Zinnwald Lithium (LSE:ZNWD) — Investor Presentation

0:01 Good morning, ladies and gentlemen, and welcome to the ZINNWALD LITHIUM PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab

0:19 The company may not be in a position to answer every question received during the meeting itself. However, company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like to submit the following poll. And if you give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to Anton DePlessy, CEO from ZINNWALD LITHIUM. Good morning. Good morning, and thanks very much for for hosting this webinar. Great opportunity to to speak to our investors. We prepared a short investor presentation, which has gone live on our website as well, so that's that's available for download there. And I'll I'll run through that. I won't slavishly go through through every page, but but, hopefully, that will give a good overview of the project. So just to start that process, our standard disclaimer at the beginning, I won't go through that.

1:12 But then just a quick overview of the project. So we're a name listed resources company, and we are developing our 100% owned ZINNWALD LITHIUM project, which is in Germany. This is a an asset that we acquired in a series of transactions over the last fourteen or fifteen months. And as I say, we now own 100% and have full control of the asset, and it's the the primary asset within the within the business. We believe it's an in an attractive project. It's aims to be an integrated project that'll produce all the way to battery grade lithium products. It's a large resource between the core mining licenses, ZINNWALD license, and our satellite licenses, some of which have had some drill work on them. We have over 1,000,000 tons lithium carbonate equivalent contained, which makes us certainly one of the larger projects in Europe.

2:09 And then I mentioned the exploration licenses. We we believe that there's good potential resource upside from those, and I'll get into a little what we what we're doing with those further on in the in the presentation. The other thing to note is that the project as designed has the potential to produce some pretty attractive byproducts amongst those as potassium sulfate, which is a a a key fertilizer component. The project itself is located just 35 kilometers from Dresden in the former East Germany. So it's really in the heart of the European chemical and automotive industries, which is which is essential. It's also an established mining district, so mining has been occurring in this area for for over four hundred years, and that is quite important in terms of local acceptability and also availability of of skilled labor.

3:06 The backdrop of of lithium demand, I think everyone who follows us or follows the sector at all knows that the switch to electric vehicles is the real key driver behind this. That seems to be gaining momentum. And certainly, especially within the within Europe, there's very strong government support and conviction to to to have that change. And we're now seeing the big European automakers getting behind this and and actually starting to expend serious money on on switching to to EVs, and that's driving lithium demand at at a very high high rate. And that's then impacting lithium pricing, which sitting on the spot pricing side, we've seen, you know, you know, sort of fourfold increase in lithium pricing just in the last year.

3:54 And then finally, just on on on this page, we believe we bring, you know, an experienced board with with a with a good and deep set of skills, both, you know, on the technical side as well as on the financing side, as well as a team on the ground in Germany to to get the project going. Just on this next page, ESG, environmental, social, and governance. This is core to to what we do and and the whole philosophy of the company. At at base, lithium is a is a is a key and lithium ion batteries are a key enabling technology for the energy transition. Storage is going to be absolutely key. I'll get into that a little a little bit later. But so, you know, in terms of what governments and people want to do in terms of lowering carbon emissions, lithium will be an essential part of that as it makes its way into batteries.

4:49 Specifically on the project and and efficiency, the idea is that that this will be an integrated project, so we're minimizing transport and associated emissions. It's a small footprint underground mine, so, again, trying to limit the impact on on the environment. And, you know, a lot of the sort of byproducts and and side streams are are relatively benign, which is which is excellent as well. From a social perspective, as mentioned, this is an established mining area. There's been mining there for for over four hundred years that goes a long way to to improving social acceptability, and that's very important to us. There's also a lot of brownfield infrastructure and skilled labor in the area, which helps as well. And then finally, from a governance perspective, we are UK listed with with all of the levels of transparency in corporate governance that that that comes with that.

5:46 We we we're adhering to the QCA corporate governance code, and we've established board level sustainability committees. In terms of the market, there's a lot of commentary at the moment, and it's it's it's fairly ubiquitous and and and universal in the sense of, you know, there are not a lot of naysayers to to a very exciting outlook for demand for for lithium. So it is established as the battery technology at at the moment. And, certainly, there there are a number of, you know, credible commentators suggesting that demand will grow at, you know, an average rate well above 20%. And you see, you know, there's some out there saying CAGR of of of over, you know, around 28% for the foreseeable years. And demand really can't keep up. The time scale to bring mines, new mines online is is is long and challenging. Any of you who who are existing mining investors will will know that.

6:51 And that's resulting in in in a substantial projected shortfall in in supply over the next few years. We we anticipate that that will really start to to hit and be apparent already apparent in the market, but will really become apparent in the market from the middle of the decade. Then in terms of, you know, the the the the nature of of of lithium demand and the specific lithium products that are in demand, and we're seeing a shift towards, certainly in Europe, a shift towards lithium hydroxide, and that informs some of the technical decisions we've made, which we'll get on to in in in just a little bit. This page, don't think we need to to weigh on, but, really, you know, the the the point of this is Europe is itself is is becoming a very core area of demand, particularly for EVs. It's one of the one of the core regions in the world.

7:44 The trend was was likely started in in Asia, but but but Europe really has stepped up to to the plate on this. EU is designated. This has been key to to the economic development over the next few years and has added, you know, lithium to its list of critical materials. So, also, again, a realization that there needs to be some some local supply. And that's that's a little bit covered on on this page. I think what what what's key to note is, you know, everything I've I've just said about demand for for for batteries and therefore lithium in Europe is is absolutely key, but there are no current lithium producing assets in Europe, and and there are relatively few projects waiting in the wings to do that.

8:35 In terms of our location, with this little red star over here on this map on the right and around us, you can see all of the planned and existing battery factories and associated, fabs for the industry. So we're we're right in the heart of that, in Germany. And as you can see from this chart on the bottom left here, Germany is is projected to be, you know, one of the core areas of of demand growth for for batteries and therefore battery factories and therefore and therefore lithium. So we we're ideally located in in that sense and for that. This is just a comparison of us against some of the other projects, hard rock lithium projects in in in Europe, so it excludes the brine projects.

9:25 You know, as you can see, we're one of the larger resources, and and the resource number there is for our core ZINNWALD LITHIUM license. It it it excludes our exploration properties, which we believe have have good potential to to increase that. So certainly relative to some of the other players out there, we have we have a large resource. We're also, for on a great perspective, relatively well positioned, especially against,

9:48 you know, some of the other ZINNWALD LITHIUM deposits. So that would be Sinovac and and Trelevore. Then just assuming in in on on where we are and what the project is, so relatively small footprint underground mine. The intention is to have a fully integrated project all within the immediate area, so minimizing transport to the to the extent possible, producing battery grade products. So we recently con concluded our lithium hydroxide test work. So we've proven that we can viably and economically produce lithium hydroxide. And as I said before, that's emerging as, you know, a key product for the for the European market used in in in in battery chemistries and technologies that are behind what a lot of the European automakers are doing. So that that that's a core focus for us. But we have demonstrated that the project is quite flexible. We could also produce lithium carbonate or or lithium fluoride if if we wanted to. So it's essentially an economic decision for us.

10:57 We also produce we also will produce, I should say, valuable by byproducts, high purity SOP, so that's potassium sulfate, a core fertilizer component, and, you know, also in the current market, you know, the sort of strength of having local supply of of these kinds of things is is is coming to the fore as we look at, you know, traditionally where those products come from, Russia, Ukraine, countries like that where supply has been disrupted. Core mining license valid until 2047, so we have a mining license in place. Mine life around thirty years depending on on on production levels that we sustain. And then in the area, we've got, yeah, yeah, a a number of exploration licenses.

11:46 Just on on the map on the right, you can see where the project is on the Czech German border. We're on the German side. If you're familiar with the ZINNWEC project, it sits within EMH. We are, in fact, the German end of that same overall ore body. So it's it's it's really a contiguous ore body there. And, in fact, in that picture on the on the right, you can see me in the historical underground mine at the at the border, which is which is underground. This is just a slightly more detailed map of the area and shows our our main license here. It's this area in red. So that's where we have the mining license up to twenty forty seven. And then these sort of sort of bluey green areas are are are exploration licenses that we hold. So the Altenberg license here, which, you know, means when we ultimately start to look at the step out from from the core license, we we have that ground.

12:38 And then Falconheim and Zadersdorf, you know, both within 11 or 12 kilometers. Falconheim is more like, know, five or six kilometers from the core license, and then is 11 or 12. So very much in the local region, and we will do work to determine whether those licenses can contribute to the overall project and and enhance the scale. In terms of existing infrastructure in the area, as I mentioned, this was a mining area. It was mined for tin heavily for tin tungsten in in up to the to the the early nineties. And so there's, a fair amount of old infrastructure in in the area in addition to other infrastructure like railway lines, roads, power, and and and water.

13:28 This is just our resource statement and also the historic resource that was on the Zadistorf exploration license, but I don't think we need to go through through that. Then then on here, just kind of some of the advantages we see from a sustainability perspective. You know, being near to the to the end market is is extremely important, not only because you're you're minimizing cost and and transport, and you're minimizing the associated c o two emissions with that. But when you compare it to, you know, to other supply lines that are, you know, come where the product is coming from from South America or Australia via China, you know, as as we enter a world where, you know, tighter, more easily controlled supply lines become more important, you know, as we've seen global disruption from, you know, things like the the the pandemic and and and other disruptions, I think the the ability to to be a local supplier in an important market is is gonna become critically critically and more important.

14:34 Small physical footprint, as I mentioned, on, you know, a small underground mine, the ability to to utilize, you know, potentially the ability to to to utilize existing infrastructure, which would further limit disruption. Our process is is is not water intensive relative to some of the others. So the brine projects all, you know, by their nature, you use a lot of water, which which has environmental implications.

15:02 But our process itself is is not very water intensive, so it's a dry magnetic separation and and and doesn't doesn't, you know, utilize too too much water. Energy intensity, you know, obviously, the the the brines benefit from from solar, whereas whereas we don't. But relative to to other hard rocks, you know, like spodumene, we use a lower energy process than them. And then finally, in terms of the actual technology here, and this is important, you know, our our technology is is is pretty conventional. I mean, all the steps of the process to in the flow sheet are processes that are that are used in in in other mining operations elsewhere. So, you know, nothing nothing individually is unique to our process.

16:00 Finally, what what what is our strategy? So we want to be an important battery grade lithium hydroxide supplier. So we're focused on on lithium hydroxide, and we wanna and we want to supply the European battery sector. We're also looking at how we can in increase the production potential both from the ZINNWALD license area and then further work that we need to do on on the exploration licenses to see whether those can add add to the project. So that's that's a core area of our of our strategy. As I mentioned, focus on lithium hydroxide ahead of other more niche products, although we do have the flexibility to to produce those. And then it's all about, you know, how from that point on, it's all about how we can optimize the project. So this is looking at all the ways we can enhance it, improve efficiencies, cut cost, and so on.

16:55 And then maximizing revenue from from potential byproducts. So SOP, we've we've proven in our test work to this point. We can we can produce a very high quality or very high purity SOP. Tin is also present in in the ore. It hasn't historically been looked at in in in a lot of detail, but that is that is an area that that we want to look at. I mean, tin pricing, obviously, at the moment is is very favorable, and therefore, it it makes sense for us to look at that. And then, you know, in the in the near to medium term, we will continue to look at flow sheet optimization. We're doing infill drilling to help refine our our mine planning. We will advance work on exploration licenses, and then, you know, it's value engineering and optimization, as I mentioned before.

17:48 Alongside that, we're we're looking to negotiate access to some of the legacy infrastructure to the extent it makes sense, and then we will look to advance discussions with with potential offtakers as well as finance providers. So that that is is really kind of what I wanted to go through on the on the on the the base presentation just to leave you with kind of what we see as the the investment case. So we're an integrated lithium project. We're really in the heart of both the automotive and the chemical industry, and that's important in terms of access to to, you know, both skilled personnel as well as actually access to to certain key suppliers of of materials we need for for the process.

18:39 We've got a meaningful resource position. And in addition to that, we have got some pretty interesting looking expansion potential there. So that could make us certainly one of the the larger projects potentially in in in Europe. And then we're we're pushing on towards construction as as quickly as we can. Fundamentals of the market couldn't be stronger. We've seen pricing run up massively over the last year, and there are not a lot of commenters suggesting that that's going to reverse in the near or even longer term. And then we've got a good team in place. The the the board has a lot of experience across the necessary functional areas of finance and and on the technical side, both mining and and on the lithium industry.

19:27 And we think we can pull it together. Thanks very much. I think that that that concludes the presentation as I wanted to go through it. Happy to to look at and answer questions. That's great. Anton, thank you so much for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. Just while Anton takes a few moments to review those questions submitted already, I'd like to remind you that recording this presentation along with a copy of the slides and the published Q and A can be accessed via your Investor Meet company dashboard. Anton, you'll probably note that we received a number of questions from investors throughout today's call, but we also have a number that we received ahead. So perhaps if I may, I could start off with these pre submitted questions. And and thank you once again to everybody that's shown engagement today and and before the event in their questions. So the first question reads as follows. When do you expect the first shipment of products to be delivered to a client?

20:23 So our our expectation is that demand in in Europe will will really begin to show a massive ramp up, really starting now, but it will it will really reach an a period of intensity in in the middle of the decade. And we would hope to try and match our production to that. So we're we would aim for for the middle of the decade or as close to that as as as as we can get. There are obviously some factors which are outside of our full control that will impact that timing, you know, namely permitting and and and financing. But, you know, the aim is is, as I say, is the aim is for the for the middle of the decade for production. Thanks, Anton. Turning to the next question. What is being done to encourage localization of supply in Europe?

21:10 So and it's it's been I'd say it's been slow to date, but you've seen the EU try and get behind this. So one of the things they've done is designate lithium as an an element that's on their list of of of critical raw materials. So they're very anxious to to have a local source of of of supply. That has yet to turn into sort of fundamental support in terms of of of funding, etcetera. But you have seen the the start of that. So in fact,

21:41 the EU did vote, I think it was about €3,500,000,000 to try and give the the battery manufacturing side of the industry a boost in in Europe. So you've seen a lot of that money flow into into the battery manufacturers, and it and it should, you know, ultimately, as they start to focus on where they're going to get their raw materials from, there should be some trickle down from that. But but, effectively, what they've done is they've stimulated the battery sector significantly. That will then pull through into into all the areas that that sort of feed into that that sector. Thanks very much indeed. If I may turn to the next question around off takers. Have you had any preliminary discussions with any potential off takers?

22:27 And who could they potentially be? Look. We can't really talk about, you know, specifically about about any individual conversations we we would have. Those would those would typically be under under an NDA. We we are speaking to a range of people. I mean, unlike, you know, some some others in the sector who've rushed to sign up offtake agreements very early on in their project lives, and to my mind, thereby give up a lot of optionality, We've been quite cautious about how we how we approach that, you know, such that, you know, ultimately, when we do sign off, take it, we'll be with with the right partner who's who's willing to to support us. So those conversations are ongoing, but but, you know, that's I think that's all I can say on that at at at this point.

23:14 No. Thank you very much indeed. What's your relationship like with the local or regional authorities in Germany? I think it's it's it's good. We're we're endeavoring to to deepen that. The, sort of core project team has been largely unchanged for, you know, since the inception of this project. So there is a team on the ground in Germany, who have relationships with, local authorities. I think as I mentioned before, the the this the project is in an area where mining has been, quite an important industry for a long time. It's it's had something of a hiatus in in more recent years, but there's a long and proud tradition of mining there. And therefore, there is a lot of sort of natural local support for a project of this nature that aims to bring, you know, mining back back to the area.

24:08 That's great. Thank you very much indeed. What are the challenges to creating local supply in Europe and really how are you positioned compared to that of your peers? Well, I think bringing any mine on stream in Europe is is challenging. There's a lot of scrutiny on on permitting and social acceptability, and the the, you know, the you've you've you've seen on on some other projects in in Europe, there've been some resistance from from local populations as to whether or not they want mining in the area. You know, as I mentioned before, this is an old mining area. There is acceptance of of mining. It's obviously beholden on us to make sure that we design a project that is as sensitive to to local feeling and and and the environment, etcetera, as as possible. But we're starting from a baseline of of, you know, people wanting a project here, which I think is gives us a a significant advantage.

25:08 Thank you. I've got a couple more presubmitted questions, if I may, the first of which is is as follows. Are there any other exploration licenses in the area that you could or would want to pick up? Look. We we're always looking at that, but we have, you know, substantial land position already at the moment. We've got, you know, three main exploration licenses in addition to the ZINNWALD mining license. So we we have the ground immediately surrounding that mining license. So that gives us the, you know, the potential step out. And then we also have have two others in in the area, Zadistorf, which we picked up about six months ago, which, you know, has a historic resource on it, And then Falconheim, which we've been doing the sort of review of of historic information on. So it was drilled historically for Tim Tungsten back in in in in the in sort of GDR time, and we are looking to test that historic work. So we've been we've been going we have that data, and we've been going through that data.

26:11 And we will in the in the near term, one of our projects is to is to test some of that historic drilling and see if it fits our geological model. And then from that, we'll flow whether or not that that project can can form an adjunct to to the to the core project, which, you know, we believe there's a a good chance that it that it can. Thank you. And finally, the final presubmitted question, shortage of shortage of experience seems to be a key risk for mining companies at the moment. Are you facing any of these issues? Not currently. Look. Getting good personnel is is always a challenge. You know, what I would say on this, Freiburg, which is, you know, one of one of the cities very close to to the project area is, you know, has a large university.

27:02 Mining has always been a core discipline of of that university. So there is you know, this is a university that generates geologists and and and mining engineers. So that that is very helpful at at the stage we're at. We also, you know, have benefited from from help from from from various academics on on that. Then, also, Germany is is is really kind of the heart of the European chemical industry and and lithium to to produce a battery grade lithium product is as much a chemical process as it is a a mining process. So the fact that, you know, this really is the heart of the chemical industry means that, you know, there are industrial chemists available who understand industrial scale chemistry. So that's helpful for us as well. That's great. Well, thank you very much, and thank you for those questions.

27:56 If I may, Anton, just ask you to open up the q and a tab. You'll see you've received quite a few questions from investors today. So if I could ask you to read out those questions and where appropriate to give a response, and then I'll pick up from you at the end. So can you explain why the project is focusing on battery grade lithium hydroxide? So in in very broad brush terms, the the the two core products in the lithium battery space are are lithium carbonate and lithium hydroxide. Lithium hydroxide is a key input into nickel based battery chemistries. So if you have a Tesla Model s or one of the new VW electric cars, those are those typically have nickel based battery cells in them. And the benefit of nickel based battery cells is they they enjoy higher energy density and better cold weather performance. So automakers in in Europe have have prioritized those attributes.

28:54 Lithium carbonate is used in used is predominantly used in the in the iron based chemistry. So they have some advantages in terms of of of cost, but they suffer a little bit on the on the energy density and the cold weather performance. So it's a all of these things are a trade off, but what what we're hearing and and and and what we're being told is that that for Europe, it's the nickel based chemistries that that that will be the sort of medium term dominant, and therefore, providing lithium hydroxide is is what the market wants. It does enjoy a small price premium to to lithium carbonate, although that moves around with time. But but that is we're effectively responding to market demand on on that.

29:48 Are there any potential synergies with the nearby CINNWALD project? It's very seldom that you get a contiguous or or close by projects where there wouldn't be a synergy. But, you know, as to what those are, it would it would require a, you know, sort of very detailed study to say. What is the plan for the noncore assets? We really have only one noncore asset, which is the Abbeytown project in Ireland. As zinc and lead prices have, gone up, over the last eighteen months. We, you know, we still think that that's an attractive asset. It's not something we, as a management team, want to devote time and energy on given all that we're trying to do on on lithium. We think that would be a distraction.

30:37 We have done the necessary work to retain the core license there and drop the sort of outer lying licenses, but we will seek to either partner that asset or or sell it if we if we can. But it isn't the holding cost for that is is extremely low. You mentioned other projects in Europe and your expectation for your own commercial delivery mid decade. What is your view of the risk of being late to the market versus other Europe projects? I think all projects in Europe suffer from, you know, the same challenges suffer from and benefit from the same challenges and and and and kind of market demand outlook. So, you know, I don't think we have, you know, any especially more challenging elements to the project. All projects are different.

31:32 All have different advantages and disadvantages. You know, I think, you know, anyone who tells you it's it's completely easy and plain sailing is is is not telling you the the the full truth. These things will always be challenging, but I think we're we're we're well as well positioned as anyone and and better than a lot. Do you see sodium ion battery technology becoming a threat to the lithium market? One reads almost every day of of new battery technologies coming and whether they will completely sort of overturn the industry and and and and change demand. My answer to that is a lot of those are still in the lab, so they're a long way from being in vehicles or in or in other applications.

32:20 And, you know, what you've seen is is really billions of euros of committed investment into lithium ion battery factories, you know, around the world and and in Europe in particular. And those are investment decisions make it made with, you know, fairly long time scales in mind. You know, the the the CEOs of the company is making those investments. They're not making those on the basis that those are gonna be redundant in in, you know, in less than ten years or or even probably twenty years. So I take quite a lot of comfort from that, that these are people who, you know, are doing the research on other technologies themselves or certainly following the research on other technologies themselves, and they have made the decision to invest, you know, substantial sums of money in in lithium ion technology. So I think that underlies lithium demand, you know, certainly for the, I would say, for the long term.

33:17 You know, you can never discount a sort of a new technology popping up, but I think, you know, just given where the investment's been, that that doesn't seem likely in in the very short term. Based on existing data, are you able to give a very first overview of the project economics on expected IRR? So, obviously, we we we're we're shifting the nature of the project. We've we've we've we've changed the the sort of end product, and we've just been through, you know, an extremely rigorous test with program on that, which has given us a lot of the information we need in terms of kind of OpEx costs and CapEx costs for for that component.

34:05 We're still working through that. We're also looking at, as I mentioned, how we can pull production forward to increase the production rate for the project. So these are all things that need to be looked at. And it's not you can't look at them in isolation. You have to look at them in terms of the of the overall of the overall project. So, you know, obviously, we we internally have a have a view on on what that all means economically. But in terms of sharing something with you at this point, I think it's a little bit premature, but but as soon as we can, we we will. Okay. When when do you expect to have a BFS completed? So BFS bankable feasibility study, obviously, a core document for for any financing.

34:54 You know, again, as I mentioned, we're working as quickly as we as we can on this. I would say, you know, within sort of the next you know, our hope is that if if if things go well, we'd be able to do to to come to a conclusion on that, you know, in around eighteen, twenty months. But, obviously, you know, that that's dependent on on on a number of factors. Anton, if I may just give you a few moments just to read because for every question you answer, there seems to be another one that comes through. So just to give you a bit of time to select some of those questions, I'd I'd just like to remind investors that, of course, we'll make all the q and a available to you along with a copy of the slides and the recording shortly a bit later on this afternoon. So, Anton, please feel free to to carry on.

35:43 But, of course, any questions that we don't manage to get through today, we can always review post today's If I may, I'll just hand back to you if there's any other questions that you wanna pick up. Sure. I think just looking through these, I think I've I've I've answered most of them that I can. Well well, perfect. Look. Why don't we do this? If any further questions come in, Anton, obviously, I'll make those available to you. And thank you once again to everybody for their questions and for their engagement this morning. Anton, I know that investor feedback will be particularly important to you and to the company, and I will shortly redirect investors to provide you with their thoughts and expectations. But before doing so, I wondered if I may just ask you just for a few closing comments just to wrap up with. And then as I say, I'll redirect investors to give you their thoughts.

36:34 Sure. Look. We are very excited about the project we have here. We've we've owned it for a long period of time. We we first consolidated ownership just over six months ago. Since then, we've been doing deep technological dive into the project and seeing where we can optimize it And then having raised some money at the back end of last year, we're we're pushing forward with those plans. So, you know, stay tuned. I think we've got an exciting story ahead of us. That's great, Anton. Thank you very much indeed for your time today for and for updating investors. Can I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in in order the management team can really better understand your views and expectations?

37:21 This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of ZINNWALD LITHIUM, I'd like to thank you very much indeed for attending this morning's presentation. That now concludes today's session. So good morning to you all.