% of Deutsche Lithium GmBH ("Deutsche Lithium") for €1.5 million cash and 50 million new ordinary shares. By taking full ownership of Deutsche Lithium, we are now in a much stronger position to capitalise on unlocking the full potential of the Zinnwald Lithium Project (the "Project") for the benefit of our shareholders.

Based in south-eastern Germany, the Project has a number of attractive attributes, not least its location in the heart of the European chemical and automotive industries. The European Union has set itself a target of being carbon neutral by 2050, and battery storage, where lithium-ion is a leading technology, is a vital enabling technology for this. The shift towards electric vehicles ("EVs") is gathering momentum and Europe is increasingly seeking to become an important global centre for EV production. As the importance of EV manufacturing grows so too does the importance of a local supply chain. In recognition of this, the EU has designated lithium a critical raw material and is actively seeking to encourage local production.

The economics of the Project have previously been demonstrated and we have identified a number of key work streams which will be required to advance it towards production. We are completing the initial phase of the lithium hydroxide ('LioH') test work which is delivering encouraging initial results showing the potential to produce a high quality, battery grade LioH alongside the already proven ability to produce battery grade lithium fluoride and lithium carbonate. We will update the market further once this work is completed.

Another important development during the period was the granting of the Sadisdorf exploration licence. This licence, located approximately 12 km from the Company's Zinnwald licence area, has an historic JORC resource which adds materially to our existing resources and, together with two other exploration licences held by the Company, has the potential to add significant resource upside to the Project.

In Ireland, the Company has rationalised its licence holdings and has retained only the core prospecting licence related to the brownfield Abbeytown Project. The zinc price has rebounded strongly during the course of 2021 and the Company's objective with regard to Abbeytown remains to find a partner or purchaser for the asset. In Sweden we have relinquished our Brännberg licences as non-core, its value having previously been written off.

We note with interest the Rule 2.7 announcement on 25 August 2021 by our 35.5% shareholder Bacanora Lithium plc ("Bacanora") and Ganfeng International Trading (Shanghai) Limited ("Ganfeng") regarding an Offer for Bacanora by Ganfeng. As noted in this announcement Bacanora intends to make a distribution in specie of the shares held by Bacanora in Zinnwald to Bacanora's shareholders including Ganfeng. Should the conditions for the distribution in specie be met we look forward to working with our potential new shareholders going forward.

Financials

The Company continues to maintain its extremely disciplined approach to expenditure and cash management and as such is well funded into 2022, with cash of €2.3m as at the date of this report.

Outlook

As the sole owner of one of Europe's more advanced battery-grade lithium projects, capable of producing a number of downstream battery grade lithium products, we are delighted to now control what we consider to be an extremely strategic asset.

Our focus over the next 12 to 18 months will involve undertaking test work to ascertain the commercial viability of producing a wider range of lithium compounds as well as value engineering and optimisation of the flow sheet and associated infrastraucture leading into an updated feasibility study. Work with regard to permitting is also ongoing.

Further discussions with both off-take and financing partners will also take place as we seek to advance the Project. I view the future with a high degree of confidence and would like to thank our shareholders for their continued support.

With plenty of latent demand for lithium, a highly experienced team on the ground in Germany and access to a pool of additional skilled labour we look forward to updating you on our progress.

Jeremy Martin

Non-Executive Chairman

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ZINNWALD LITHIUM PLC

STRATEGIC REPORT

FOR THE SIX MONTHS ENDED 30 JUNE 2021

The directors present the strategic report for the six months ended 30 June 2021.

• Highlights - 6 months to 30 June 2021
• • Acquired remaining 50% of Deutsche Lithium to consolidate full ownership of the Zinnwald Lithium project
  • Granted new five-year exploration licences at Sadisdorf
  • Completed initial phase of Lithium Hydroxide testwork

• Operational review and outlook Germany
  During the first half of 2021, the Company has continued to progress the Project on both a corporate and operational level.
  In line with our previously stated corporate strategy, we successfully completed the acquisition of a further 50% of Deutsche Lithium GmbH ("Deutsche Lithium") giving us 100% ownership and full operational control of the Project. The acquisition cost was €8.8 million, with the majority of the purchase consideration structured as an issue of new ordinary shares in the Company allowing us to conserve cash resources. New ordinary shares equivalent to 19.6% of our enlarged share capital were issued as part of the transaction and were distributed to a number of parties.
  At the Project level during the year to date, we have been busy advancing various workstreams and have completed the initial phase of the lithium hydroxide ("LiOH") testwork. The initial results were highly encouraging and showed the potential to produce a high purity, battery grade product that is low in contaminants. We have also generated LiOH product samples, which we will be sharing with potential off- takers to help them evaluate the product. The ability to produce a high quality, battery-grade LiOH, alongside the Project's already demonstrated ability to produce battery grade lithium fluoride and lithium carbonate, further demonstrates the flexible nature of the Project and its ability to produce high value products to meet demand from battery makers.
  Additionally, during the period, Deutsche Lithium was granted a five-year Exploration Licence (the "Sadisdorf Licence") covering approximately 225 hectares ("ha") in the Erzgebirge or Ore Mountains region of Saxony, Germany. This complements two other exploration licences already held by Deutsche Lithium: the Falkenhain licence, covering 295.7 ha and with a term to 31 December 2022; and the Altenberg licence, covering 4,225.3 ha and with a term to 15 February 2024. The Sadisdorf Licence is circa 12km NNE of Zinnwald's key lithium deposit and forms part of the same geological unit that hosts the historic Li-Sn-W deposits at Zinnwald, Falkenhain and Altenberg.
  The grant of this licence coupled with the Falkenhain and Altenburg licences represents exciting expansion potential for Zinnwald and, based on the historical resource delineated by previous licence holders, effectively increases our overall resource to greater than 1 million tons contained lithium carbonate equivalent ("LCE"), an increase of over 50%. We will be undertaking further work on all our exploration licence areas to further evaluate their potential and how they can enhance the Project.
  Looking forward, the Company is working to advance the permitting status of the 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.

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ZINNWALD LITHIUM PLC

STRATEGIC REPORT (CONTINUED)

FOR THE SIX MONTHS ENDED 30 JUNE 2021

• Operational review and outlook (continued) Germany (continued)
  In addition, the Company will begin a process of updating the feasibility study, value engineering work and finalisation of the plant locations.
  With regard to the exploration licences, the Company has commenced data analytics and archive work with regard to the Sadisdorf licence. With regard to the Falkenhain licence, old drill cores have been prepared for mineral processing test work. Initial tests have indicated similar characteristics to the bulk samples from the Zinnwald licence.
  Lithium Market
  During the first half of 2021 stronger than expected electric vehicle production and sales volumes and only modest battery raw material supply response resulted in a tightening lithium market situation. As a result, both lithium carbonate and lithium hydroxide prices showed strong recoveries almost doubling from levels seen at the beginning of the year.
  As governments and organisations worldwide drive the rapid deployment of new clean energy technologies, the role of critical materials, including metals such as lithium, is becoming more apparent. The EU estimates 18 times more lithium is required by 2030 to support its climate-neutrality scenarios, while at least 24 new lithium battery Gigafactories are planned in Europe with four expected to come online in 2021, bringing Europe's production capacity from its current 30 GWh to 700 GWh by 2028. To keep up with this demand, the EU is focused on encouraging local supply.
  Ireland and Sweden
  At the time of the reverse takeover transaction in October 2020, the Company placed its Irish and Swedish assets under care and maintenance while seeking either a partner or purchaser for the assets. In Sweden, the Company has now relinquished all of its licences, as these were considered non-core and closed its Filial entity in Sweden. The value of these licences in the Company's accounts had previously been fully written off.
  At the Abbeytown project in Ireland, the Company's wholly-owned subsidiary, Erris Zinc Ltd, ("Erris Zinc"), carried out drilling of one diamond core drill hole on PL 3735 to meet minimum expenditure requirements for the biannual review of the permit. The hole, ERAB011, was located 20m to the east of hole ERAB005 drilled in 2018 (4.1m grading 15.63% zinc and lead combined and 90.68g/t silver). ERAB011, ERAB005 and ERAB008 are located on the same drill fence 375m south of the southernmost extent of the old workings and are the furthest south of all the drill holes drilled by Erris.
  The aim of drilling the hole was to extend the known mineralisation in hole ERAB005 to the east and determine how wide the mineralised corridor may be. The hole angled at -60° and drilled to a depth of 211.5m was drilled to target potential mineralisation in the crinoidal limestone 20m from the intersection in ERAB005. The hole intersected alteration including calcite veins and pyrite mineralisation in the Index Bed, Lower Grit and minor localised chalcopyrite mineralisation in the lower mixed beds with a maximum value of 0.7m @ 0.348 % Cu. The copper mineralisation was intersected vertically beneath high-gradelead-zinc mineralisation in hole ERAB005.
  The alteration in the crinoidal limestone and Index Bed is consistent with proximal alteration to a mineralised structure. Mineralisation appears to be strongly buffered by the carbonate lithology such that very low values of base metals can occur in the carbonates a very short distance from the conduits which can host high-grade base metals. While the results of this hole (ERAB011) were disappointing, the high-grade mineralisation in hole ERAB005 remains open to the south and the exploration model is such that the best targets will be found where the NNE faults intersect with east-west trending north or south dipping extensional faults. Exploration targets remain untested such as the strong soil targets 900 m along trend from the drilled mineralisation which are associated with a large regional normal fault. These targets warrant further drilling.
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