Zinnwald Lithium : Annual Report and Financial Statements for the Year Ended 31 December 2022

Company Registration No: 10829496 (England and Wales)

ZINNWALD LITHIUM PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

ZINNWALD LITHIUM PLC

COMPANY INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2022

ZINNWALD LITHIUM PLC

CONTENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

ZINNWALD LITHIUM PLC

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2022

As the largest provider of climate financing in the world, the EU, together with its member states, is focused on facilitating a green transition and tackling the adverse effects of climate change. However, its planned reforms are simply not possible without the rapid transition to electric vehicles and a large scale build out of energy storage capacity. Central to this is an order of magnitude increase in the supply of batteries.

The need to source a supply of critical materials that support green energy technologies from within the continent is clear. This was highlighted by European Commission president Ursula von Leyden who said in her October 2022 State of the Union address, "lithium and rare earths are already replacing gas and oil at the heart of our economy". Accordingly, a new Critical Raw Material Act (the "CRMA") was introduced on 16 March 2023 to address risks to supply and advance new domestic mining projects. The CRMA proposes a comprehensive set of actions to ensure the European Union's access to a secure, diversified, affordable and sustainable supply of critical raw materials, including lithium. The CRMA also sets clear benchmarks for domestic capacities along the strategic raw material supply chain and to diversify EU supply including at least 10% of the EU's annual consumption for extraction and 40% for processing.

This bodes well for Zinnwald as it develops its 100% owned integrated lithium hydroxide ('LiOH') project in Germany positioned to support the European battery storage and EV manufacturing sectors from the end of 2026.

Having proved the viability of LiOH production in March 2022, as well as the potential to produce economically significant amounts of commercially saleable by-products, our focus then turned to the re-design of the Project that culminated in the publishing of a PEA that fully described the new technical plan for the Project in September. This reported positive economics: pre-tax NPV8 of US$1,605m, IRR of 39.0%, $192m EBITDA and a payback of just 3.3 years.

The PEA emphasised other positive attributes of the Project including its location in a mining district at an historic underground mine with existing infrastructure, availability of skilled labour, and support of the Saxony authorities and local community. Furthermore, it highlighted the Project's strong ESG credentials with the potential to be a zero-waste project with high-demandby-products including fertiliser, limited water use, and low-cost sustainable mining strategy focused on minimising C02 emissions.

We are now seeking to further optimise the Project's economics by evaluating the potential to increase the mining rate resulting in higher lithium product output. During 2022, the relevant approvals required to commence two drilling campaigns were sought and subsequently granted enabling the start of an infill drill campaign at the key Zinnwald Lithium Deposit in July, and an exploration drill campaign at one of our satellite deposits, Falkenhain, in September. Initial results from these programmes indicate the potential for an increased resource at Zinnwald and the potential for significant lithium resources at Falkenhain which could represent possible feed material for the core project. The data acquired will be collated to optimise the mining plan and fed into the Bankable Feasibility Study ('BFS'), which we currently anticipate publishing towards the end of the year.

In tandem, other sizeable work programmes are underway to refine and optimise our plans including the development of processing technologies, continued Environmental Impact Assessment ('EIA') and other permit application processes, the evaluation of options for the construction strategy and further work/negotiations on infrastructure aspects of the Project.

Corporate

Today we have announced a major milestone in the development of the Company in the securing of our first industrial cornerstone investor, AMG Advanced Metallurgical Group ("AMG"). As part of a wider placing, to be done at a material premium to our current share price, we will raise a minimum of £14m and AMG will acquire a 25% stake in Zinnwald. This is a significant endorsement of our strategy to have AMG as a partner, which is one of the most advanced Lithium companies in both Germany and the wider EU. We are also pleased that our existing substantial shareholders, Henry Maxey and Mark Tindall have all elected to subscribe to maintain their shareholdings.

At the start of 2023 we appointed Tamesis Partners as joint corporate broker and financial adviser. Tamesis has initiated research coverage of the Company. We look forward to working with Tamesis to broaden our interaction with institutional investors focused on the mining space.

In addition, we were pleased to announce that we have entered into an agreement with Ocean Partners Ltd for it to acquire our subsidiary Erris Zinc Ltd, which owns the Abbeytown Project, in return for a royalty and future cash payment once Abbeytown goes into production. As we previously stated, our core focus is on the Zinnwald Lithium Project and we believe that Abbeytown will be better advanced as part of a business focused on the commodity and the region. As such we are confident that Ocean Partners will be excellent stewards of the project and that the transaction will deliver value to Zinnwald from this asset.

1