Zinnwald Lithium : Annual Report and Financial Statements for the Year Ended 31 December 2021

Company Registration No. 10829496 (England and Wales)

ZINNWALD LITHIUM PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

ZINNWALD LITHIUM PLC

COMPANY INFORMATION

Directors	Jeremy Martin
	Anton du Plessis
	Cherif Rifaat
	Graham Brown
	Peter Secker
Secretary	Cherif Rifaat
Company number	10829496
Registered office	29-31 Castle Street
	High Wycombe
	Bucks
	HP13 6RU
	United Kingdom
Business address	The Clubhouse
	8 St James's Square
	London
	SW1Y 4JU
	United Kingdom
Independent Auditor	PKF Littlejohn LLP
	15 Westferry Circus
	Canary Wharf
	London
	E14 4HD
	United Kingdom
Nominated Adviser	Allenby Capital Ltd
	5th Floor
	5 St Helen's Place
	London
	EC3A 6AB
	United Kingdom
UK Brokers	Oberon Capital Limited
	Nightingale House
	65 Curzon Street
	London
	W1J 8PE
	United Kingdom
Solicitors	DWF LLP
	Bridgewater Place
	Water Lane
	Leeds
	LS11 5DY
	United Kingdom

ZINNWALD LITHIUM PLC

COMPANY INFORMATION

Registrar	Share Registrars Ltd
	The Courtyard
	17 West Street
	Farnham
	Surrey
	GU9 7DR
	United Kingdom
Public Relations	St Brides Partners Ltd
	51 Eastcheap
	London
	EC3M 1JP
	United Kingdom

ZINNWALD LITHIUM PLC

CONTENTS

	Page
Chairman's statement	1 - 2
Strategic report	3 - 13
Directors' responsibilities statement	14
Directors' report	15 - 17
Corporate Governance Statement	18 - 30
Independent auditor's report	31 - 35
Group statement of comprehensive income	36
Group statement of financial position	37
Company statement of financial position	38
Group statement of changes in equity	39
Company statement of changes in equity	40
Group statement of cash flows	41
Company statement of cash flows	42
Notes to the financial statements	43 - 71

ZINNWALD LITHIUM PLC

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2021

Chairman's Statement

The past year has seen a number of key milestones delivered by Zinnwald Lithium. During the course of 2021, we gained full control of our flagship Zinnwald Lithium Project (the "Project") in south-eastern Germany via a cash and shares transaction worth €8.8 million. We also expanded our mineral resource base in the Saxony region, following the granting of an additional exploration license at Sadisdorf by the regional mining authority

• bringing our total resource inventory at the Zinnwald Project to over one million tonnes lithium carbonate equivalent ('LCE'). These transactions achieved in 2021 have served to firmly establish Zinnwald Lithium as major player in the in the European lithium space. To round the year off, we took advantage of the strong lithium market and raised approximately €7 million in equity - securing funds to advance the Project.

Having gained 100% ownership of Deutsche Lithium in June 2021, management completed a thorough technical review of the Project during the second half of the year. We also analysed market trends in battery chemistry, through meetings with off-takers and battery manufacturers, as to preferred lithium product and anticipated demand. As part of this, we are undertaking additional test work to determine our ability to produce lithium hydroxide economically and the results are expected shortly. The conclusion of our technical review, and the encouraging results from the initial test work, has resulted in pivoting the Project to focus on battery- grade lithium hydroxide as its primary end product.

In addition, as part of the ongoing value engineering work, trade off studies are underway to determine the optimum mining rate and process plant capacity. By increasing the targeted annual production rate, there is the potential to maximise the project economics and lower the cash cost. which is a key driver for the Project to be in the lower range of the cost curve. The work also focuses on other key ways to optimise the Project, including identifying options for cost reduction, as well as enhancements that reduce the CO2 footprint and our overall environmental impact.

In terms of the lithium market, 2021 was a year in which commodity markets benefitted from the impact of the increasingly rapid shift to electric vehicles ('EVs') and the implications for the critical raw materials required to produce lithium-ion batteries. Since January 2021, the price for lithium hydroxide has more than doubled and spot prices in China have recently hit levels of ~$50,000/tonne. As the growth in EV demand gathers pace, we believe supply deficits in the lithium market will become increasingly apparent. On the back of this surge, many market commentators have raised their long-term lithium price forecasts, which further supports the potential value of the Project.

Europe, in particular, is forecast to emerge as a key market for lithium with regional lithium battery production forecast to increase fifteen-fold by 2030. It is worth noting that, presently, there are no domestic European producers of battery-grade lithium products. In addition, even if all the currently contemplated lithium projects in Europe commence production, there will still be a need for significant import volumes to meet anticipated demand. Positioned in the heart of the German automotive sector, the Zinnwald Lithium Project has the potential to become a highly important strategic source of a vital commodity for the transition to a greener economy for both Germany and Europe.

With regard to our non-core assets, in Ireland the Company has rationalised its license holdings and retained just the core prospecting license related to the brownfields Abbeytown Project. The zinc price rebounded strongly during 2021 and the Company's core objective for Abbeytown remains to find a partner or purchaser for the asset. In Sweden, we relinquished our Brännberg licences.

Looking ahead to 2022, the funds raised in December last year have set us up well to advance the Project. Specific workstreams planned for 2022 include completing detailed test work and preliminary engineering studies related to lithium hydroxide production. We will also be undertaking an in-fill drilling campaign at Zinnwald, as part of detailed mine planning, all part of the ongoing value engineering.

It is important to highlight that the Saxony region of Germany in which the Project is located has a long history of mining and contains legacy mining infrastructure. Work is currently underway to determine if it is viable to utilise parts of this existing infrastructure around the Project as part of our planned mining operations. This, in turn, has the potential to improve the logistics of the Project and lessen the impact on local communities and the environment through less movement on local roads.

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