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DJ European Lithium Limited Interim Financial Report

TIDMEUR

RNS Number : 0818G

European Lithium Limited

13 March 2020

European Lithium Ltd

("European Lithium", "EUR" or "the Company")

Interim Financial Report

European Lithium is pleased to announce its audited interim financial report for the 6 months ended 31 December 2019.

The full report can be found on the company website:

https://wcsecure.weblink.com.au/pdf/EUR/02086868.pdf

DIRECTORS' REPORT

Your Directors submit the Interim Financial Report of European Lithium Limited (European Lithium or the Company) and its controlled entities (together the Group) for the half-year ended 31 December 2019. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

Review of Operations

Corporate

Placement

During the half year ended 31 December 2019, the Company issued 5.3m shares to raise cash proceeds of $477,000 (before expenses) (Placement A).

Also, during the period, the Company issued 5.0m shares to raise cash proceeds of $425,000 (before expenses) (Placement B).

Financing Facility - Magna

On 7 September 2018, the Company entered into a convertible note agreement with MEF I, L.P. (Magna) of which A$2.5m (1,840,500 convertible notes) was drawn down on 7 September 2018.

On 13 September 2019, Magna agreed to extend the maturity date of the convertible notes on issue from 7 September 2019 to 30 November 2019. In consideration for this extension, the Company issued Magna 1,000,000 fully paid ordinary shares on 13 September 2019.

During the half year ended 31 December 2019, the Company converted 253,260 notes and redeemed 434,782 notes (each with a face value of US$1.10). As at 31 December 2019, Magna had nil convertible notes remaining.

Financing Facility - Winance

On 31 July 2019, the Company entered into a convertible note agreement with Winance Investment LLC (Winance) of which A$2.0m (2,000 convertible notes) was drawn down on 20 September 2019.

During the half year ended 31 December 2019, the Company converted 1,060 notes. As at 31 December 2019, Winance had 940 convertible notes outstanding.

Debt Facility

On 30 December 2019, the Company announced that it had agreed a long-term debt facility of EUR 7,500,000 with a Swiss based sophisticated investor introduced by Helvetican International AG (Debt Facility).

The Debt Facility will allow the Company to continue with the DFS at the Company's Wolfsberg Lithium Project in Austria and for general working capital purposes.

Key terms and conditions of the Debt Facility are included in the announcement released on 30 December 2019.

Capital Raisings and Movements

On 11 July 2019, the Company issued 2,000,000 fully paid ordinary shares pursuant to Placement A. The Company also issued 983,548 fully paid ordinary shares to Magna upon the conversion 50,000 convertible notes.

On 31 July 2019, the Company issued 995,223 fully paid ordinary shares issued to Magna upon the conversion of 50,000 convertible notes.

On 16 August 2019, the Company issued 1,016,411 fully paid ordinary shares issued to Magna upon the conversion of 50,000 convertible notes.

On 13 September 2019, the Company issued 1,000,000 fully paid ordinary shares to Magna as consideration for the extension of repayment date of the convertible notes.

On 25 September 2019, the Company issued 285,714 fully paid ordinary shares to Winance upon the conversion of 20 convertible notes.

On 30 September 2019, the Company issued 3,300,000 fully paid ordinary shares pursuant to Placement A. THe Company also issued 1,999,999 fully paid ordinary shares to Winance upon the conversion of 140 convertible notes.

On 7 October 2019, the Company issued 819,917 fully paid ordinary shares to Magna upon the conversion 40,000 convertible notes.

On 11 October 2019, the Company issued 1,428,571 fully paid ordinary shares to Winance upon the conversion of 100 convertible notes.

On 23 October 2019, the Company issued 1,428,570 fully paid ordinary shares to Winance upon the conversion of 100 convertible notes.

On 30 October 2019, the Company issued 2,857,142 fully paid ordinary shares to Winance upon the conversion of 200 convertible notes.

On 5 November 2019, the Company issued 5,000,000 fully paid ordinary shares pursuant to Placement B.

On 12 November 2019, the Company issued 1,428,571 fully paid ordinary shares to Winance upon the conversion of 100 convertible notes.

On 19 November 2019, the Company issued 1,428,571 fully paid ordinary shares to Winance upon the conversion of 100 convertible notes.

On 26 November 2019, the Company issued 1,428,571 fully paid ordinary shares to Winance upon the conversion of 100 convertible notes.

On 5 December 2019, the Company issued 853,289 fully paid ordinary shares to Magna upon the conversion of 30,000 convertible notes.

On 10 December 2019, the Company issued 1,428,571 fully paid ordinary shares to Winance upon the conversion of 100 convertible notes.

On 11 December 2019, the Company issued 17,500,000 unlisted options to Directors and 8,440,000 options to participants in the December 2017 and May 2017 placements and to various service provider of the Company as approved at the Company's 2019 AGM. The options are exercisable at 10c each on or before 30 June 2020.

On 13 December 2019, the Company issued 950,026 fully paid ordinary shares to Magna upon the conversion of 33,260 convertible notes.

On 17 December 2019, the Company issued 1,428,571 fully paid ordinary shares to Winance upon the conversion of 100 convertible notes.

Wolfsberg Lithium Project - Austria

Drilling

Phase 1 drilling covering the shallow holes with a depth of less than 300m has been completed in Q3/2019. The drill core samples have been assayed at ALS laboratory in Dublin, Ireland where crushing, pulp and Li(2) O analysis was completed. The Company expects the final assay results from phase 1 drilling in Q1/2020. A short delay took place when some samples had to be resent to the laboratory's facilities.

The five shallow drill holes of phase 1 with a maximum depth of 290.0 m were completed in Zone 1 during Q3/2019. All five drill holes show multiple pegmatite intersections. Three drill holes contain pegmatite intersections with a true thickness up to 2 m. The phase 1 drillings confirm the suspected extension of pegmatite veins at depth. For details on the Q3/2019 drilling results, we refer to the company's Q3/2019 report, published on 31 October 2019 at the ASX and titled " 30 September 2019 Quarterly Report".

Application for drilling of the deep holes with more than 300m of depth covering phase 2 in of the drilling program in Zone 1 has been lodged in Q4/2019 to the mining authority. An official hearing at the municipality involving compulsory public and private parties during the approval process took place on 30th October and was coordinated and moderated under the leadership of the mining authority. The approval for the phase 2 drilling program is expected to be issued in Q1/2020 when drilling will commence shortly thereafter.

Definitive-Feasibility Study (DFS)

Results from phase 1 of the summer drilling program (shallow holes <300m depth in Zone 1 have been assessed for eligibility to convert the JORC resource from Inferred into Measured and Indicated category and upgrade resources to 10.98mt. All holes have been considered to be of sufficient quality to contribute to the expected resource update. This is a successful outcome as expected and convinces the company to move ahead with the envisaged deep holes. Together with the deep holes from phase 2 will this form the basis to convert the Measured and Indicated resources into JORC reserves during the DFS mine planning and scheduling. The Zone 1 drilling programme to increase the Measured and Indicated Resource allows the DFS to be undertaken at the envisaged higher mining rate of max. 800,000tpa.

SRK Consulting (SRK) continued to work on the optimized mine design and increased declaration of mineral reserves, based on the PFS and current drilling program results.

During the 3(rd) and 4(th) quarter, Dorfner/Anzaplan carried out significant metallurgical test work to assess and optimize the process lines, flowsheets and layouts. This testing is to ensure a high-quality final product (Lithium Hydroxide) is produced using the most efficient and competitive metallurgical processes from the beginning of the production cycle. All metallurgic test work took place at the pilot plant for the Wolfsberg Project at Dorfner/Anzaplan's testing facility in Hirschau, Germany and have been completed in Q4/2019. The results will be published in a timely manner during Q1/2020, based on the comprehensive and detailed technical report.

DRA Global continued independently to assess and review the metallurgical test work to complete their research studies in a timely manner and attended to all work stages in Hirschau, Germany.

Land Access

In Q4 2019 the company renewed 54 exploration and 11 mining licenses. The decision of the mining authority is based on the significant effort European Lithium has demonstrated to develop the Wolfsberg Lithium Project. The exploration progress to increase the resources and metallurgic test work to produce battery grade lithium hydroxide in high level industrial purity have shown the company's successful work to the mining authority. This is a significant milestone to secure the company's rights to develop the Wolfsberg Lithium Project through the DFS into production.

Environmental

No environmental work has been carried out in Q3 and Q4/2019.

Monitoring of water flows and quality from the mine have continued.

Hydrogeology

The Company continued during Q3 and Q4/2019 with hydrogeology monitoring program on a weekly, monthly and quarterly time frame:

   --      Weekly monitoring includes measuring the water level at the surface and underground sites, 

-- The monthly monitoring program includes sampling and analyzing defined chemical and physical parameters,

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-- The quarterly monitoring program includes water sampling and analyzing water from previously defined field sites and analyses at certified Austrian lab in Austria. The water samples are analyzed according to the Austrian state requirements for drinking water.

All hydrogeological data continues to be stored and secured into the Company's database.

The preparation work by SRK, and the geological consultant, GEO Unterweissacher, continues to ensure in-hole hydrogeological test work has been completed appropriately and can continue in future.

Data from the above activities is fed into a water measuring database from which an annual report is abbreviated.

Marketing

The strategy for the Company has remained unchanged and focused on the supply of lithium hydroxide to the nascent lithium battery plants of Europe. The Company has continued discussions with a number of industry players regarding future off-take contracts. Good progress has already been made with potential off-take partners.

Horizon 2020

As reported in Q1 2019, the company's 100% owned subsidiary ECM Lithium AT GmbH (ECM) has lodged contribution papers to participate in the European Union funded Horizon 2020 - GREENPEG programme. In Q4 the company was approved to participate in the GREENPEG programme. All requested and compulsory paperwork has been lodged in Q4/2019 to Horizon 2020 administrators and approval is expected in Q1/2020. This is another success showing the company's abilities and legibility to contribute with EU-level support to the sustainable supply of battery grade lithium, sourced and produced in Europe.

During Q3 and Q4 2019 the company has continued to work proactively in the already approved and funded Horizon 2020 LithRef programme .

Events Subsequent to Reporting Date

On 6 January 2020, the Company issued 18,000,000 unlisted options to Helvetican with an exercise price of $0.10c each that can be exercised on or before 30 June 2020.

On 7 January 2020, the Company issued 20,000,000 unlisted options to Helvetican with an exercise price of $0.10c each that can be exercised on or before 30 June 2020.

On 20 January 2020, the Company entered into a short-term loan agreement for $400k. Under the terms of the facility, interest of $40k is payable at the repayment date of 20 February 2020 with penalty interest applying for the late repayment of funds. Funds were drawn down under the facility on 20 January 2020.

On 24 January 2020, the Company issued 8,333,333 fully paid ordinary shares to Winance upon the conversion of 500 convertible notes.

On 24 January 2020, the Company issued 500,000 unlisted options to Winance with an exercise price of $0.10c each that can be exercised on or before 30 June 2020.

On 5 February 2020, the Company announced that it had listed on the ASX the options with an exercise price of $0.10 each that can be exercise on or before 30 June 2020. Trading of these options is under the ASX code EURO.

On 27 February 2020, the Company issued 7,333,333 fully paid ordinary shares to Winance upon the conversion of 440 convertible notes.

On 4 March 2020, Mr Stefan Muller resigned as a Non-Executive Director of the Company. Following Mr Mullers resignation, Mr Tim Turner was appointed as Non-Executive Director of the Company effective 4 March 2020.

On 5 March 2020, the Company drew down $2m from the Winance finance facility through the issue of 2,000 convertible notes.

No matters or circumstances have arisen since the end of the half-year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs in future financial years.

Auditor's Independence Declaration

Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the Company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on page 6 and forms part of this Directors' report for the half-year ended 31 December 2019.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act 2001.

____________________________

Antony Sage

Non-Executive Chairman

13 March 2020

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

 
                                                    Note      For the six        For the six 
                                                             months ended       months ended 
                                                              31 December        31 December 
                                                                     2019               2018 
                                                                        $                  $ 
                                                          ---------------  ----------------- 
 Continuing operations 
 Revenue and other income                            3              3,365             23,817 
 Employee benefits expense                           4           (96,000)           (98,000) 
 Loss on fair value of financial assets 
  through profit or loss                             6                  -           (81,000) 
 Depreciation and amortisation expense                            (2,473)            (1,440) 
 Finance costs                                       4          (121,801)           (27,715) 
 Transaction costs relating to the issue 
  of convertible note facility                       7          (160,000)          (100,000) 
 Difference between transaction price of 
  convertible note and fair value at initial 
  recognition                                         7         (363,883)          (318,115) 
 Fair value loss on remeasurement of convertible 
  note                                               7             31,777           (46,754) 
 Impairment of deferred exploration and 
  evaluation expenditure                             5                  -              (330) 
 Consulting fees                                                (211,734)          (327,212) 
 Travel expenses                                                (155,589)          (251,250) 
 Regulatory and compliance costs                     4          (463,774)          (584,492) 
 Share based payments                                8          (364,490)          (435,258) 
 Other expenses                                      4          (414,730)           (21,589) 
 Loss before income tax                                       (2,319,332)        (2,269,338) 
 Income tax expense                                                     -                  - 
                                                          ---------------  ----------------- 
 Loss after tax from continuing operations                    (2,319,332)        (2,269,338) 
                                                          ---------------  ----------------- 
 
 Other comprehensive income, net of income 
  tax 
 Items that may be reclassified to profit 
  or loss 
 Exchange differences on translation of 
  foreign operations                                            (225,072)            529,387 
 Other comprehensive income for the period, 
  net of income tax                                             (225,072)            529,387 
 
 Total comprehensive loss for the period                      (2,544,404)        (1,739,951) 
                                                          ---------------  ----------------- 
 
 
 Loss per share for the period 
 Basic loss per share (cents per share)              10            (0.39)             (0.41) 
 Diluted loss per share (cents per share)            10            (0.39)             (0.41) 
 
 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2019

 
                                        Note   31 December   30 June 2019 
                                                      2019              $ 
                                                         $ 
                                              ------------  ------------- 
 ASSETS 
 Current Assets 
 Cash and cash equivalents                          32,165      1,199,738 
 Trade and other receivables                       443,792        309,918 
 Total Current Assets                              475,957      1,509,656 
                                              ------------  ------------- 
 
 Non-Current Assets 
 Property, plant and equipment                       6,500          7,030 
 Deferred exploration and evaluation 
  expenditure                            5      34,892,153     33,004,593 
 Restricted cash and other deposits                 31,140         31,517 
 Financial assets                        6         128,000        128,000 
                                              ------------  ------------- 
 Total Non-Current Assets                       35,057,793     33,171,140 
                                              ------------  ------------- 
 
   TOTAL ASSETS                                 35,533,750     34,680,796 
                                              ------------  ------------- 
 
 LIABILITIES 
 Current Liabilities 
 Trade and other payables                        1,619,939      1,028,183 
 Convertible note                        7       1,110,338      1,078,136 
 Total Current Liabilities                       2,730,277      2,106,319 
                                              ------------  ------------- 
 
 TOTAL LIABILITIES                               2,730,277      2,106,319 
                                              ------------  ------------- 
 
 NET ASSETS                                     32,803,473     32,574,477 
                                              ============  ============= 
 
 EQUITY 
 Issued capital                          8      22,621,952     20,283,788 
 Reserves                                9       7,111,600      6,901,436 
 Retained earnings                               3,069,921      5,389,253 

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                                              ------------  ------------- 
 
 TOTAL EQUITY                                   32,803,473     32,574,477 
                                              ============  ============= 
 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF YEAR ENDED 31 DECEMBER 2019

 
                                              Note   31 December   31 December 
                                                            2019          2018 
                                                               $             $ 
                                                    ------------  ------------ 
 Cash flows from operating activities 
 Payments to suppliers and employees                   (900,248)   (1,478,111) 
 Payments for exploration                            (2,034,238)   (1,149,251) 
 Finance costs                                           (7,426)      (27,715) 
 Interest received                                         3,365        23,817 
 VAT Refund                                            (120,347)       (6,752) 
 Net cash used in operating activities               (3,058,894)   (2,638,012) 
 
 Cash flows from investing activities 
 Proceeds from the sale of exploration 
  tenements                                                    -             - 
 Payment for property, plant and equipment               (1,992)       (2,716) 
 Net cash used in investing activities                   (1,992)       (2,716) 
 
 Cash flows from financing activities 
 Proceeds from capital raisings                          902,000             - 
 Payment for share issue costs                          (35,051)             - 
 Proceeds from convertible note facility       7       2,000,000     2,500,000 
 Transaction costs related convertible 
  note facility                                7       (160,000)      (75,000) 
 Repayment of convertible loan note 
  facility                                     7       (812,443)             - 
 Net cash provided by financing activities             1,894,506     2,425,000 
                                                    ------------  ------------ 
 
 Net decrease in cash and cash equivalents           (1,166,380)     (215,728) 
 Cash and cash equivalents at beginning 
  of year                                              1,199,738     3,258,892 
 Effects on exchange rate fluctuations 
  on cash held                                           (1,193)         1,167 
                                                    ------------  ------------ 
 Cash and cash equivalents at end 
  of year                                                 32,165     3,044,331 
                                                    ============  ============ 
 

The above statements are to be read in conjunction with the notes to the Financial Statements in the full report.

Going concern

The interim financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

The Company incurred an operating loss after tax for the period ended 31 December 2019 of $ 2,319,332 (31 December 2018: $ 2,269,338 loss ), had cash and cash equivalents of $ 32,165 at 31 December 2019 (30 June 2019: $1,199,738), had a net working capital deficit of $ 2,254,320 at 31 December 2019 (30 June 2019: $596,663 deficit) and a net cash outflow from operating activities amounting to $ 3,058,894 (31 December 2018: $2,638,012) .

The Group's ability to continue as a going concern and to continue to fund its planned expanded activities is dependent on raising further capital and/or drawing down on the convertible note facility and/or generating additional revenues from its operations and/or reducing or deferring exploration expenditure or operational costs.

The Directors believe the Group will continue as a going concern, after consideration of the following factors:

-- The Group has successfully completed its pre-feasibility study and work is underway on the Definitive-Feasibility Study (DFS). The Company has agreed a long-term debt facility of EUR 7,500,000 with a Swiss based sophisticated investor introduced by Helvetican International AG (Debt Facility) allowing access to funds for the purposes of the DFS. The Company has yet to draw down on the Debt Facility as outstanding security issues relating to the loan require finalisation;

-- The Company has established the Winance convertible loan note facility (refer note 7) allowing access to funds for the purposes of working capital and project DFS; and

-- The Group is able to defer certain exploration-related expenditures in order to retain a positive cash balance;

-- The Group is able to realise its financial assets if required; and

-- The Group is in discussions with a number of entities regarding future off-take contracts and is continuing efforts to secure key customers in key markets and is confident of generating additional sales revenue within the next 12 months.

However, should the fundraising above not be completed, or be available on a sufficiently timely basis, there exists a material uncertainty that may cast significant doubt as to where the Company would continue as a going concern and therefore whether it will realize its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. Quarterly updates will be made with regards to this in accordance with the NEX Exchange Growth Market Rules for Issuers.

- END -

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014

For further information please contact:

 
 European Lithium Ltd              +61 861 819 792 
 Tony Sage                         info@europeanlithium.com 
 NEX Corporate Adviser             +44 207 220 1666 
 James Joyce 
 James Sinclair-Ford 
 
 Tavistock (UK PR & IR Adviser) 
                                   +44 207 920 3150 
 Emily Fenton / Oliver Lamb         +44 778 855 4035 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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