Lifezone Metals Ltd 6-K, filed Dec 14, 2023
Lifezone Metals Ltd (LZM)
About this 6-K
Lifezone Metals Ltd filed this 6-K on December 14, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of December 2023
Commission File Number: 001-41737
Lifezone Metals Limited
Commerce House, 1 Bowring Road
Ramsey, Isle of Man, IM8 2LQ
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
On December 13, 2023, during the regular quarterly meeting of the Board of Directors of Lifezone Metals Limited (the “Company”), the Board approved the financial results of for the nine months ended September 30, 2023. A copy of the company’s unaudited condensed consolidated interim financial statements as of September 30, 2023 and for the nine month periods ended September 30, 2023 and 2022 is furnished as Exhibit 99.1 to this report on Form 6-K, and a copy of the company’s management’s discussion and analysis of financial condition and results of operations for the period ended September 30, 2023 is furnished as Exhibit 99.2 and Quantitative and Qualitative Disclosures about Market Risk is furnished as Exhibit 99.3 to this report on Form 6-K. The Company intends to continue reporting quarterly financial results in 2024.
1
EXHIBIT INDEX
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Lifezone Metals Limited | ||
| Date: December 14, 2023 | By: | /s/ Ingo Hofmaier |
| Name: | Ingo Hofmaier | |
| Title: | Chief Financial Officer | |
3
Exhibit 99.1
LIFEZONE METALS LIMITED
Unaudited Condensed Consolidated INTERIM Financial Statements
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2023
1
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
for the Nine months ended September 30, 2023 and September 30, 2022
| Three Months Ended | Nine Months ended | |||||||||||||||||
| September 30 | September 30 | |||||||||||||||||
| Note | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||||
| Revenue | 5 | 556,271 | 531,739 | 1,063,019 | 1,646,044 | |||||||||||||
| (Including related party revenues of $215,660 and $508,290, $654,568 and $1,573,452 for the three months end and nine months ended September 30, 2023 and 2022, respectively) | ||||||||||||||||||
| Loss on foreign exchange | 8 | (228,619 | ) | (114,441 | ) | (142,072 | ) | (144,914 | ) | |||||||||
| General and administrative expenses | 8 | (347,843,080 | ) | (4,613,327 | ) | (361,255,729 | ) | (10,128,400 | ) | |||||||||
| Operating loss | (347,515,428 | ) | (4,196,029 | ) | (360,334,782 | ) | (8,627,270 | ) | ||||||||||
| Interest income | 6 | 87,678 | 99,237 | 357,478 | 127,053 | |||||||||||||
| Interest expense | 7 | (58,974 | ) | (68,306 | ) | (150,642 | ) | (198,861 | ) | |||||||||
| Loss before tax | (347,486,724 | ) | (4,165,098 | ) | (360,127,946 | ) | (8,699,078 | ) | ||||||||||
| Income tax | - | - | - | - | ||||||||||||||
| Loss for the financial period | (347,486,724 | ) | (4,165,098 | ) | (360,127,946 | ) | (8,699,078 | ) | ||||||||||
| Other comprehensive income | ||||||||||||||||||
| Other comprehensive income that may be reclassified to profit or loss in subsequent periods (net of tax): | ||||||||||||||||||
| Exchange (loss) gain on translation of foreign operations | (213,406 | ) | 5,699 | (297,697 | ) | 40,888 | ||||||||||||
| Total other comprehensive (loss) income for the period | (213,406 | ) | 5,699 | (297,697 | ) | 40,888 | ||||||||||||
| Total other comprehensive loss for the period | (347,700,130 | ) | (4,159,399 | ) | (360,425,6423 | ) | (8,658,190 | ) | ||||||||||
| Net loss for the period: | ||||||||||||||||||
| Attributable to ordinary shareholders of the company | (348,749,555 | ) | (3,637,183 | ) | (359,153,155 | ) | (7,851,748 | ) | ||||||||||
| Attributable to non-controlling interests | 1,262,831 | (527,915 | ) | (974,791 | ) | (847,330 | ) | |||||||||||
| (347,486,724 | ) | (4,165,098 | ) | (360,127,946 | ) | (8,699,078 | ) | |||||||||||
| Total comprehensive loss: | ||||||||||||||||||
| Attributable to ordinary shareholders of the company | (348,962,961 | ) | (3,631,484 | ) | (359,450,852 | ) | (7,810,860 | ) | ||||||||||
| Attributable to non-controlling interests | 1,262,831 | (527,915 | ) | (974,791 | ) | (847,330 | ) | |||||||||||
| (347,700,130 | ) | (4,159,399 | ) | (360,425,643 | ) | (8,658,190 | ) | |||||||||||
| Net loss per share: | ||||||||||||||||||
| Basic and diluted net loss per ordinary share | 21 | (4.53 | ) | (0.07 | ) | (5.56 | ) | (0.13 | ) | |||||||||
| /s/ Ingo Hofmaier | |
| Ingo Hofmaier | |
| Chief Financial Officer | |
| Date: December 14, 2023 |
See accompanying notes to unaudited condensed consolidated interim financial statements.
2
UNAUDITED CONDENSED CONSOLIDATED INTERIM
STATEMENTS OF FINANCIAL POSITION
as of September 30, 2023 and December 31, 2022
| Note | September 30, 2023 | December 31, 2022 | ||||||||
| $ | $ | |||||||||
| Assets | ||||||||||
| Non-current assets | ||||||||||
| Goodwill | 13 | 9,020,813 | - | |||||||
| Exploration and evaluation assets and mining data | 12 | 48,564,547 | 18,455,306 | |||||||
| Patents | 13 | 625,985 | 602,867 | |||||||
| Other intangible assets | 13 | 205,119 | 92,096 | |||||||
| Property and equipment | 11 | 5,449,426 | 884,322 | |||||||
| Right-of-use assets | 11 | 1,476,271 | 352,307 | |||||||
| 65,342,161 | 20,386,898 | |||||||||
| Current assets | ||||||||||
| Inventories | 104,656 | 49,736 | ||||||||
| Trade and other receivables | 10 | 8,643,323 | 6,005,207 | |||||||
| (Including receivables from related parties of $75,000 and $655,683 as of September 30, 2023, and December 31, 2022, respectively and receivables from affiliated entities of $1,612,291 and $959,935 as of September 30, 2023 and December 31, 2022, respectively) | ||||||||||
| Subscription receivable | 15 | - | 50,000,000 | |||||||
| Cash and cash equivalents | 9 | 73,258,538 | 20,535,210 | |||||||
| 82,006,517 | 76,590,153 | |||||||||
| Total assets | 147,348,678 | 96,977,051 | ||||||||
| Liabilities and equity | ||||||||||
| Equity | ||||||||||
| Share capital | 20 | 7,819 | 3,101 | |||||||
| Share premium | 20 | 177,764,792 | 25,436,656 | |||||||
| Share based payment reserve | 20 | 265,558,785 | 25,483,348 | |||||||
| Warrant reserves | 20 | 15,097,425 | - | |||||||
| Other reserves | 20 | (6,850,950 | ) | (15,495,254 | ) | |||||
| Foreign currency translation reserve | 20 | (181,833 | ) | 115,864 | ||||||
| Redemption reserve | 20 | 280,808 | 280,808 | |||||||
| Accumulated deficit | 20 | (403,443,757 | ) | (44,290,602 | ) | |||||
| Total Shareholders’ equity (deficit) | 48,233,089 | (8,466,079 | ) | |||||||
| Non-controlling interests | 20 | 83,478,093 | 84,452,884 | |||||||
| Total equity | 131,711,182 | 75,986,805 | ||||||||
See accompanying notes to unaudited condensed consolidated interim financial statements.
3
UNAUDITED CONDENSED CONSOLIDATED INTERIM
STATEMENTS OF FINANCIAL POSITION
as of September 30, 2023 and December 31, 2022
| Note | September 30, 2023 | December 31,
2022 | ||||||||
| $ | $ | |||||||||
| Non-current liabilities | ||||||||||
| Lease liabilities | 16 | 1,106,714 | 290,576 | |||||||
| Long term asset retirement obligation provision | 19 | 303,000 | 303,000 | |||||||
| Contingent consideration | 18 | 3,809,045 | 3,689,755 | |||||||
| 5,218,759 | 4,283,331 | |||||||||
| Current liabilities | ||||||||||
| Lease liabilities | 16 | 455,749 | 105,304 | |||||||
| Trade and other payables | 14 | 9,962,988 | 16,601,611 | |||||||
| 10,418,373 | 16,706,915 | |||||||||
| Total liabilities | 15,637,496 | 20,990,246 | ||||||||
| Total equity and liabilities | 147,348,678 | 96,977,051 | ||||||||
| /s/ Ingo Hofmaier | |
| Ingo Hofmaier | |
| Chief Financial Officer | |
| Date: December 14, 2023 |
See accompanying notes to unaudited condensed consolidated interim financial statements.
4
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
for the nine months ended September 30, 2023 and September 30, 2022
| Note | Share Capital | Share Premium | Share
Based Payment Reserve | Warrant Reserves | Other Reserves | Foreign currency translation reserve | Redemption Reserve | Accumulated Deficit | Total Shareholders’ equity | Convertible loans issued | Non-controlling Interests | Total
equity | ||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| At January 1, 2022 | 1,843 | 25,436,656 | 9,988,094 | - | - | - | 280,808 | (20,707,260 | ) | 15,000,141 | 39,040,000 | (176,238 | ) | 53,863,903 | ||||||||||||||||||||||||||||||||||||
| Transactions with shareholders: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares | 1,258 | - | - | - | - | - | - | - | 1,258 | - | - | 1,258 | ||||||||||||||||||||||||||||||||||||||
| Total transactions with shareholders | 1,258 | - | - | - | - | - | - | 1,258 | - | - | 1,258 | |||||||||||||||||||||||||||||||||||||||
| Total loss for the interim financial period | - | - | - | - | - | - | (7,851,748 | ) | (7,851,748 | ) | - | (847,330 | ) | (8,699,078 | ) | |||||||||||||||||||||||||||||||||||
| Total other comprehensive income for the interim financial period | - | - | - | - | 40,888 | - | - | 40,888 | - | - | 40,888 | |||||||||||||||||||||||||||||||||||||||
| At September 30, 2022 | 3,101 | 25,436,656 | 9,988,094 | - | - | 40,888 | 280,808 | (28,559,008 | ) | 7,190,539 | 39,040,000 | (1,023,568 | ) | 45,206,971 | ||||||||||||||||||||||||||||||||||||
| At January 1, 2023 | 3,101 | 25,436,656 | 25,483,348 | - | (15,495,254 | ) | 115,864 | 280,808 | (44,290,602 | ) | (8,466,079 | ) | - | 84,452,884 | 75,986,805 | |||||||||||||||||||||||||||||||||||
| - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of a subsidiary: | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
| Reorganization: | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
| Exercise of share options | 83 | 573,515 | (11,103,650 | ) | - | 10,640,556 | - | - | - | 110,504 | - | - | 110,504 | |||||||||||||||||||||||||||||||||||||
| Exercise of RSUs | 150 | 9,524,850 | (14,379,698 | ) | - | 4,854,698 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Share for share exchange | 2,934 | (2,934 | ) | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of shares: | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
| Warrants: | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
| Public warrants | - | (7,866,000 | ) | - | 14,490,000 | (6,624,000 | ) | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Private placement warrants | - | (380,475 | ) | - | 607,425 | (226,950 | ) | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Earnouts: | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
| Earnouts to shareholder | - | - | 248,464,035 | - | - | - | - | - | 248,464,035 | - | - | 248,464,035 | ||||||||||||||||||||||||||||||||||||||
| Earnouts to sponsors | - | - | 17,094,750 | - | - | - | - | - | 17,094,750 | - | - | 17,094,750 | ||||||||||||||||||||||||||||||||||||||
| Issue of share capital: | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
| Issuances to SPAC shareholders and sponsors | 799 | 79,960,741 | - | - | - | - | - | - | 79,961,540 | - | - | 79,961,540 | ||||||||||||||||||||||||||||||||||||||
| Issuance to PIPE Investors | 702 | 70,172,468 | - | - | - | - | - | - | 70,173,170 | - | - | 70,173,170 | ||||||||||||||||||||||||||||||||||||||
| Issuance to Simulus Shareholders | 50 | 6,029,950 | - | - | - | - | - | - | 6,030,000 | - | - | 6,030,000 | ||||||||||||||||||||||||||||||||||||||
| Equity issuance costs | - | (5,683,979 | ) | - | - | - | - | - | - | (5,683,979 | ) | - | - | (5,683,979 | ) | |||||||||||||||||||||||||||||||||||
| Total transactions with shareholders | 4,718 | 152,328,136 | 240,075,437 | 15,097,425 | 8,644,304 | - | - | - | 416,150,020 | - | - | 416,150,020 | ||||||||||||||||||||||||||||||||||||||
| Total loss for the interim financial period | - | - | - | - | - | - | - | (359,153,155 | ) | (359,153,155 | ) | - | (974,791 | ) | (360,127,946 | ) | ||||||||||||||||||||||||||||||||||
| Total other comprehensive loss for the interim financial period | - | - | - | - | - | (297,697 | ) | - | - | (297,697 | ) | - | - | (297,697 | ) | |||||||||||||||||||||||||||||||||||
| At September 30, 2023 | 20 | 7,819 | 177,764,792 | 265,558,785 | 15,097,425 | (6,850,950 | ) | (181,833 | ) | 280,808 | (403,443,757 | ) | 48,233,089 | - | 83,478,093 | 131,711,182 | ||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated interim financial statements.
5
UNAUDITED CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENTS
for the nine months ended September 30, 2023 and September 30, 2022
| September 30 | September 30 | |||||||||
| Note | 2023 | 2022 | ||||||||
| $ | $ | |||||||||
| Cash flows from operating activities | ||||||||||
| Consolidated loss for year | (360,425,643 | ) | (8,658,190 | ) | ||||||
| Adjustments for: | ||||||||||
| SPAC transaction expenses | 8 | 76,857,484 | - | |||||||
| Share-based compensation expense | 20 | 265,558,785 | - | |||||||
| Interest income | 6 | (357,478 | ) | (127,053 | ) | |||||
| Amortization of intangibles | 13 | 123,274 | 33,619 | |||||||
| Foreign exchange loss | 8 | 142,072 | 144,914 | |||||||
| Interest expense | 7 | 150,642 | 198,861 | |||||||
| Depreciation of property and equipment and right-of-use assets | 11 | 848,951 | 109,992 | |||||||
| Operating loss before working capital changes | (17,101,913 | ) | (8,297,857 | ) | ||||||
| Changes in trade and other receivables | (836,648 | ) | (1,495,262 | ) | ||||||
| Changes in related party receivables | (64,832 | ) | (142,802 | ) | ||||||
| Changes in inventories | (54,920 | ) | (55,406 | ) | ||||||
| Changes in other current assets | (1,623,805 | ) | (485,283 | ) | ||||||
| Changes in prepaid mining license | 754,753 | 758,735 | ||||||||
| Changes in customer credit to related party | - | (208,550 | ) | |||||||
| Changes in trade and other payables | 14 | (4,704,319 | ) | 571,371 | ||||||
| Net cash used in operating activities | (23,631,684 | ) | (9,355,054 | ) | ||||||
| Cash flows from investing activities | ||||||||||
| Interest received from bank | 6 | 350,637 | 120,232 | |||||||
| Patent costs incurred | (81,100 | ) | (69,014 | ) | ||||||
| Expenditure on property and equipment | 11 | (540,871 | ) | (7,512 | ) | |||||
| Expenditure on other intangible assets | 13 | (178,315 | ) | - | ||||||
| Investment in exploration and evaluation assets | 12 | (30,109,241 | ) | (3,527,986 | ) | |||||
| Acquisition of subsidiaries, net of cash acquired | 22 | (8,085,255 | ) | (7,591 | ) | |||||
| Net cash used in investing activities | (38,644,542 | ) | (3,491,871 | ) | ||||||
| Cash flows from financing activities | ||||||||||
| Proceeds from exercise of stock options | 110,534 | - | ||||||||
| Net proceeds from PIPE transaction | 1 | 70,173,170 | - | |||||||
| Proceeds from SPAC acquisition | 1 | 3,104,056 | - | |||||||
| Share issuance cost | 8 | (5,683,979 | ) | - | ||||||
| Payment of lease liabilities | 16 | (179,222 | ) | (66,223 | ) | |||||
| Proceeds from receipt of subscription receivable, net of transaction cost | 1 | 47,500,000 | - | |||||||
| Net cash provided by (used in) financing activities | 115,024,529 | (66,223 | ) | |||||||
| Net increase (decrease) in cash and cash equivalents | 52,748,700 | (12,913,148 | ) | |||||||
| Cash and cash equivalents | ||||||||||
| Effect of exchange rate changes in cash | (25,372 | ) | (73,350 | ) | ||||||
| Beginning of period | 20,535,210 | 45,624,110 | ||||||||
| End of period | 73,258,538 | 32,637,612 | ||||||||
See accompanying notes to unaudited condensed consolidated interim financial statements.
6
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 1. | General information |
Lifezone Metals Limited (the Company, individually and together with its controlled subsidiaries “Lifezone”) is a limited company incorporated and domiciled in Isle of Man, whose shares are publicly traded on the New York Stock Exchange (“NYSE”) since July 6, 2023 under the trading symbol LZM. Lifezone warrants trade under the symbol LZMW.
Lifezone’s registered office is located at Commerce House, 1 Bowring Road, Ramsey, IM8 2LQ, Isle of Man. The Unaudited Condensed Consolidated Interim Financial Statements of Lifezone for the nine months ended September 30, 2023, were authorized for release in accordance with a resolution of the Directors of Lifezone on December 13, 2023.
The Unaudited Condensed Consolidated Interim Financial Statements of Lifezone have been reviewed by Grant Thornton Ireland, an independent public accountant prior to filing in accordance with the standards of the United States Public Company Accounting Oversight Board applicable to reviews of interim financial information.
Lifezone is a modern metals company engaged in the development, patenting, and licensing of its hydrometallurgical processing technology (“Hydromet Technology”) for use in the extractive metallurgy, minerals, and recycling industries. Lifezone’s primary metals asset is the Kabanga Nickel project in Tanzania, believed to be one of the world’s largest and highest-grade undeveloped nickel sulfide deposits. Information on the group structure of Lifezone is provided in Note 2.3.
Information on other related party relationships of Lifezone is provided in Note 17.
Background and basis for preparation
History and organization
Lifezone Holdings Limited (“Lifezone Holdings”) was formed as a holding company for Lifezone Limited and acquired 100% of the equity interest (including outstanding options and Restricted Stock Units, “RSUs”) in Lifezone Limited on June 24, 2022, in consideration for issuing shares of Lifezone Holdings on a 1:1 basis to Lifezone Limited shareholders at the time (following a 1:200 split of shares of Lifezone Limited) (the “Lifezone Holdings Transaction”). Also, on June 24, 2022 (just prior to the Lifezone Holdings Transaction), the shareholders of Kabanga Nickel Limited (“KNL”), other than Lifezone Limited and BHP Billiton (UK) DDS Limited (“BHP”), exchanged their shares of KNL for shares of Lifezone Holdings on a 1:1 basis (the “Flip-Up”). The KNL options were also exchanged for options in Lifezone Holdings on a 1:1 basis as part of the Flip-Up.
As Lifezone Holdings did not have any previous operations, Lifezone Limited and KNL (together with its subsidiaries) are together viewed as the predecessors to Lifezone Holdings and its consolidated subsidiaries. As a result, the consolidated financial statements of Lifezone Holdings recognize the assets and liabilities received in the Lifezone Holdings Transaction and the Flip-Up at their historical carrying amounts, as reflected in the historical financial statements of Lifezone Limited and KNL (together with its subsidiaries).
Lifezone Metals Limited was incorporated on December 8, 2022 for the purpose of effectuating the SPAC Transaction referred to below. Prior to the consummation of the transaction, Lifezone Metals Limited had no material assets and did not operate any businesses.
7
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 1. | General information (continued) |
BHP investments
On December 24, 2021, KNL entered into a $40 million convertible loan agreement with BHP and Lifezone Limited established a joint venture with BHP under the Lifezone Subscription Agreement in relation to the Kabanga Nickel project. Following the conversion of convertible loans on July 1, 2022, BHP held an 8.9% interest in KNL, reflected within non-controlling interests.
On October 14, 2022, BHP agreed to invest a further $50 million in KNL in the form of equity under the Tranche 2 Subscription Agreement, the completion of which was subject to certain conditions. Lifezone Limited satisfied substantially all the closing conditions and received the $50 million on February 15, 2023 and issued a stock certificate on the same day, bringing BHP’s interest in KNL from 8.9% as of December 31, 2022 to 17.0%, effective February 15, 2023. Associated with this transaction KNL paid $2.5 million equity issuance cost, with the liability to an investment bank accounted for as a payable in 2022.
SPAC Transaction
On December 13, 2022, Lifezone and GoGreen Investments Corporation (“GoGreen”), an exempted special purchase acquisition company (“SPAC”) incorporated under the laws of the Cayman Islands and formerly listed on the NYSE, entered into a business combination agreement (“BCA”) with GoGreen Sponsor 1 LP, a Delaware limited partnership (the “Sponsor”), Aqua Merger Sub, a Cayman Islands exempted company (the “Merger Sub”) and Lifezone Holdings.
Lifezone, Lifezone Holdings and GoGreen consummated the SPAC Transaction pursuant to the BCA (the “SPAC Transaction”) on July 6, 2023 (the “Closing” and the “Closing Date” respectively). The transaction was unanimously approved by GoGreen’s Board of Directors and was approved at the extraordinary general meeting of GoGreen’s shareholders held on June 29, 2023 (the “EGM”). GoGreen’s shareholders also voted to approve all the other proposals presented at the EGM. As a result of the SPAC Transaction, the Merger Sub, as the surviving entity after the SPAC Transaction, and Lifezone Holdings each became wholly owned subsidiaries of Lifezone Metals Limited. As Lifezone shareholders hold the majority of shares in the combined entity post the acquisition, Lifezone’s key management personnel continues to direct the combined business and Lifezone set the direction of the board composition, Lifezone is considered the accounting acquirer.
The SPAC Transaction was accounted for as a capital reorganization (“Reorganization”). Under this method of accounting, GoGreen was treated as the “acquired” company for financial reporting purposes, with Lifezone being the accounting acquirer and accounting predecessor. Accordingly, the Reorganization was treated as the equivalent of Lifezone Metals issuing shares at Closing of the Reorganization for the net assets of GoGreen, accompanied by a recapitalization via Private Investment in Public Equity (“PIPE”) transaction. The Reorganization, which is not within the scope of IFRS 3 since GoGreen did not meet the definition of a business in accordance with IFRS 3, was accounted for within the scope of IFRS 2. In accordance with IFRS 2, Lifezone recorded a one-time non-cash expense of $76.9 million recognized as a SPAC Transaction expense, based on the excess of the fair value of Lifezone shares issued at a value of $10 per share over the fair value of GoGreen’s identifiable net assets acquired.
8
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 1. | General information (continued) |
SPAC Transaction (continued)
GoGreen’s net assets as of June 30, 2023, prior to the Closing of the SPAC Transaction predominantly comprised of cash and cash equivalents, less current liabilities, are together considered the fair value of GoGreen’s identifiable net assets. In accordance with IFRS 2 paragraph 10, the net assets of GoGreen will be stated at fair value, with no goodwill or other intangible assets recorded and any excess of fair value of Lifezone shares issued over the fair value of GoGreen’s identifiable net assets acquired represents a compensation for the service of a stock exchange listing for its shares, shown as SPAC Transaction expenses below.
| Shares
issued at Closing | Fair
value per Share | Fair
value of shares at closing date | ||||||||||
| $ | ||||||||||||
| Previous GoGreen Sponsor shareholders | 6,468,600 | 10.00 | 64,686,000 | |||||||||
| Previous GoGreen public shareholders | 1,527,554 | 10.00 | 15,275,540 | |||||||||
| 7,996,154 | 79,961,540 | |||||||||||
| Fair value of GoGreen net assets | (3,104,056 | ) | ||||||||||
| SPAC Transaction expense | 76,857,484 | |||||||||||
The BCA was signed concurrent to the closing of the PIPE transaction, which raised $70.2 million of gross proceeds.
Prior to the Closing, the SPAC incurred 94.47% of redemptions from public shareholders following a redemption vote deadline of June 27, 2023, leaving 1,527,554 residual shares in trust. At the Closing, Lifezone acquired GoGreen and former GoGreen shareholders received the number of Lifezone shares and warrants equal to their former holdings of GoGreen shares and warrants. The outstanding warrants formerly associated with GoGreen will therefore be recognized in Lifezone future reported financial position.
Immediately prior to the Closing, holders of all outstanding Lifezone Holdings options (18,054 total) and restricted stock units (30,000 total) elected to exercise or settle, respectively, their options and restricted stock units for Lifezone Holdings shares. All outstanding Lifezone Holdings shares were subsequently exchanged for Lifezone shares at the Closing Date July 6, 2023 at a ratio of c. 94:1.
The SPAC Transaction is expected to have a significant impact on Lifezone’s future capital structure and operating results. The most significant change in Lifezone’s reported financial positions is an approximate increase in cash and cash equivalents from $44.4 million as at June 30, 2023 to $73.3 million as at September 30, 2023. Cash inflows during the three months ending September 30, 2023 related to $70.2 million in gross proceeds from the PIPE transaction consummated substantially simultaneously with the SPAC Transaction and $16.5 million GoGreen cash (post redemptions, but before paying all existing GoGreen liabilities), resulting in $86.6 million gross proceeds for Lifezone before listing and equity issuance costs.
9
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 1. | General information (continued) |
SPAC Transaction (continued)
As a result of the SPAC Transaction, Lifezone as the new parent company, became a SEC-registered Foreign Private Issuer (“FPI”) listed on the NYSE, which requires implementing procedures and processes to address public company regulatory requirements and customary practices. Management expects to incur additional annual expenses as a public company.
Following the Closing, but prior to the completion acquisition of Simulus Group Pty Ltd (“Simulus”) on July 18, 2023 as described in detail below, Lifezone shareholders comprised all prior shareholders of Lifezone Holdings, prior shareholders of GoGreen (including its public shareholders post-redemptions and Sponsor shareholders) plus all PIPE investors resulting in Lifezone having a total of 77,693,602 shares issued and outstanding.
Pursuant to earnout arrangements under the BCA, former Lifezone Holdings and Sponsor shareholder will receive additional Lifezone shares if the daily volume-weighted average price of Lifezone shares equals or exceeds (i) $14.00 per share for any 20 trading days within a 30-trading day period (“Trigger Event 1”) and (ii) $16.00 for any 20 trading days within a 30-trading day period (“Trigger Event 2”). Of the total shares issued and outstanding, 1,725,000 shares are issued but in escrow and relate to the Sponsor earnouts, which are subject to the occurrence of the two trigger events. Further information on the accounting earnouts is provided in Note 20.
Lifezone’s Form F-1 registration statement became effective on September 29, 2023, registering the resale of certain Lifezone Metals shares and (private) warrants owned by certain previous Lifezone Holdings shareholders, the Sponsor shareholders (including its limited partners), PIPE investors and the sellers of the Simulus business. Pursuant to the BCA, a 180-day lock-up period following the Closing Date applies to (i) 5,133,600 Lifezone shares, and 667,500 warrants received by the Sponsor shareholders and (ii) the Lifezone shares received by the previous Lifezone Holdings shareholders who owned 1.5% or more of the outstanding Lifezone Holdings shares prior to the Closing Date, in each case, subject to certain exceptions. 1,335,000 Lifezone shares received by the Sponsor shareholders were subject to a 60-day lock-up from the Closing Date.
10
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 1. | General information (continued) |
SPAC Transaction (continued)
Lifezone’s shareholdings at the time of the Closing are summarized below. The table below excludes shares issued at the completion of the acquisition of Simulus which was completed on July 18, 2023 as discussed in Note 22.
| Shareholders | Shares
At Closing | %
At Closing | Shares (Fully Diluted) | Fully Diluted % | ||||||||||||
| Previous Lifezone Holdings shareholders | 62,680,131 | 80.7 | % | 62,680,131 | 52.5 | % | ||||||||||
| Previous GoGreen Sponsor shareholders | 6,468,600 | 8.3 | % | 6,468,600 | 5.4 | % | ||||||||||
| Previous GoGreen public shareholders | 1,527,554 | 2.0 | % | 1,527,554 | 1.3 | % | ||||||||||
| PIPE Investors | 7,017,317 | 9.0 | % | 7,017,317 | 5.9 | % | ||||||||||
| Total | 77,693,602 | 100.0 | % | 77,693,602 | 65.0 | % | ||||||||||
| Warrants ($11.50 Exercise Share Price) | ||||||||||||||||
| Previous GoGreen public warrants | 13,800,000 | 11.6 | % | |||||||||||||
| Previous GoGreen Sponsor warrants | 667,500 | 0.6 | % | |||||||||||||
| Total | 14,467,500 | 12.1 | % | |||||||||||||
| Earnout Trigger Event 1 ($14.00 per Share) | ||||||||||||||||
| Previous Lifezone Holdings shareholders | 12,536,026 | 10.5 | % | |||||||||||||
| Previous GoGreen Sponsor shareholders | 862,500 | 0.7 | % | |||||||||||||
| Total | 13,398,526 | 11.2 | % | |||||||||||||
| Earnout Trigger Event 2 ($16.00 per Share) | ||||||||||||||||
| Previous Lifezone Holdings shareholders | 12,536,026 | 10.5 | % | |||||||||||||
| Previous GoGreen Sponsor shareholders | 862,500 | 0.7 | % | |||||||||||||
| Total | 13,398,526 | 11.2 | % | |||||||||||||
| Fully Diluted Total | 119,458,154 | 100.0 | % | |||||||||||||
11
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 1. | General information (continued) |
Simulus acquisition
On March 3, 2023, Metprotech, a wholly owned subsidiary of Lifezone, signed a share sale agreement with the shareholders of Simulus, a leading hydrometallurgical laboratory and engineering company located in Perth, Australia.
The transaction formally closed on July 18, 2023 for a total consideration of $14.53 million comprising a $1.0 million deposit paid on March 27, 2023, a cash consideration of $7.5 million paid on closing and 500,000 shares in Lifezone. The vendors are restricted from disposing of, transferring, or assigning their consideration shares for a period of six months from the completion of the Simulus acquisition.
Further information on the accounting of the Simulus acquisition is provided in Note 22.
| 2. | Significant accounting policies |
| 2.1. | Basis of preparation |
Lifezone’s Unaudited Condensed Consolidated Interim Financial Statements for the nine months ended September 30, 2023 have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ under the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and are reported in U.S. dollars (“USD” or “$”).
The Unaudited Condensed Consolidated Interim Financial Statements have been prepared on a historical cost basis unless otherwise stated.
The same accounting policies, presentation and methods of computation have been followed in these Unaudited Condensed Consolidated Interim Financial Statements as were applied in the preparation of the financial statements of Lifezone Holdings for the year ended December 31, 2022, except for the impact of the adoption of the Standards and Interpretations as described in Note 2.2
These standards and amendments do not have a significant impact on these unaudited condensed consolidated interim financial statements and therefore the disclosures have not been made.
Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New IFRS, amendments and Interpretations not adopted in the current year have not been disclosed as they are not expected to have a material impact on the Lifezone’s financial statements.
The Unaudited Condensed Consolidated Interim Financial Statements incorporate the results of the Flip-Up as discussed in Note 1, as of June 24, 2022. Lifezone Holdings acquired 100% of the equity interest in Lifezone Limited, a transaction accounted for using the predecessor value method. Business combinations under common control are outside the scope of IFRS 3, therefore, Lifezone management used its judgment to develop an accounting policy that is relevant and reliable, in accordance with IAS 8. Management considered the application of the predecessor value method as the most appropriate (also known as merger accounting), which involves accounting for the assets and liabilities of the acquired business using existing carrying values of the acquired business.
12
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 2. | Significant accounting policies (continued) |
| 2.1. | Basis of preparation (continued) |
In the Unaudited Condensed Consolidated Interim Statement of Financial Position, the acquiree’s identifiable assets and liabilities are recognized at their carrying values at the acquisition date. The increase in the fair value of share-based payment reserves, assumed by Lifezone Holdings as part of the Flip-Up, was accounted for directly in equity under Other Reserves. The results of acquired operations are included in the Unaudited Condensed Consolidated Interim Statement of Comprehensive Income from the date on which control is obtained.
Lifezone has prepared the Unaudited Condensed Consolidated Interim Financial Statements on the basis that it will continue to operate as a going concern as discussed in Note 2.5.
The Unaudited Condensed Consolidated Interim Financial Statements comprise the financial statements of Lifezone and all its controlled subsidiaries as of September 30, 2023. Control is achieved when Lifezone is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, Lifezone controls an investee if, and only if, Lifezone has:
| ● | power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee); |
| ● | exposure, or rights, to variable returns from its involvement with the investee; or |
| ● | the ability to use its power over the investee to affect its returns. |
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when Lifezone has less than a majority of the voting or similar rights of an investee, Lifezone considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
| ● | the contractual arrangement(s) with the other vote holders of the investee; |
| ● | rights arising from other contractual arrangements; and |
| ● | Lifezone’s voting rights and potential voting rights. |
Lifezone reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when Lifezone obtains control over the subsidiary and ceases when Lifezone loses control of the subsidiary. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the year are included in the Unaudited Condensed Consolidated Interim Financial Statements from the date Lifezone gains control until the date Lifezone ceases to control the subsidiary.
| 2.2. | Accounting pronouncements |
The accounting policies adopted in the preparation of the unaudited condensed consolidated interim financial statements are consistent with those followed in the preparation of the annual consolidated financial statements of Lifezone Holdings for the year ended December 31, 2022, except for the adoption of new standards effective as of January 1, 2023. Lifezone has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective. Several amendments apply for the first time in 2023, but do not have an impact on the unaudited condensed consolidated interim financial statements of the Company, as follows:
| ● | IFRS 17 ‘Insurance Contracts’ |
| ● | Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12, Income Taxes) |
| ● | Definition of Accounting Estimates (Amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors) |
| ● | Disclosure of Accounting Policies (Amendments to IAS 1, Presentation of Financial Statements, and IFRS Practice Statement 2, Making Materiality Judgements) |
13
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 2. | Significant accounting policies (continued) |
| 2.3. | Basis of consolidation |
Profit or loss and each component of other comprehensive income are attributed to the equity holders of Lifezone Metals Limited as the parent entity of Lifezone and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with Lifezone’s accounting policies. All intra-group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of Lifezone are eliminated on full consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If Lifezone loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest, and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment remains recognized at fair value.
Lifezone attributes total comprehensive income or loss of subsidiaries between the owners of Lifezone Metals Limited as the parent entity and the non-controlling interests based on their respective ownership interests.
The Consolidated Interim Financial Statements comprise the financial statements as of September 30, 2023, of the following 19 subsidiaries.
| Direct / | Country of | Principal place of | Percentage
of Ownership (%) | |||||||||||
| Name of subsidiary | Indirect | incorporation | Business | 2023 | 2022 | |||||||||
| Aqua Merger Sub (in liquidation) | Direct | Cayman Islands | Cayman Islands | 100.0 | % | 100.0 | % | |||||||
| Lifezone Holdings Limited | Indirect | Isle of Man | Isle of Man | 100.0 | % | 100.0 | % | |||||||
| Lifezone Limited | Indirect | Isle of Man | Isle of Man | 100.0 | % | 100.0 | % | |||||||
| Lifezone Holdings US, LLC | Indirect | United State of America | United State of America | 100.0 | % | 0 | % | |||||||
| Lifezone US Holdings Limited | Indirect | United Kingdom | United Kingdom | 100.0 | % | 0 | % | |||||||
| Lifezone US Holdings LLC | Indirect | United State of America | United State of America | 100.0 | % | 0 | % | |||||||
| Lifezone Recycling US, LLC | Indirect | United State of America | United State of America | 100.0 | % | 0 | % | |||||||
| LZ Services Limited | Indirect | United Kingdom | United Kingdom | 100.0 | % | 100.0 | % | |||||||
| Kabanga Holdings Limited | Indirect | Cayman Islands | Cayman Islands | 83.0 | % | 91.1 | % | |||||||
| Kabanga Nickel Company Limited | Indirect | Tanzania | Tanzania | 83.0 | % | 91.1 | % | |||||||
| Kabanga Nickel Limited | Indirect | United Kingdom | United Kingdom | 83.0 | % | 91.1 | % | |||||||
| Kagera Mining Company Limited | Indirect | Tanzania | Tanzania | 83.0 | % | 91.1 | % | |||||||
| Metprotech Pacific Proprietary Limited | Indirect | Australia | Australia | 100.0 | % | 100.0 | % | |||||||
| The Simulus Group Pty Limited | Indirect | Australia | Australia | 100.0 | % | 0 | % | |||||||
| Simulus Pty Limited | Indirect | Australia | Australia | 100.0 | % | 0 | % | |||||||
| Romanex International Limited | Indirect | Canada | Canada | 83.0 | % | 91.1 | % | |||||||
| Tembo Nickel Corporation Limited | Indirect | Tanzania | Tanzania | 69.7 | % | 76.5 | % | |||||||
| Tembo Nickel Mining Company Limited | Indirect | Tanzania | Tanzania | 69.7 | % | 76.5 | % | |||||||
| Tembo Nickel Refining Company Limited | Indirect | Tanzania | Tanzania | 69.7 | % | 76.5 | % | |||||||
14
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 2. | Significant accounting policies (continued) |
| 2.3. | Basis of consolidation (continued) |
Lifezone Holdings US, LLC, Lifezone US Holdings LLC and Lifezone Recycling US, LLC were incorporated on September 15, 2023 in the state of Delaware, USA. Lifezone US Holdings Limited was incorporated on September 12, 2023 in the United Kingdom. Investments in these entities as of September 30, 2023 reflect the nominal share value. These three companies have no tangible assets or business activities at the date of this report.
| 2.4. | Business combinations under common control |
Business combinations involving entities under common control are outside the scope of IFRS 3 ‘Business Combinations’ (Paragraphs B5–B12D) and there is no other specific IFRS guidance. Accordingly, Lifezone management used its judgement to develop an accounting policy that is relevant and reliable, in accordance with
IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’.
| 2.5. | Going concern |
The management of Lifezone has assessed the going concern assumptions of Lifezone during the preparation of these Unaudited Condensed Consolidated Interim Financial Statements. Lifezone generated a net comprehensive loss attributable to ordinary shareholders of the company of $359.5 million for the nine months ended September 30, 2023 (September 30, 2022: $7.8 million) and accumulated losses of $403.4 million at September 30, 2023 (December 31, 2022: $44.4 million).
As of September 30, 2023, Lifezone had consolidated cash and cash equivalents of $73.3 million. The cash flow for the nine months ended September 30, 2023 was $52.7 million (September 30, 2022: net outflows $13.0 million), consisting of $115.0 million of net inflows (September 30, 2022: net outflows $0.07 million) from financing activities arising from the completion of the SPAC Transaction, the PIPE transaction and an investment by BHP in KNL. Net outflows from operating activities of $23.6 million (September 30, 2022: net outflows $9.4 million) and net outflows from investing activities of $38.6 million (September 30, 2022: net outflows $3.5 million), relate mainly to expenditure for the Kabanga Nickel project and the Simulus acquisition.
Based on Lifezone’s current and increasing liquidity and anticipated funding requirements, Lifezone will need additional capital in the future to fund its operations and project developments. Lifezone’s future operating losses and capital requirements may vary materially from those currently planned and will depend on many factors including Lifezone’s growth rate, the execution of various growth projects, and the demand for the Hydromet Technology, capital costs expected for the construction costs of the Kabanga Nickel project, and the demand for the minerals we envision extracting in our metals extraction business and as well as for Lifezone’s working capital requirements.
To enhance our liquidity position or increase our cash reserve for future investments or operations, we continue to explore arrangements with potential customers for the offtake of the metals that we expect to produce in the future from the Kabanga Nickel project, and we may in the future seek equity, mezzanine and alternative or debt financing. Additionally, we may receive the proceeds from any exercise of any warrants in cash. Each Lifezone warrant represents the right to purchase one ordinary Lifezone share at a price of $11.50 per share in cash.
15
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 2. | Significant accounting policies (continued) |
| 2.5. | Going concern (continued) |
Lifezone’s Form F-1 registration statement became effective on September 29, 2023, registering the resale of certain Lifezone Metals shares and (private) warrants owned by certain previous Lifezone Holdings shareholders, the Sponsor shareholders (including its limited partners), PIPE investors and the sellers of the Simulus business. Pursuant to the BCA, a 180-day lock-up period following the Closing applies to (i) 5,133,600 Lifezone shares, and 667,500 warrants received by the Sponsor shareholders and (ii) the Lifezone shares received by the previous Lifezone Holding’s shareholders who owned 1.5% or more of the outstanding Lifezone Holdings shares prior to the Closing, in each case, subject to certain exceptions. 1,335,000 Lifezone shares received by the Sponsor shareholders were subject to a 60-day lock-up from the Closing Date.
We believe the likelihood that warrant holders will exercise their warrants, and therefore the amount of cash proceeds that we would receive is dependent upon the market price of our Lifezone ordinary shares. On December 13, 2023, the market price for our Lifezone ordinary shares was $8.50. When the market price for our Lifezone ordinary shares is less than $11.50 per share (i.e., the warrants are “out of the money”), we believe warrant holders will be unlikely to exercise their warrants. If all the warrants are exercised, an additional 14,391,200 Lifezone ordinary shares would be outstanding, with further details available under Note 27 (Subsequent events).
The Unaudited Condensed Consolidated Interim Financial Statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realization of assets and discharge of liabilities in the ordinary course of business. Lifezone has not generated significant revenues from operations and, as common with many exploration-stage mining companies, Lifezone raises financing for its exploration, study and research and development activities in discrete tranches. As such, the ability of Lifezone to continue as a going concern depends on its ability to secure this additional financing. In the event Lifezone issues additional equity in the future, shareholders could face significant dilution in their holdings.
Together with its brokers and financial advisors, Lifezone continuously monitors capital market conditions, and the Board recurrently considers various forms of financing available to Lifezone.
In the event that Lifezone is unable to secure sufficient funding, it may not be able to fully develop its projects, and this may have a consequential impact on the carrying value of the related exploration and evaluation assets and the investment of Lifezone Metals Limited in its subsidiaries as well as the going concern status of Lifezone. Given the nature of Lifezone’s current activities, it will remain dependent on equity, mezzanine, debt funding or monetizing the offtake from the Kabanga Nickel project until such time as the Lifezone becomes self-financing from the commercial production of its mineral resources and royalties received from intellectual property rights linked to its Hydromet Technology. To the extent that Lifezone foresees increasing financing risks, jeopardizing the existence of Lifezone, Lifezone can accelerate the reduction of costs and aim for smaller, more targeted capital raises.
Given that Lifezone will likely need to raise funds within twelve months from the date of approval of these unaudited condensed consolidated interim financial statements for project development, new projects, acquisitions and to fund operations, the situation gives rise to a material uncertainty as there can be no assurance Lifezone will be able to raise required financing in the future. Notwithstanding this material uncertainty, the Directors of Lifezone consider it appropriate to prepare the financial statements on a going concern basis given Lifezone’s ability to raise necessary funding and its shareholder base at Lifezone and at KNL. The financial statements do not include the adjustments that would result if Lifezone was unable to continue as a going concern.
16
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 2. | Significant accounting policies (continued) |
| 2.6. | Functional and reporting currency |
These Unaudited Condensed Consolidated Interim Financial Statements are presented in USD, which is Lifezone’s functional currency, and all values are rounded to the nearest USD, except where otherwise indicated. The functional currency is the currency of the primary economic environment in which the entity operates. Accordingly, Lifezone measures its financial results and financial position in USD, expressed as $ in this document.
Lifezone incurs transactions mainly in USD, British Pounds (“GBP”), Australian Dollars (“AUD”) and Tanzanian Shillings (“TZS”).
The subsidiaries LZ Services Limited (“LZSL”) a company incorporated in England and Wales; and Metprotech Pacific Pty Ltd (“Metprotech”) a company incorporated in Australia, are both wholly owned subsidiaries of Lifezone Limited, and have functional currencies as GBP and AUD respectively. Simulus and its subsidiary Simulus Pty Limited both companies incorporated in Australia, are wholly owned subsidiaries of Metprotech and have functional currencies of AUD. The balances of the subsidiaries reporting under other currencies are translated to USD.
| 3. | Key sources of estimation and uncertainty |
Significant accounting judgements, estimates and assumptions.
The preparation of Lifezone’s Unaudited Condensed Consolidated Interim Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the future period.
The judgements, estimates and assumptions applied in the Unaudited Condensed Consolidated Interim Financial Statements, including the key sources of estimation uncertainty, were the same as those applied in Lifezone’s (and its predecessor holding companies) last annual financial statements for the year ended December 31, 2022.
Fair value hierarchy
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
17
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 3. | Key sources of estimation and uncertainty (continued) |
Fair value hierarchy (continued)
Equity Instruments for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
| ● | Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities |
| ● | Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable |
| ● | Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable |
For instruments that are recognised in the financial statements at fair value, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The management determines the policies and procedures for non-recurring measurement, such as share options and restricted stock units. There are no recurring fair value measurements, and the movement in the fair value of the share options and restricted stock units is due to a modification during the year.
Management have involved external valuers for valuation of the equity instruments. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. Share options and restricted stock units are currently measured under Level 3, the inputs for which are disclosed in Note 20.
Management have assessed that the fair values of cash and cash equivalents, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
| 4. | Segment information |
For management purposes, Lifezone is organized into business units based on the main types of activities and has two reportable operating segments, as follows:
| ● | Metals extraction and refining business; and |
| ● | Intellectual property (“IP”) licensing business. |
The Metals extraction and refining segment of the business consists of Lifezone’s interest in KNL, comprising the Kabanga Nickel project. The IP segment comprises patents residing with and managed by Lifezone’s subsidiary Lifezone Limited, and a team of highly trained engineers and scientists based in Lifezone’s newly acquired hydromet laboratory based in Perth, with the majority having joined via the Simulus acquisition, that closed on July 18, 2023.
Further information on the accounting of the Simulus acquisition is provided in Notes 1 and 22.
The Chief Executive Officer ensures that the corporate strategy is being implemented. He manages Lifezone on a day-to-day basis, monitors the operating results of its two business units separately for the purpose of making decisions about resource allocation and performance assessment and is Lifezone’s Chief Operating Decision Maker. Segment performance is evaluated based on cash flows, operating profit or loss before taxes and is measured with operating profit or loss in the Unaudited Condensed Consolidated Interim Financial Statements.
18
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 4. | Segment information (continued) |
However, Lifezone’s financing and treasury operations are managed by corporate functions based in London.
Inter-segment eliminations and transactions are identified separately, and the combined segments’ information is reconciled to the Statement of Financial Position and Statement of Comprehensive Income.
Inter-segment revenues are eliminated upon consolidation and reflected in the ‘Inter-segment eliminations’ column.
The results for the nine months ending September 30, 2023 and September 30, 2022 respectively are shown below.
| Intellectual | Metals | Inter-Segment | ||||||||||||||
| Property | Extraction | eliminations | Total | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| For the nine months ended September 30, 2023 | ||||||||||||||||
| Revenue | 8,027,904 | 1,274,076 | (8,238,961 | ) | 1,063,019 | |||||||||||
| Interest income | 78,023 | 279,455 | - | 357,478 | ||||||||||||
| (Loss) gain on foreign exchange | (253,222 | ) | 111,150 | - | (142,072 | ) | ||||||||||
| General and administrative expenses | (26,929,249 | ) | (342,565,441 | ) | 8,238,961 | (361,255,729 | ) | |||||||||
| Interest expense | (71,851 | ) | (78,791 | ) | - | (150,642 | ) | |||||||||
| Loss before tax | (19,148,395 | ) | (340,979,551 | ) | - | (360,127,946 | ) | |||||||||
| For the period ended September 30, 2023 | ||||||||||||||||
| Segment assets | 10,738,961 | 136,609,717 | - | 147,348,678 | ||||||||||||
| Segment liabilities | (4,616,593 | ) | (11,020,903 | ) | - | (15,637,496 | ) | |||||||||
| Intellectual | Metals | Inter-Segment | ||||||||||||||
| Property | Extraction | eliminations | Total | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| For the nine months ended September 30, 2022 | ||||||||||||||||
| Revenue | 6,440,383 | - | (4,794,339 | ) | 1,646,044 | |||||||||||
| Interest income | 46,122 | 80,931 | - | 127,053 | ||||||||||||
| (Loss) on foreign exchange | (55,753 | ) | (89,161 | ) | - | (144,914 | ) | |||||||||
| General and administrative expenses | (3,256,825 | ) | (11,665,914 | ) | 4,794,339 | (10,128,400 | ) | |||||||||
| Interest expense | - | (198,861 | ) | - | (198,861 | ) | ||||||||||
| Gain (loss) before tax | 3,173,927 | (14,873,005 | ) | - | (8,699,078 | ) | ||||||||||
| For the period ended September 30, 2022 | ||||||||||||||||
| Segment assets | 11,870,999 | 45,521,793 | - | 54,392,792 | ||||||||||||
| Segment liabilities | (372,848 | ) | (8,812,973 | ) | - | (9,185,821 | ) | |||||||||
19
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 5. | Revenue |
| Three
months ended September 30, | Nine
months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Kellplant Proprietary Ltd | 56,140 | 130,583 | 129,680 | 1,133,122 | ||||||||||||
| Kelltechnology SA Proprietary Ltd | 159,520 | 377,707 | 524,888 | 440,330 | ||||||||||||
| Consulting and management fee with affiliated companies | 215,660 | 508,290 | 654,568 | 1,573,452 | ||||||||||||
| Non-affiliated company revenue | 340,611 | 23,449 | 408,451 | 72,592 | ||||||||||||
| 556,271 | 531,739 | 1,063,019 | 1,646,044 | |||||||||||||
Revenue is attributable to Hydromet consulting related to mineral beneficiation operations of affiliated companies and technical and laboratory services provided by Simulus to a wide array of customers. The affiliated entities are joint venture entities of Lifezone. Lifezone Limited has a 50% interest in Kelltech Limited, a joint venture with Sedibelo Resources Limited. Lifezone Limited has an indirect 33.33% interest in Kelltechnology SA Proprietary Ltd (“KTSA”), a subsidiary of Kelltech Limited, and Kellplant Proprietary Ltd (“Kellplant”), a wholly owned subsidiary of KTSA as disclosed in detail in Note 23.
Non-affiliated company revenue of $340k during the three months ending September 30, 2023 relates to third party customers following the Simulus acquisition as disclosed in Note 1 and 22.
| 6. | Interest income |
| Three
months ended September 30, | Nine
months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Interest on shareholder loans | - | 2,656 | 6,841 | 6,821 | ||||||||||||
| Other interest company revenue | 87,678 | 96,581 | 350,637 | 120,232 | ||||||||||||
| 87,678 | 99,237 | 357,478 | 127,053 | |||||||||||||
Other interest income arises from cash in bank deposits with bank interest averaging 0.10 -1.40% over the period.
| 7. | Interest expense |
| Three
months ended September 30, | Nine
months ended September 30, | |||||||||||||||||
| Note | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||||
| Interest accretion on contingent consideration | 18 | 40,186 | 59,905 | 119,290 | 179,714 | |||||||||||||
| Interest accretion on lease liability | 16 | 18,788 | 7,006 | 31,352 | 17,752 | |||||||||||||
| Other interest expenses | - | 1,395 | - | 1,395 | ||||||||||||||
| 58,974 | 68,306 | 150,642 | 198,861 | |||||||||||||||
20
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 8. | General and administrative expenses |
The following is a summary of key expenses included in general and administrative expenses:
| Three
months ended September 30, | Nine
months ended September 30, | |||||||||||||||||
| Note | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||||
| Wages & employee benefits | 2,070,172 | 925,602 | 3,886,714 | 2,224,736 | ||||||||||||||
| Professional fees | 1,181,725 | 1,075,535 | 11,374,386 | 3,119,398 | ||||||||||||||
| Directors’ fees | 262,179 | 43,604 | 348,679 | 130,729 | ||||||||||||||
| Legal expenses | 80,357 | 118,982 | 245,577 | 261,146 | ||||||||||||||
| Mining expenses | - | 351,578 | - | 934,816 | ||||||||||||||
| Depreciation of property and equipment | 11 | 534,589 | 30,929 | 642,281 | 76,618 | |||||||||||||
| Depreciation of right of use asset | 11 | 144,641 | 9,887 | 206,670 | 33,374 | |||||||||||||
| Amortization of intangible assets | 84,973 | - | 123,274 | 33,619 | ||||||||||||||
| Share-based expense - Lifezone Holdings shareholder earnout | 20 | 248,464,035 | - | 248,464,035 | - | |||||||||||||
| Share-based expense - Sponsor earnout | 20 | 17,094,750 | - | 17,094,750 | - | |||||||||||||
| SPAC transaction expenses | 76,857,484 | - | 76,857,484 | - | ||||||||||||||
| Taxes & licenses | - | 1,486,749 | - | 1,546,071 | ||||||||||||||
| Loss gain on foreign exchange | 228,619 | 114,441 | 142,072 | 144,914 | ||||||||||||||
Lifezone incurred costs of $23.2 million associated with the SPAC and PIPE transactions over 2022 and 2023, of which $9.6 million were accrued in 2022, while $13.5 million were incurred in 2023. Lifezone has apportioned $5.7 million as directly attributable to equity issuance fees recognised within shareholder’s equity resulting in a net balance of $7.9 million expensed which is included in Professional fees above for the nine months ended September 30, 2023 (September 30, 2022: $573,299).
Share-based payment expenses of $265,558,785 under the SPAC Transaction have been recognized in accordance with IFRS 2 Share-based Payment, related to the earnouts with market performance vesting conditions as described in Note 1. These earnouts relate to shares granted to previous Lifezone Holdings shareholders and Sponsor shareholders. In addition, related to the SPAC Transaction, Lifezone has recognized $76,857,484 as SPAC transaction expenses to account for the excess of fair value of equity in Lifezone issued to participating (non-redeeming) GoGreen shareholders over the fair value of GoGreen’s identifiable net assets acquired classified as a service of a stock exchange listing in accordance with IFRS 2, paragraph 10.
Lifezone capitalized mining expenses in Q3 2023 to exploration and evaluation assets following advancement in its exploration and study program as disclosed in detail in Note 12.
21
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 9. | Cash and cash equivalents |
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Cash in banks | 73,258,538 | 20,535,210 | ||||||
Cash in banks earns interest at the bank deposit rates averaging 0.10 -1.40% over the period.
Interest income from cash and cash equivalents amounted to $350,637 for the nine months ended September 30, 2023 (December 31, 2022: $214,252).
| 10. | Trade and other receivables |
Other receivables consist of the following:
| September 30, | December 31, | |||||||||
| Note | 2023 | 2022 | ||||||||
| $ | $ | |||||||||
| Tax receivables | 4,255,692 | 2,827,070 | ||||||||
| Other receivables | 427,000 | 158,231 | ||||||||
| Receivables from affiliated entities | 17 | 1,612,291 | 959,935 | |||||||
| Prepayments | 2,184,751 | 560,946 | ||||||||
| Related party receivables | 17 | 75,000 | 655,683 | |||||||
| Prepaid mining license | 88,589 | 843,342 | ||||||||
| 8,643,323 | 6,005,207 | |||||||||
Tax receivables are short term and receivable within twelve months following applicable tax refund application in the local tax jurisdiction. Lifezone has VAT receivables with Tanzania and United Kingdom tax authorities, and GST receivables with Australian tax authority.
Receivables from affiliated entities relate to short term services and payments on behalf of affiliated entities disclosed in Note 17. Trade receivables arising from revenue activities are included as part of Receivables from affiliated entities. Credit terms are 30 days from the start of the period being charged.
Prepayments include Directors and officers (“D&O”) annual insurance in addition to a 6-year run out cover taken out as part of the BCA transaction. D&O insurance was required to cover the risk of potential compensation claims against business’ directors for alleged wrongful acts such as breach of trust, breach of duty, neglect, etc. As of September 30, 2023 D&O insurance amounted to $1,252,676.
Lifezone’s Tanzanian subsidiary Tembo Nickel Corporation Limited (“Tembo Nickel”) is required to pay an annual fee to maintain its mining license with the Tanzanian Mining Commission. The prepaid portion of the fee is reflected in the Prepaid mining license balance above.
All other receivables are short term in nature.
22
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 11. | Property and equipment and right-of-use assets |
Lifezone’s property and equipment and right-of-use assets include building, transportation equipment, and office and computer equipment. The carrying amounts for the reporting periods can be analyzed as follows:
| Buildings | Transportation equipment | Office
and computer equipment | Laboratory and testing equipment | Total
Property and equipment | Right-of-use assets | Total | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||
| As at January 1, 2022 | 932,623 | 41,457 | 52,292 | - | 1,026,372 | - | 1,026,372 | |||||||||||||||||||||
| Additions | - | 82,495 | 202,369 | - | 284,864 | 469,743 | 754,607 | |||||||||||||||||||||
| Disposals for the period | (255,346 | ) | - | (16,445 | ) | - | (271,791 | ) | - | (271,791 | ) | |||||||||||||||||
| As at December 31, 2022 | 677,277 | 123,952 | 238,216 | - | 1,039,445 | 469,743 | 1,509,188 | |||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||||||
| As at January 1, 2022 | (14,713 | ) | (7,773 | ) | (3,041 | ) | - | (25,527 | ) | - | (25,527 | ) | ||||||||||||||||
| Charge for the period | (22,068 | ) | (36,639 | ) | (70,889 | ) | - | (129,596 | ) | (117,436 | ) | (247,032 | ) | |||||||||||||||
| As at December 31, 2022 | (36,781 | ) | (44,412 | ) | (73,930 | ) | - | (155,123 | ) | (117,436 | ) | (272,559 | ) | |||||||||||||||
| Carrying amount at December 31, 2022 | 640,496 | 79,540 | 164,286 | - | 884,322 | 352,307 | 1,236,629 | |||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||
| As at January 1, 2023 | 677,277 | 123,952 | 238,216 | - | 1,039,445 | 469,743 | 1,509,188 | |||||||||||||||||||||
| Additions from acquisitions | - | - | 220,698 | 4,704,783 | 4,925,481 | 261,139 | 5,186,620 | |||||||||||||||||||||
| Foreign exchange impact | - | - | (11,603 | ) | (247,364 | ) | (258,967 | ) | - | (258,967 | ) | |||||||||||||||||
| Additions | - | 75,551 | 465,320 | - | 540,871 | 1,069,495 | 1,610,366 | |||||||||||||||||||||
| As at September 30, 2023 | 677,277 | 199,503 | 912,631 | 4,457,419 | 6,246,830 | 1,800,377 | 8,047,207 | |||||||||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||||||||||
| As at January 1, 2023 | (36,781 | ) | (44,412 | ) | (73,930 | ) | - | (155,123 | ) | (117,436 | ) | (272,559 | ) | |||||||||||||||
| Exchange adjustments | - | - | (483 | ) | (10,307 | ) | (10,790 | ) | - | (10,790 | ) | |||||||||||||||||
| Charge for the period | (16,551 | ) | (51,639 | ) | (377,575 | ) | (185,726 | ) | (631,491 | ) | (206,670 | ) | (838,161 | ) | ||||||||||||||
| As at September 30, 2023 | (53,332 | ) | (96,051 | ) | (451,988 | ) | (196,033 | ) | (797,404 | ) | (342,106 | ) | (1,121,510 | ) | ||||||||||||||
| Carrying amount at September 30, 2023 | 623,945 | 103,452 | 460,643 | 4,261,386 | 5,449,426 | 1,476,271 | 6,925,697 | |||||||||||||||||||||
During 2022, the Lifezone disposed of certain buildings and office and computer equipment with a carrying value of $271,791. These assets relate to the legacy Tanzanian operations deemed no longer in use. Lifezone recognized a loss on disposal of property and equipment amounting to $271,791 in the prior year audited Consolidated Statement of Comprehensive Income.
There were no disposals during the nine months ended September 30, 2023.
Non-cash additions of $1,330,634 relating to new leased office space were recognized in the nine months ended September 30, 2023 as disclosed in Note 16.
23
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 12. | Exploration and evaluation assets and mining data |
| Mining Data | Exploration and evaluation assets | Total | ||||||||||
| $ | $ | $ | ||||||||||
| Cost | ||||||||||||
| As at January 1, 2022 | 12,746,135 | - | 12,746,135 | |||||||||
| Additions during the period | - | 5,709,171 | 5,709,171 | |||||||||
| Carrying amount as at December 31, 2022 | 12,746,135 | 5,709,171 | 18,455,306 | |||||||||
| Cost | ||||||||||||
| As at January 1, 2023 | 12,746,135 | 5,709,171 | 18,455,306 | |||||||||
| Additions during the period | - | 30,109,241 | 30,109,241 | |||||||||
| Carrying amount as at September 30, 2023 | 12,746,135 | 35,818,412 | 48,564,547 | |||||||||
The capitalization of exploration and evaluation costs assumes that there is a reasonable prospect that the project can be developed into a profitable mining operation and that the exploration and evaluation expenditure and study work relating to a mineral resource within a valid license area could result in cash in-flows over time.
Exploration and evaluation expenditures are recognized and measured at cost and the exploration and evaluation assets are classified as intangible assets.
Lifezone assesses exploration assets for impairment when facts and circumstances suggest that the carrying amount exceeds the recoverable amount. In making this assessment, Lifezone have regard to the facts and circumstances noted in IFRS 6, paragraph 20. In performing its assessment of each of these factors, as at September 30, 2023, Lifezone has:
| ● | reviewed the time period that Lifezone group companies have the right to explore the area and noted no instances of expiration, or licences that are expected to expire in the near future and not be renewed. |
| ● | determined that further exploration and evaluation expenditure is either budgeted or planned for these licences; |
| ● | not decided to discontinue exploration activity due to there being a lack of quantifiable mineral resource; and |
| ● | not identified any instances where sufficient data exists to indicate that there are licences where the exploration and evaluation expenditure is unlikely to be recovered from successful development or sale. |
Lifezone assesses on a project-by-project basis if the exploration and evaluation phase has concluded. At the earliest, an exploration asset gets reclassified as a development asset when a current and positive Feasibility Study describing the development path for the mineral resource was released and is available publicly. That is usually also the time when a mineral reserve gets declared. A reclassification will happen at the latest when an exploration asset gets approved for development.
Where Lifezone is unsuccessful in acquiring or being granted a tenement area, any such costs are immediately expensed. All costs incurred prior to securing the legal right to undertake exploration activities on a project are written-off as incurred. Exploration and evaluation expenditures to not include expenditures incurred after the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.
Additions during the period are essentially capitalized expenditure incurred in the development of Kabanga Nickel project in Tanzania.
24
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 13. | Other intangibles assets |
| Patents | Goodwill | Software | Total Intangibles | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Cost | ||||||||||||||||
| As at January 1, 2022 | 806,868 | - | - | 806,868 | ||||||||||||
| Additions during the period | 92,545 | - | 92,096 | 184,641 | ||||||||||||
| As at December 31, 2022 | 899,413 | - | 92,096 | 991,509 | ||||||||||||
| Accumulated amortization | ||||||||||||||||
| As at January 1, 2022 | (225,451 | ) | - | - | (225,451 | ) | ||||||||||
| Charge for the period | (71,095 | ) | - | - | (71,095 | ) | ||||||||||
| As at December 31, 2022 | (296,546 | ) | - | - | (296,546 | ) | ||||||||||
| Carrying amount at December 31, 2022 | 602,867 | - | 92,096 | 694,963 | ||||||||||||
| Cost | ||||||||||||||||
| As at January 1, 2023 | 899,413 | - | 92,096 | 991,509 | ||||||||||||
| Additions during the period | 81,100 | 9,020,813 | 178,315 | 9,280,228 | ||||||||||||
| As at September 30, 2023 | 980,513 | 9,020,813 | 270,411 | 10,271,737 | ||||||||||||
| Accumulated amortization | ||||||||||||||||
| As at January 1, 2023 | (296,546 | ) | - | - | (296,546 | ) | ||||||||||
| Charge for the period | (57,982 | ) | - | (65,292 | ) | (123,274 | ) | |||||||||
| As at September 30, 2023 | (354,528 | ) | - | (65,292 | ) | (419,820 | ) | |||||||||
| Carrying amount at September 30, 2023 | 625,985 | 9,020,813 | 205,119 | 9,851,917 | ||||||||||||
Goodwill recognized in the period relates to the acquisition of Simulus, a leading hydrometallurgical laboratory and engineering company located in Perth, Australia by Metprotech on July 18, 2023 as disclosed in detail in Note 22.
Management with the assistance of an independent valuation specialist, have concluded that no identifiable intangible assets existed from the acquisition of Simulus. Management have concluded that the fair value of the intangible assets acquired as a result of the Simulus transaction was de minimis (i.e., no independent value existed). Based on this conclusion and given the de minimis value, any intangible assets that may exist are not required to be recorded and classified outside of goodwill. Management also determined that recording and classifying a de minimis amount of intangible assets within goodwill would not cause the financial statements to be misleading and/or cause a reasonable user of the financial statements to arrive at a different conclusion.
There were no indicators of impairment during the period to September 30, 2023 to suggest that the provisional goodwill had been impaired. Therefore, as at September 30, 2023, the goodwill relating to the Simulus acquisition has not yet been subject to any impairment testing.
25
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 14. | Trade and other payables |
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Trade payables | 891,541 | 645,677 | ||||||
| Tax payable | 129,007 | 595,412 | ||||||
| Accrued expenses | 8,942,440 | 15,360,522 | ||||||
| 9,962,988 | 16,601,611 | |||||||
Included in accrued expenses and trade payables as of September 30, 2023 are $2,500,000 (December 31, 2022: $9,649,642) of accrued non-recurring listing costs and equity issuance costs in relation to the SPAC and PIPE transactions. On October 13, 2023 the $2,500,000 above amount was paid.
All amounts are short-term. The carrying value of trade payables and accrued expenses are considered to be a reasonable approximation of their fair value.
| 15. | Subscription receivable |
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Subscription receivable | - | 50,000,000 | ||||||
In October 2022, BHP agreed to invest a further $50 million in KNL in the form of equity under the Tranche 2 Subscription Agreement. Please refer to Note 2.3
| 16. | Lease liabilities |
Lifezone’s Tanzanian subsidiary, Tembo Nickel entered into a contract with Cordula Limited, Tanzania for lease of office space in Dar Es Salaam used for operations in 2022 for term five (5) years and an additional contract in 2023 for a further 5 years. The lease contract does not include variable lease payments. As at September 30, 2023 the remaining lease term was three (3) years.
Lifezone’s Australian subsidiary, Metprotech leases office space in Perth used for operations from Trustees of the Christian Brothers, Australia. The lease contract does not include variable lease payments. As at September 30, 2023 the remaining lease term was one (1) year and nine (9) months.
As part of the Simulus acquisition that closed on July 18, 2023 (please refer to Note 22), Lifezone assumed the existing lease obligations of Simulus. Simulus entered into a contract with the Seattle Investments Pty Ltd, Australia for lease of office and warehouse space in Perth used for operations in 2020. The terms of the lease were five (5) years. The lease contract does not include variable lease payments. As at September 30, 2023 the remaining lease term was one (1) year and seven (7) months.
On August 3, 2023, Simulus entered into a contract with Nowa Pty Ltd Australia for lease of office and warehouse space in Perth used for operations in 2022. The terms of the lease were five (5) years. The lease contract does not include variable lease payments. As at September 30, 2023 the remaining lease term was four (4) years and ten (10) months.
Lifezone or group subsidiaries’ obligations under its leases are secured by lessor’s title to the leased assets.
26
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 16. | Lease liabilities (continued) |
| 2023 | ||||
| $ | ||||
| As at January 1, 2022 | - | |||
| Additions | 456,068 | |||
| Interest accretion on lease liability | 20,745 | |||
| Payments | (80,933 | ) | ||
| As at January 1, 2023 | 395,880 | |||
| Current | 105,304 | |||
| Non-current | 290,576 | |||
| 395,880 | ||||
| As at January 1, 2023 | 395,880 | |||
| Additions | 1,314,453 | |||
| Interest accretion on lease liability | 31,352 | |||
| Payments | (179,222 | ) | ||
| As at September 30, 2023 | 1,562,463 | |||
| Current | 455,749 | |||
| Non-current | 1,106,714 | |||
| 1,562,463 | ||||
Shown below is the maturity analysis of the undiscounted lease payments:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Less than 1 year | 521,768 | 122,513 | ||||||
| More than 1 year but less than 5 years | 1,162,885 | 311,850 | ||||||
| 1,684,653 | 434,363 | |||||||
| 17. | Significant related party transactions |
Related Party relationships with shareholders with significant influence
The three founding shareholders of Lifezone and members of their immediate family are related parties, some with significant influence over the affairs of Lifezone. Keith Liddell and family, Chris von Christierson and family, and Peter Smedvig, personally and via various investment companies and trusts collectively held approximately 63.0% of the outstanding Lifezone shares as of September 30, 2023. The three founding shareholders (including the members of their immediate families) are long-term financial supporters of the business and are not considered to be related to each other and are not considered to control or jointly control the financial and operating policy decisions of Lifezone. Lifezone has no commercial relationships beyond Peter Smedvig’s shareholding in Lifezone and no compensation or transfer of resources took place during the reporting period with Peter Smedvig and known family members.
27
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 17. | Significant related party transactions (continued) |
Related Party relationships with shareholders with significant influence (continued)
The Liddell family holdings are in aggregate approximately 30.7 % of all outstanding Lifezone shares as of September 30, 2023, making him and members of his immediate family related parties with significant influence over the affairs of the Company. Keith Liddell is a director at various group companies and was the Chairman of Lifezone Holdings until the listing at the NYSE, when he became the Chairman of Lifezone. He is also retained as a consultant to provide metallurgical engineering services to Lifezone in matters related to metals recovery and advice in respect of design, engineering, commissioning, and operation of Lifezone’s metal and mineral projects. This commercial agreement between Lifezone and Keth Liddell replaced an earlier agreement with Keshel Consult Limited, which was terminated on June 30, 2023, and replaced with a commercial agreement between Lifezone and Keith Liddell directly with effect from July 1, 2023.
His children, Simon Liddell and Natasha Liddell are employees of Metprotech; Simon Liddell is a director of the company Metprotech, and Natasha Liddell is a member of the Executive Committee. Keith’s stepson, Charles Liddell, has an IT consultancy agreement with KNL. Keith Liddell’s wife Shelagh Jane Liddell also holds shares and has not received compensation during the reporting period and has no commercial agreement with Lifezone.
Chris von Christierson was a director at various group companies but resigned as a non-executive director from the boards of Lifezone Holdings, Lifezone Limited and KNL with effect from August 31, 2023. He no longer holds any directorships with any group company. During the period January to September 2023, Chris von Christierson, through Southern Prospecting (UK) Limited was paid $21,656 (January to September 2022: $21,656) as non-executive director by Lifezone Limited, a wholly owned subsidiary of Lifezone, and through Southern Prospecting (UK) Limited was paid $21,656 (January to September 2022: $21,656) as a non-executive director by KNL, a wholly owned subsidiary of Lifezone. The holdings in trusts where family members of Chris von Christierson are beneficiaries are classified as true trust holdings managed by professional trustees, making Chris von Christierson and close family members not related parties with significant influence.
Director Compensation
During the period January to September 2023, Keith Liddell was paid $22,031 (January to September 2022: $22,031) as a non-executive director by Lifezone Limited, a wholly owned subsidiary of Lifezone and Keith Liddell was paid $22,031 (January to September 2022: $22,031) as a non-executive director by KNL, a subsidiary of Lifezone. Keith Liddell resigned from a number of Lifezone directorships on September 11, 2023, including Lifezone Holdings Limited, Lifezone Limited, and KNL.
Natasha Liddell was a non-paid Director of Lifezone Holdings and Lifezone Limited before resigning on September 11, 2023.
Directorships
| Name of entity | Type | Keith Liddell | Simon Liddell | |||
| Metprotech Pacific Pty Limited | Subsidiary | ● | ● | |||
| Simulus Pty Ltd | Subsidiary | ● | ||||
| The Simulus Group Pty Ltd | Subsidiary | ● | ||||
| Tembo Nickel Mining Company Limited | Subsidiary | ● | ||||
| Tembo Nickel Refining Company Limited | Subsidiary | ● | ||||
| Tembo Nickel Corp. Limited | Subsidiary | ● |
28
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 17. | Significant related party transactions (continued) |
Resignations and appointments for the nine months ended September 30, 2023
Chris von Christierson resigned on August 31, 2023 from:
| ● | Lifezone Holdings Limited, |
| ● | Lifezone Limited, |
| ● | Kabanga Nickel Limited, |
| ● | Kelltech Limited. |
| ● | Tembo Nickel Mining Company Limited, |
| ● | Tembo Nickel Refining Company Limited; and |
| ● | Tembo Nickel Corp. Limited. |
Natasha Liddell resigned on September 11, 2023 from:
| ● | Lifezone Holdings Limited; and |
| ● | Lifezone Limited. |
Keith Liddell resigned on September 11, 2023 from:
| ● | Lifezone Holdings Limited, |
| ● | Lifezone Limited, |
| ● | LZ Services Limited, |
| ● | Kabanga Nickel Limited, |
| ● | Kelltech Limited; and |
| ● | Kelltechnology South Africa (RF) (Pty) Ltd. |
Keith Liddell was appointed on July 6, 2023 as a director of Lifezone Metals Limited
Keith Liddell was appointed on July 18, 2023 as a director of:
| ● | Simulus Pty Ltd; and |
| ● | The Simulus Group Pty Ltd. |
Transactions with significant shareholders and their extended families
Lifezone had a commercial agreement with Keshel Consult Limited for the engagement of Keith Liddell as a technical consultant of Lifezone Limited. For the nine months ending September 30, 2023 $392,445 was paid or payable to Keshel Consult Limited (September 30, 2022: $401,360). The total amount outstanding as at September 30, 2023 was $nil (September 30, 2022: $nil). This commercial agreement between Lifezone and Keshel Consult Limited was terminated on June 30, 2023, and replaced with a commercial agreement between Lifezone and Keith Liddell directly with effect from July 1, 2023.
Mr. Charles Liddell (stepson of Mr. Keith Liddell) is the owner / partner in the Australian firm Integrated Finance Limited. For the nine months ending September 30, 2023, Integrated Finance Limited were paid or payable $34,650 (September 30, 2022: $34,650) for the provision of information technology services to KNL, a wholly owned subsidiary of Lifezone. The total amount outstanding as of September 30, 2023 is $nil (September 30, 2022: $nil).
Ms. Natasha Liddell (the daughter of Mr. Keith Liddell) is a paid employee of Metprotech, a wholly owned subsidiary of Lifezone. For the nine months ending September 30, 2023, Ms. Natsha Liddell was paid $233,471 (September 30, 2022: $213,364), including short-term bonuses and pension payments. She joined Metprotech from BHP Australia in 2022 and is responsible for Sustainability and Communications at Lifezone.
29
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 17. | Significant related party transactions (continued) |
Transactions with significant shareholders and their extended families (continued)
Mr. Simon Liddell (the son of Mr. Keith Liddell) is a paid employee of Metprotech, a wholly owned subsidiary of Lifezone. For the nine months ending September 30, 2023, Mr. Simon Liddell was paid $214,755 (September 30, 2022: $142,778), including short-term bonuses and pension payments. He is VP Mining and has extensive underground mining experience, having joined from Gold Fields in Australia in 2022.
Lifezone Limited has a commercial agreement with Southern Prospecting (UK) Limited for the engagement of Chris von Christierson as a consultant of Lifezone Limited, a wholly owned subsidiary of Lifezone, in respect of mining projects and management. For the nine months ending September 30, 2023 Southern Prospecting was paid $56,050 (September 30, 2022: $56,050). The total amount outstanding at September 30, 2023 was $nil (September 30, 2022: $nil). This commercial agreement with Southern Prospecting (UK) Limited was terminated on August 31, 2023.
Lifezone Limited has a commercial agreement with Transition Resources Limited for the engagement of Anthony von Christierson as a consultant of Lifezone Limited. For the nine months ending September 30, 2023 $163,193 was paid or payable to Transition Resources Limited (September 30, 2022: $136,412). The total amount outstanding on September 30, 2023 was $192,402 (September 30, 2022: $nil). This commercial agreement with Transition Resources Limited was terminated on July 31, 2023, around the time of the completion of the listing project. As of August 1, 2023, Anthony von Christierson is an employee of LZSL, a wholly owned subsidiary of Lifezone and is a Senior Vice President, leading Lifezone’s business development department.
Related Party Loans
At the time of the listing, Lifezone did not provide personal loans to directors or a member of the Executive Committee.
Lisa Smith, a shareholder, but not considered holding significant influence over Lifezone has a loan of $75,000 with KNL. As at September 30, 2023 this was outstanding and is expected to be repaid before H1, 2024.
Related party receivables
Lifezone had receivables due from related parties as follows.
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Balances with affiliated entities | ||||||||
| BHP Billiton (UK) DDS Limited | 338,567 | 211,099 | ||||||
| Kelltechnology SA Proprietary Ltd | 1,273,724 | 748,836 | ||||||
| Other receivables | 1,612,291 | 959,935 | ||||||
| Balances with key management personnel | ||||||||
| Related party receivables – Interest free | 75,000 | 375,000 | ||||||
| Related party receivables – Interest bearing | - | 280,683 | ||||||
| 75,000 | 655,683 | |||||||
Balances with key management personnel
There are no balances with key management as at 30 September 2023.
30
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 17. | Significant related party transactions (continued) |
Related party share-based payments
Lifezone Holdings granted restricted stock units to key management personnel as described in detail in Note 20.
Receivables from affiliated entities
Relate to short-term services to and payments on behalf of affiliated entities and are considered provided at arm’s length.
Remuneration of key management personnel
| Three
months ended September 30, | Nine
months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Cash compensation for services | 1,475,733 | 715,235 | 3,060,472 | 1,951,747 | ||||||||||||
| Short-term bonuses | - | - | 512,524 | - | ||||||||||||
| Pension and medical benefits | 35,558 | 21,022 | 67,693 | 43,876 | ||||||||||||
| Total compensation paid to key management personnel | 1,511,291 | 736,257 | 3,640,689 | 1,995,623 | ||||||||||||
The amounts disclosed in the table are the amounts recognized as an expense during the reporting period related to key management personnel as listed below.
| Keith Liddell | Chairman |
| Chris Showalter | Chief Executive Officer |
| Ingo Hofmaier | Chief Financial Officer (joined June 29, 2023) |
| Dr Michael Adams | Chief Technology Officer |
| Gerick Mouton | Chief Operating Officer |
| Benedict Busunzu | Tembo Nickel Chief Executive Officer |
| Spencer Davis | Group General Counsel (joined March 1, 2023) |
| Natasha Liddell | Chief Sustainability Officer |
| Anthony von Christierson | Senior Vice President: Commercial and Business Development |
| Evan Young | Senior Vice President: Investor Relations and Capital Markets (joined October 10, 2023) |
31
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 17. | Significant related party transactions (continued) |
Related party revenue
Lifezone had sales to related parties as follows for the period ending:
| Three
months ended September 30, | Nine
months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Kellplant Proprietary Ltd | 56,140 | 130,583 | 129,680 | 1,133,122 | ||||||||||||
| Kelltechnology SA Proprietary Ltd | 159,520 | 377,707 | 524,888 | 440,330 | ||||||||||||
| Consulting and management fee with affiliated companies | 215,660 | 508,290 | 654,568 | 1,573,452 | ||||||||||||
Related party revenue is attributable to Lifezone’s principal activity of hydromet consulting related to mineral beneficiation operations of affiliated companies primarily based in South Africa as discussed in Note 5. These affiliated entities are joint venture entities. Lifezone Limited has a 50% interest in Kelltech Limited, a joint venture with Sedibelo Resources Limited. Lifezone Limited has an indirect 33.33% interest in KTSA, a subsidiary of Kelltech, and Kellplant, a wholly owned subsidiary of KTSA as disclosed in detail in Note 23.
| 18. | Contingent consideration |
In April 2021, KNL completed the acquisition of all shares of Kabanga Holdings Limited from Barrick International (Barbados) Corporation and Glencore Canada Corporation (“GCC”) and all shares of Romanex International Limited from GCC and Sutton Resources Limited for a total consideration of $14 million, to acquire the physical assets and all historical IP related to the Kabanga Nickel project. The IP relates to a significant amount of data and exploration and study expenses that earlier owners invested into the Kabanga Nickel project.
Of the $14 million, $8 million was paid by KNL to the previous owners before completion of the acquisition, with the remaining $6 million due to the sellers in stage payments as below:
| ● | The first tranche amounting to $2 million: payable at the earlier of completion of feasibility study and 3rd anniversary of the contract from date of signing. |
| ● | The second tranche amounting to $4 million: payable at the earlier of the completion of feasibility study or the 5th anniversary of the contract from date of signing. |
On December 15, 2022 KNL made the first tranche payment amounting to $2 million. The remaining $4 million is expected to be paid at the completion of a definitive feasibility study (“DFS”) or on December 9, 2024, whatever is earlier.
The present value of the outstanding balance of contingent consideration as of September 30, 2023 discounted at 4.25% has been reported on the Statement of Financial Position at $3,809,045 (December 31, 2022: $3,689,755).
32
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 18. | Contingent consideration (continued) |
The carrying amounts for the reporting periods can be analyzed as follows:
| $ | ||||
| Gross carrying amount | ||||
| At January 1, 2022 | 5,681,603 | |||
| Repayment | (2,000,000 | ) | ||
| Remeasurement gain | (235,505 | ) | ||
| Accretion of interest | 243,657 | |||
| At December 31, 2022 | 3,689,755 | |||
| Accretion of interest | 119,290 | |||
| At September 30, 2023 | 3,809,045 | |||
The discounted % reflects a 2-year facility appropriately priced market comparable commercial loan offered by the company bank.
| 19. | Long term rehabilitation provision |
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Asset retirement obligation provision | 303,000 | 303,000 | ||||||
Lifezone’s exploration, development and future mining and processing activities are subject to various Tanzanian Government controls and regulations relating to protection of the environment, including requirements for the closure and reclamation of mining properties. Through the exploration and evaluation activities on Lifezone’s prospecting and mining properties, asset retirement obligations are incurred.
Lifezone expects to create provisions for the future cost of asset retirement and industry specific rehabilitation obligations on a discounted cash flow basis at the time of developing its mines and constructing and using related processing facilities. Asset retirement obligations represent the present value of future rehabilitation costs relating to prospecting and mining sites. Assumptions are made on the current and future economic environment, which management believes are a reasonable basis upon which to estimate future liabilities. These estimates are reviewed regularly to consider any material changes to the assumptions because of changes in laws and regulations, public expectations, costs, analysis of site conditions and changes in technology to restore the mine sites. However, actual asset retirement cost will ultimately depend upon future market prices for the necessary rehabilitation work required that will reflect market conditions at the relevant time.
Lifezone provided an asset retirement obligation as of September 30, 2023 of $303,000 (December 31, 2022: $303,000). These are historic obligations that were consolidated when Lifezone acquired the Kabanga Nickel project. All current exploration sites in Tanzania are restored once activities are completed. Lifezone is currently assessing if there are any legacy areas that require rehabilitation. Given that there is a chance that no liabilities exist, management has not reassessed the value of the asset retirement obligation provision during the nine months ended September 30, 2023.
33
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity |
Lifezone Holdings was incorporated on March 28, 2022, as a holding company for Lifezone Limited and acquired 100% of the equity interest in Lifezone Limited on June 24, 2022. Refer to Note 1.
Lifezone was incorporated on December 8, 2022, as a holding company for Lifezone Holdings and acquired 100% of the equity interest in Lifezone Holdings on July 6, 2023 as part of the SPAC Transaction. Refer to Note 1.
| September 30, 2023 | December 31, 2022 | |||||||||||||||
| Number
of Shares | $ | Number
of Shares | $ | |||||||||||||
| Share capital | ||||||||||||||||
| Lifezone Holding Limited | ||||||||||||||||
| Number of ordinary shares in issue | 620,290 | |||||||||||||||
| Nominal average value per ordinary per share | 0.005 | |||||||||||||||
| Nominal value of ordinary total shares: | 3,101 | |||||||||||||||
| Lifezone Metals Limited | ||||||||||||||||
| Number of ordinary shares in issue | 78,193,602 | |||||||||||||||
| Nominal average value per ordinary per share | 0.0001 | |||||||||||||||
| Nominal value of ordinary total shares: | 7,819 | |||||||||||||||
Share capital.
Share capital reflects the par value of shares issued as shown in the Unaudited Condensed Consolidated Interim Financial Position in the presentational currency USD.
Share premium.
Share premium reflects the excess of consideration received, net of equity issuance fees, over par value of shares.
Other reserve.
Other reserves reflect revaluation of Share-based payments and restricted stock units.
Foreign currency translation reserve.
The assets and liabilities of Lifezone’s foreign subsidiaries are translated into USD using the exchange rates in effect on the balance sheet dates. Equity accounts are translated at historical rates, except for the change in retained earnings during the year, which is the result of the period as shown in the Unaudited Condensed Consolidated Interim Statement of Comprehensive Income. Revenue and expense accounts are translated using the weighted average exchange rate during the period. The cumulative translation adjustments associated with the net assets of foreign subsidiaries are recorded in Lifezone’s consolidated foreign currency translation reserve. Lifezone has subsidiaries functioning in GBP and AUD.
Accumulated deficit.
This includes all current and prior period accumulated losses of Lifezone.
34
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity (continued) |
Reconciliation of Shareholders’ equity (deficit) movement
| September 30, 2023 | Movements | December 31, 2022 | ||||||||||||||||||
| Number
of Shares | $ | $ | Number
of Shares | $ | ||||||||||||||||
| Share capital, beginning | 620,290 | 3,101 | 1,843 | |||||||||||||||||
| Transactions with shareholders | ||||||||||||||||||||
| Lifezone Holdings restricted stock units exercised | 30,000 | 150 | 150 | - | - | |||||||||||||||
| Lifezone Holdings share options, net settled exercised | 16,602 | 83 | 83 | - | - | |||||||||||||||
| 46,602 | 233 | 233 | - | - | ||||||||||||||||
| Total Lifezone Holdings shares prior to exchange | 666,892 | 3,334 | - | - | - | |||||||||||||||
| Share exchange transaction | ||||||||||||||||||||
| Total Lifezone Holdings shares exchange for Lifezone Metals shares | (666,892 | ) | (3,334 | ) | (3,334 | ) | - | - | ||||||||||||
| Exchange ratio 94:1 | ||||||||||||||||||||
| Exchanged for Issue of Lifezone Metal Limited shares | 62,680,131 | 6,268 | 6,268 | - | - | |||||||||||||||
| Previous GoGreen Sponsor shareholders | 6,468,600 | 647 | 647 | - | - | |||||||||||||||
| Previous GoGreen public shareholders | 1,527,554 | 153 | 153 | - | - | |||||||||||||||
| PIPE Investors | 7,017,317 | 702 | 702 | - | - | |||||||||||||||
| Simulus Vendors | 500,000 | 50 | 50 | - | - | |||||||||||||||
| 78,193,602 | 7,819 | 7,819 | ||||||||||||||||||
| Share flip up transaction | ||||||||||||||||||||
| Swap of Lifezone and KNL shares | - | - | (620,290 | ) | (1,843 | ) | ||||||||||||||
| Issue of Lifezone Holdings shares | - | - | 620,290 | 3,101 | ||||||||||||||||
| - | 1,258 | |||||||||||||||||||
| Total transactions with shareholders | 78,193,602 | 7,819 | 7,819 | - | 1,258 | |||||||||||||||
| Share capital, ending | 78,193,602 | 7,819 | 4,718 | 620,290 | 3,101 | |||||||||||||||
| Share premium | 183,688,771 | 158,012,115 | 25,676,656 | |||||||||||||||||
| Equity issuance fees | (5,923,979 | ) | (5,683,979 | ) | (240,000 | ) | ||||||||||||||
| Total share premium | 177,764,792 | 152,328,136 | 25,436,656 | |||||||||||||||||
| Lifezone Holdings restricted stock units | - | (14,379,698 | ) | 14,379,698 | ||||||||||||||||
| Lifezone Holdings share options | - | (11,103,650 | ) | 11,103,650 | ||||||||||||||||
| Previous Lifezone Holdings shareholders earnouts | 248,464,035 | 248,464,035 | ||||||||||||||||||
| Previous Sponsor earnouts | 17,094,750 | 17,094,750 | - | |||||||||||||||||
| Total share based payment reserve | 265,558,785 | 240,075,437 | 25,483,348 | |||||||||||||||||
| Warrant Reserves | 15,097,425 | 15,097,425 | - | |||||||||||||||||
| Other Reserves | (6,850,950 | ) | 8,644,304 | (15,495,254 | ) | |||||||||||||||
| Translations Reserve | (181,833 | ) | (297,697 | ) | 115,864 | |||||||||||||||
| Redemption Reserve | 280,808 | - | 280,808 | |||||||||||||||||
| Accumulated deficit | (403,443,757 | ) | (359,153,155 | ) | (44,290,602 | ) | ||||||||||||||
| Total Shareholders’ equity (deficit) | 48,233,089 | 56,699,168 | (8,466,079 | ) | ||||||||||||||||
35
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity (continued) |
Convertible loan.
On December 24, 2021, KNL entered into a $40 million convertible loan agreement with BHP. The loan was converted July 1, 2022 into 35,277 ordinary shares in KNL which represented 8.9% of the total voting and economic share rights in the KNL on a fully diluted basis. Conversion of the loan to equity was subject to clearance from the Tanzanian Fair Competition Commission. The Company had recorded the BHP convertible loan as equity based on the conversion terms of the agreement.
Non-controlling Interest.
In January 2021, KNL and the Government of Tanzania established Tembo Nickel, a joint venture company in Tanzania in order to develop, process and refine future products from the Kabanga Nickel project. Through the Treasury Registrar, the Government of Tanzania owns a non-dilutable free-carried interest representing 16% of the issued share capital of Tembo Nickel. The government’s 16% interest in the joint venture arrangement is presented as a non-controlling interest in the Unaudited Condensed Consolidated Interim Financial Statements.
In October 2022, BHP also agreed to invest a further $50 million into KNL in the form of equity under the Tranche 2 Subscription Agreement, as described in detail in Note 1. KNL satisfied substantially all the closing conditions and received the $50 million on February 15, 2023 and issued a stock certificate on the same day, bringing BHP’s interest in KNL from 8.9% as of December 31, 2022 to 17.0%, effective February 15, 2023. Associated with this transaction KNL paid $2.5 million equity issuance cost.
Restricted stock units.
On November 10, 2021, restricted stock units were granted to Chris Showalter for 150 ordinary shares at $1.00 per share with a ten-year lapse date.
The restricted stock units vest only upon certain events being one of the following:
| ● | Asset sale – arm’s-length sale of all or substantially all of the assets of Lifezone Holdings. |
| ● | Share sale – arm’s-length sale of shares in Lifezone Holdings to a buyer which results in a change of control of Lifezone Holdings. |
| ● | Listing – listing of the shares of Lifezone Holdings, or a holding company formed for the purposes of the listing, on any recognized investment exchange. |
The fair value of restricted stock units recognized as expensed in the nine months ended September 30, 2023 was $Nil (December 31, 2022: $Nil) with a weighted remaining contractual life of Nil years (December 31, 2022: 9 years). The increase in the fair value of share-based payment reserves, assumed by Lifezone as part of the Flip-Up, are accounted for directly in equity under other reserves in 2022 and 2023 respectively.
The fair value of restricted stock units recognized on the statement of financial position ended September 30, 2023 was $Nil (December 31, 2022: $14,379,698), included as part of share-based payment reserve.
36
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity (continued) |
Restricted stock units (continued)
| RSUs
Unit | Fair
value ($) | |||||||
| Balance as at January 1, 2022 | 150 | 9,525,000 | ||||||
| Granted | - | - | ||||||
| Released * | (150 | ) | - | |||||
| Exchanged * | 30,000 | - | ||||||
| Lapsed | - | - | ||||||
| Fair value adjustment | - | 4,854,698 | ||||||
| Exercised | - | - | ||||||
| Outstanding at December 31, 2022 | 30,000 | 14,379,698 | ||||||
| Balance as at January 1, 2023 | 30,000 | 14,379,698 | ||||||
| Exchanged ** | (30,000 | ) | (14,379,698 | ) | ||||
| Outstanding as at September 30, 2023 | - | - | ||||||
| * | As part of the Flip-Up transaction, as mentioned in Note 1, the 150 restricted stock units granted by subsidiary Lifezone Limited in 2021 units were exchanged for 30,000 restricted stock units in Lifezone Holdings in May 2022 |
Under the BCA with GoGreen shareholders approved the merger in a special meeting held on June 29, 2023, prior to the SPAC Transaction closing. The GoGreen shareholder approval was the final legal hurdle in pursuing the merger with Lifezone Holdings.
| ** | The final transaction steps of the SPAC Transaction involved the exercise of all outstanding RSU for shares in Lifezone Holdings, before all outstanding shares of Lifezone Holdings were exchanged for shares in Lifezone. On the Closing Date, Lifezone purchased the shares of Lifezone Holdings at a ratio of c. 94:1, translating in 2,819,653 new Lifezone shares. |
Following the SPAC Transaction, as described in detail in Note 1, there are no RSU outstanding as of September 30, 2023.
Share Options.
In 2021, the Board of Directors of Kabanga Nickel Limited approved the grant of a total of 18,054 share options to certain management personnel. Based on certain milestones, 11,916 (66.7%) units vested in 2021, but none of the units were exercised. The remaining share options vest upon the following exit events:
| ● | Asset sale – arm’s-length sale of all or substantially all of the assets of Lifezone Holdings |
| ● | Share sale (including via a SPAC) – arm’s-length sale of shares in Lifezone Holdings to a buyer which results in a change of control of Lifezone Holdings |
| ● | Listing – listing of the shares of the Company, or a holding company formed for the purposes of the listing, on any recognised investment exchange. |
37
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity (continued) |
Share Options. (continued)
Share options recognized as expense in the nine months ended September 30, 2023 was $Nil (December 31, 2022: $Nil). The increase in the fair value of share-based payment reserves, assumed by Lifezone Holdings as part of the Flip-Up, are accounted for directly in equity under other reserves in 2022 and 2023 respectively.
The fair value of share options recognized in the Statement of Financial Position as of September 30, 2023 was $Nil (December 31, 2022: $11,103,650), included as part of share-based payment reserve.
Following the SPAC Transaction as described in detail in Note 1, there were no share options outstanding as of September 30, 2023. The share options outstanding as of September 30, 2022 had a weighted remaining contractual life of 7.69 years. Prior to the exercise of all outstanding Lifezone Holdings share options the options had exercise prices ranging between $58.16 and $101.78 with a weighted exercise price of $74.58.
The number and weighted average exercise price of share options per ordinary share is as follows:
| Share Options | ||||||||
| Weighted | ||||||||
| Units | price ($) | |||||||
| Balance as at January 1, 2022 | 18,054 | 74.48 | ||||||
| Outstanding at December 31, 2022 | 18,054 | 74.48 | ||||||
| Balance as at January 1, 2023 | 18,054 | 74.58 | ||||||
| Exchanged * | (18,054 | ) | (74.58 | ) | ||||
| Outstanding as at September 30, 2023 | - | - | ||||||
| * | The SPAC Transaction involved the exercise of all outstanding share options for shares in Lifezone Holdings, before all outstanding shares of Lifezone Holdings were exchanged for shares in Lifezone on the Closing Date at a ratio of c. 94:1, translating in 1,560,396 of new Lifezone shares. |
38
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity (continued) |
Earnouts
Following the SPAC Transaction on July 6, 2023 (“Acquisition date”) , as described in detail in Note 1, pursuant to earnout arrangements under the BCA, former Lifezone Holdings and Sponsor shareholder will receive additional Lifezone shares if the daily volume-weighted average price of Lifezone shares equals or exceeds (i) $14.00 per share for any 20-trading days within a 30- trading day period (“Trigger Event 1”) and (ii) $16.00 for any 20 trading days within a 30-trading day period (“Trigger Event 2”). Of the total shares issued and outstanding, 1,725,000 shares are issued but in escrow and relate to the Sponsor earnouts, which are subject to the occurrence of the two trigger events.
Classification
Management has assessed how the BCA earnout should be valued and classified in accordance with and have listed below key conditions under the agreements in the application IAS 32: Financial Instruments: Presentation and IFRS 2 Share-based Payments,
| ● | Management have assessed IAS 32 paragraph 4 exceptions for Financial Instruments and concluded the stated exceptions do not apply to the BCA earnout share agreements, therefore IFRS 2 Share-based Payment rules need to be applied. |
| ● | Furthermore, in accordance with IFRS 2, paragraph 2, as a result of the obligations created throughout the ancillary agreements attached to the Business Combination Agreement, management has concluded that IFRS 2 does apply to the BCA earnout share provisions. |
| ● | The earnout triggering events are representative of market conditions as defined within paragraph 21 of IFRS 2; therefore, since no other vesting conditions are present, the Company is required to recognize the share-based payment at inception, irrespective of whether the market conditions identified above have been met. |
| ● | In accordance with IFRS 2, market conditions constitute non-vesting conditions. As a result of the non-vesting conditions, the Company is required to recognize the share-based payment at inception, irrespective of whether the market condition has been met which is this case is considered to be representative of BOTH the measurement and grant date. Although the term “non-vesting condition” is not explicitly defined in IFRS 2, it is inferred to be any condition that does not meet the definition of a vesting condition (IFRS 2 BC364). |
| ● | Non-vesting conditions are all requirements that do not represent service or performance conditions, but which have to be met in order for the counterparty to receive the share-based payment. |
| ● | The company has recognised the goods or services have been received in accordance with IFRS 2 paragraphs 10–22. |
Accordingly, the earnouts are recognized as equity the acquisition date.
39
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity (continued) |
Earnouts (continued)
The fair value of earnouts have been independently valued based on a Monte Carlo simulation model. The assumptions used in the stock option pricing model were as below:
| Inputs | ||||||||
| Valuation Date | 07/06/2023 | |||||||
| Stock Price as of Measurement Date / BCA Date | $ | 10.32 | ||||||
| Equity Volatility (Pre BCA) | n/a | |||||||
| Equity Volatility (Post BCA) | 94.0 | % | ||||||
| Risk-Free Rate (5.00 Years) | 4.28 | % | ||||||
| Share Price Earnout Tranches | Beginning | Expiration | Share Price Hurdle | |||||
| Sale Threshold Price for Tranche 1 - Triggering Event I | 07/06/2023 | 07/06/2028 | $ | 14.00 | ||||
| Sale Threshold Price for Tranche 2 - Triggering Event II | 07/06/2023 | 07/06/2028 | $ | 16.00 | ||||
| Days Above Threshold Price | 20 | |||||||
| Days Above Measurement Period | 30 | |||||||
| Change of Control Provisions | Estimate | |||||||
| Change of Control Date | n/a | |||||||
| Probability of Change of Control | 0 | % |
The following table illustrates the number and fair value of earnouts granted, and movements at valuation date as at September 30, 2023
| Share Earnout | Fair
value per Earnout | Fair
value ($) | ||||||||||
| Balance as at January 1, 2023 | - | - | ||||||||||
| Granted - Lifezone Holdings ($14.00 per Share) | 12,536,026 | $ | 9.98 | 125,109,539 | ||||||||
| Granted - Lifezone Holdings ($16.00 per Share) | 12,536,026 | $ | 9.84 | 123,354,496 | ||||||||
| Outstanding as at September 30, 2023 | 25,072,052 | 248,464,035 | ||||||||||
| Share Earnout | Fair
value per Earnout | Fair
value ($) | ||||||||||
| Balance as at January 1, 2023 | - | - | ||||||||||
| Granted - Sponsor shareholder ($14.00 per Share) | 862,500 | $ | 9.98 | 8,607,750 | ||||||||
| Granted - Sponsor shareholder ($16.00 per Share) | 862,500 | $ | 9.84 | 8,487,000 | ||||||||
| Outstanding as at September 30, 2023 | 1,725,000 | 17,094,750 | ||||||||||
40
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity (continued) |
Warrant reserve.
As described in detail in Note 1, following Lifezone’s Form F-1 registration statement becoming effective on September 29, 2023 resulting in registering the resale of certain Lifezone Metals shares and (private) warrants owned by certain previous Lifezone Holdings and the Sponsor shareholders (including its limited partners).
Each Lifezone warrant represents the right to purchase one ordinary Lifezone share at an exercise price of $11.50 per share in cash.
Pursuant to the BCA, a 180-day lock-up period following the Closing Date applies to 667,500 warrants received by the Sponsor shareholders.
Classification
Warrants are classified as either a liability or equity on inception, depending on the terms of the agreement. Warrants are only classified as equity when they are settled by the entity delivering a fixed number of its own equity instruments and receiving a fixed amount of cash or another financial asset. The Company assesses the appropriate classification of warrants at the time of inception.
Management has assessed how both the Public Warrants and Private Placement Warrants should be valued and classified in accordance with IAS 32: Financial Instruments: Presentation.
Management have assessed IAS 32 paragraph 4 exceptions for Financial Instruments and assessed the warrants do not meet the exceptions allowed, therefore IAS 32 has been applied.
Management have reviewed the warrant agreement and the warrant assumption agreement’s, the mechanics of exercise to determine the accounting treatment, and have listed below key conditions under the agreements in the application of IAS 32, in particular to paragraphs 16A and 16B AND 16C and 16D.
| ● | The agreements are representative of a contractual obligation, arising from a derivative financial instrument, that will or may result in the future receipt or delivery of the issuer’s own equity instruments. |
| ● | The agreements are not representative of a puttable instrument as the issuer has the choice but not the obligation to repurchase or redeem the warrant instruments for cash or another financial asset. |
| ● | The Private Warrants are identical to the Public Warrants, |
| ● | The Warrant agreement requires Lifezone to issue a fixed number of shares for a fixed amount of cash, |
| ● | Exercise of the warrants will be on a gross basis or on a cashless basis per the terms, |
| ● | Lifezone may require the warrant holders to exercise on a “cashless” basis while the agreement explicitly states that Lifezone will not be in a position to net settle in cash. |
Accordingly, the warrants are recognized as equity.
41
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 20. | Equity (continued) |
Warrant reserve (continued)
The fair value of warrants outstanding have been independently valued based on a Black-Scholes option pricing model. The assumptions used in the stock option pricing model were as below:
| Inputs | ||||
| Valuation Date | 07/05/2023 | |||
| Unit Issuance Date | 10/21/2021 | |||
| Announcement Date | 12/13/2022 | |||
| Business Combination Date | 07/05/2023 | |||
| Exercise Date | 08/04/2023 | |||
| Expiration Date | 07/05/2028 | |||
| First Trading Date | 12/13/2021 | |||
| Stock Price as of Measurement Date | $ | 11.44 | ||
| Strike Price | $ | 11.50 | ||
| Risk-Free Rate (5.00 Years) | 4.16 | % | ||
| Redemption Threshold Price | $ | 18.00 | ||
| Days Above Threshold Price (Automatic Redemption) | 20 | |||
| Days Above Measurement Period | 30 | |||
| Probability of Acquisition | 100 | % | ||
Outputs
The fair value of outstanding Public Warrants have been valued at $1.05 per warrant unit at valuation date.
The fair value of outstanding Private Warrants have been valued at $0.57 per warrant unit at valuation date.
The number of warrants and fair value of outstanding Public Warrants as at September 30, 2023 is as follows:
| Number
of Warrants | Fair
value ($) | |||||||
| Balance as at January 1, 2023 | - | - | ||||||
| Public Warrants ($11.50 per warrant) | 13,800,000 | 14,490,000 | ||||||
| Outstanding as at September 30, 2023 | 13,800,000 | 14,490,000 | ||||||
The number of warrants and fair value of outstanding Private Warrants as at September 30, 2023 is as follows:
| Number
of Warrants | Fair
value ($) | |||||||
| Balance as at January 1, 2023 | - | - | ||||||
| Private Warrants ($11.50 per warrant) | 667,500 | 607,425 | ||||||
| Outstanding as at September 30, 2023 | 667,500 | 607,425 | ||||||
42
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 21. | Earnings per share (EPS) |
In the case of Lifezone, basic EPS is calculated by dividing the loss for the year attributable to ordinary equity holders of Lifezone Metals Limited (as the parent entity of Lifezone) by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the loss attributable to ordinary equity holders of Lifezone Metals Limited as the parent (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all warrants and earnouts into ordinary shares.
The following table sets forth the reconciliation of the numerator and denominator used in the computation of basic and diluted loss per common share for the three and nine months ended September 30, 2023 and September 30, 2022:
| Three months ended | Nine months ended | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss used for basic earnings per share | (348,749,555 | ) | (3,637,183 | ) | (359,153,155 | ) | (7,851,748 | ) | ||||||||
| Denominator: | ||||||||||||||||
| Basic weighted-average outstanding common shares | 77,047,215 | 58,300,082 | 64,617,797 | 58,300,082 | ||||||||||||
| Effect of dilutive potential common shares resulting from options | 153,242 | 2,819,653 | 1,921,082 | 2,819,653 | ||||||||||||
| Effect of dilutive potential restricted stock units | 84,804 | 1,560,396 | 1,063,127 | 1,560,396 | ||||||||||||
| Effect of dilutive potential warrants units | 13,681,223 | - | 4,610,522 | - | ||||||||||||
| Effect of dilutive potential earnout stock units | 25,613,213 | - | 8,631,559 | - | ||||||||||||
| Weighted-average shares outstanding - diluted | 116,579,697 | 62,680,131 | 80,844,087 | 62,680,131 | ||||||||||||
| Net loss per common share: | ||||||||||||||||
| Basic and diluted loss per share | (4.53 | ) | (0.07 | ) | (5.56 | ) | (0.13 | ) | ||||||||
Where a loss has occurred, basic and diluted loss per share is the same because the outstanding share options are anti-dilutive. Accordingly, diluted loss per share equals the basic loss per share. Earnouts and warrants outstanding as at September 30, 2023, totaling 13,136,464 (2022: nil) and Options and RSU outstanding as at September 30, 2023, totaling 3,000,253 (2022: 3,000,253) are considered potentially dilutive.
In accordance with the requirements of IAS 33 – Earnings per share, the denominator at each year was retrospectively adjusted to reflect the BCA and Simulus acquisition transaction as described in detail in Note 1.
43
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 22. | Acquisitions of subsidiaries |
Acquisitions during the current period
Simulus acquisition
On March 3, 2023, Metprotech, a wholly owned subsidiary of Lifezone, signed a share sale agreement with the vendors of Simulus, a leading hydrometallurgical laboratory and engineering company located in Perth, Australia.
The acquisition of Simulus was driven by a strategic rationale with Lifezone estimating that it would have taken years to build a comparable team with the right experience, create the corresponding laboratory setup, purchase and build the lab equipment and get it licensed. Simulus was Lifezone’s metallurgical laboratory of choice for years and the Simulus team have supported a number of studies and test work for the Kabanga Nickel and other projects, via numerous batch, pilot and engineering work.
Consequently, Lifezone acquired Simulus instead of building something similar over years. To do so, Lifezone had to pay a premium to the shareholders of Simulus to convince them to sell. Lifezone had confidence in the capability of the laboratory as Lifezone had a long-standing commercial relationship with Simulus. Lifezone has had contracts with Simulus since 2010 and Simulus was Lifezone’s preferred laboratory and process design engineer. The acquisition allows Lifezone to shorten testing times, providing guaranteed capacity when Lifezone requires such and helps Lifezone control external costs and advance its research and development initiatives.
The transaction formally closed on July 18, 2023 for a total purchase consideration of $14.53 million comprising of a $1.0 million deposit paid on March 27, 2023, a cash consideration of $7.5 million paid on closing and 500,000 shares in Lifezone, fair valued at $12.06 per share, in exchange for 100% ownership of Simulus. The vendors are restricted from disposing of, transferring, or assigning their consideration shares for a period of six months from the completion of the Simulus acquisition. Transaction costs associated with this acquisition largely related to internal costs, external costs which were incurred were not material.
Simulus property, plant, and equipment acquired have been independently fair valued under IFRS 13, using the replacement cost method as the valuation technique. This valuation method has been selected due to the nature of the specialized, modified property, plant and equipment installed by Simulus over the years of operation. The replacement cost approach reflects the amount that would be required to replace or substitute an asset with similar service capacity.
Management, with the assistance of an independent valuation specialist, have assessed that no identifiable intangible assets existed, as a result of the Simulus SPA transaction, that met either of the following 1) separability criterion and are able to be independently valued, or 2) contractual-legal criterion and able to be independently valued. Based on this management concluded that the fair value of the intangible assets acquired as a result of the Simulus transaction was de minimis (i.e., no independent value existed). Given the de minimis value, any intangible assets that may exist are not required to be recorded and classified outside of goodwill. Management also determined that recording and classifying a de minimis amount of intangible assets within goodwill would not cause the financial statements to be misleading and/or cause a reasonable user of the financial statements to arrive at a different conclusion.
44
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 22. | Acquisitions of subsidiaries (continued) |
Acquisitions during the current period (continued)
Simulus acquisition (continued)
| USD | 000’s | |||
| Assets acquired | ||||
| Cash | 427 | |||
| Trade debtors | 260 | |||
| Prepayments | 406 | |||
| Property, plant and equipment (revalued) | 4,926 | |||
| Total assets acquired | 6,019 | |||
| Liabilities assumed | ||||
| Trade creditors | (474 | ) | ||
| Total liabilities assumed | (474 | ) | ||
| WC adjustment | (35 | ) | ||
| Total identifiable net assets at fair value | 5,510 | |||
| Consideration | ||||
| Cash deposit (paid March 27, 2023) | 1,000 | |||
| Cash on completion (paid July 18, 2023) | 7,500 | |||
| Issue of shares in Lifezone Metals Limited | 6,030 | |||
| 14,530 | ||||
| Goodwill arising on acquisition | 9,020 | |||
Goodwill arising from the transaction comprises future economic benefits and expected synergies from combining the operations of Simulus as an established operating and licensed laboratory, that has the technical expertise Lifezone requires that would otherwise require time and additional resources to establish. Goodwill is not amortized but is tested for impairment at the end of each annual reporting period, and more frequently if any impairment triggers are identified.
Acquisitions during the previous period.
In January 2022, Lifezone Limited acquired all the outstanding shares of Metprotech from related parties Keith Liddell and Shelagh Jane Liddell under a share purchase agreement for a total of $7,591.
| 23. | Joint ventures |
The nature of the activities of all Lifezone’s joint ventures is trading in and operation of industrial scale, the metals extraction and metals refining investments, which are seen as complementing Lifezone’s operations and contributing to achieving Lifezone’s overall strategy.
45
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 23. | Joint ventures (continued) |
Details of each of Lifezone’s joint ventures at the end of the reporting period are as follows:
| Country of | Principal place of | Percentage
of Ownership (%) | ||||||||||
| JV Equity Entities: | incorporation | Business | 2023 | 2022 | ||||||||
| Kelltech Limited | Mauritius | Mauritius | 50 | % | 50 | % | ||||||
| Kelltechnology South Africa (RF) Proprietary Ltd | South Africa | South Africa | 33 | % | 33 | % | ||||||
| Kellplant Proprietary Ltd | South Africa | South Africa | 33 | % | 33 | % | ||||||
Lifezone has a 50% interest in Kelltech Limited, a joint venture between Sedibelo Resources Limited and Lifezone, which Lifezone granted an exclusive license to use the Hydromet Technology across Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Madagascar, Mozambique, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe, South Africa, and the Seychelles (the “SADC License Area” and the license, the “Kell License”). The Kell License relates to Lifezone Limited’s Hydromet Technology applicable to just precious metals projects and the SADC Licence Area.
Kelltech Limited owns 66.67% of KTSA and has further exclusively sub-licensed the Kell License to KTSA. The remaining 33.33% interest in KTSA is held by the Industrial Development Corporation of South Africa, a South African national development finance institution. Lifezone has an indirect 33.33% interest in KTSA.
Kellplant is a wholly owned subsidiary of KTSA with Lifezone having an indirect 33.33% interest in Kellplant. Kellplant plans to develop, own and operate a refinery at Sedibelo Resources Pilanesberg Platinum Mines operations in South Africa that will utilize Lifezone Limited’s Hydromet Technology to process and refine platinum group metals (“PGMs”), other precious metals and base metals.
At the time of the release of this document, the development of the Hydromet refinery at Sedibelo Resources’ Pilanesberg Platinum Mines operations is on hold and will need to be rescoped following Sedibelo Resources’ decision to update their mine plan and re-scope the refinery to process its underground mining operations, which have not been developed yet.
Although Lifezone holds the joint ownership in these companies, Lifezone does not have ultimate control as all major decisions had to be agreed unanimously by all parties before they could be actioned. Management therefore considered it appropriate to account for these entities as joint ventures.
All joint ventures are accounted for using the equity method.
Lifezone has recognized its 50% share in Kelltech Limited share capital of $1,000, which is fully impaired.
| 24. | Financial risk review |
This note presents information about Lifezone’s exposure to financial risks and the group’s management of capital. Lifezone’s risk management is coordinated by its directors and Lifezone does not operate any hedging operations or does not buy or sell any financial derivatives.
46
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 24. | Financial risk review (continued) |
The most significant financial risks to which Lifezone is exposed are described below:
| a) | Market risk |
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises of interest rate risk, risks related to the price of equity instruments, commodity price risk and foreign exchange rates.
Market risks affecting Lifezone are comprised of interest rate risk and foreign exchange rate risk. Financial instruments affected by market risk include deposits, trade receivables, related party receivables, trade payables, accrued liabilities, contingent considerations, and long-term rehabilitation provision.
The sensitivity analysis in the following sections relates to the positions as of September 30, 2023 and December 31, 2022.
The sensitivity analysis is intended to illustrate the sensitivity to changes in market variables on Lifezone’s financial instruments and show the impact on profit or loss and shareholders’ equity, where applicable.
The analysis excludes the impact of movements in market variables on the carrying value of provisions.
The following assumptions have been made in calculating the sensitivity analysis:
| ● | The Statement of Financial Position sensitivity relates to foreign currency-denominated trade payables. |
| ● | The sensitivity of the relevant profit before tax item and/or equity is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at September 30, 2023 and December 31, 2022; and |
| ● | The impact on equity is the same as the impact on profit before tax. |
| b) | Credit risk |
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Lifezone’s revenue is currently concentrated with two primary customers, KTSA and Kellplant, both affiliated entities, and accordingly Lifezone is exposed to the possibility of loss if such customers default. Lifezone addresses this risk by monitoring its commercial relationship with such customers and by seeking to develop additional patented technology and entering into new partnerships.
Loan credit was extended to Lisa Smith for $75,000 as shown in Note 17. Credit risk is therefore regarded as low. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was $75,000.
Lifezone evaluated the collectability of its consolidated loan receivables of $75,000 and determined that no allowance loss is required.
47
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 24. | Financial risk review (continued) |
| b) | Credit risk (continued) |
Set out in the following page is the information about the credit risk exposure of Lifezone’s financial assets as at September 30, 2023 and December 31, 2022:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Cash and cash equivalents | 73,258,538 | 20,535,210 | ||||||
| Subscription receivable | - | 50,000,000 | ||||||
| Other receivables | 427,000 | 158,231 | ||||||
| Receivables from affiliated entities | 1,612,291 | 959,935 | ||||||
| Related party receivables | 75,000 | 655,683 | ||||||
| 75,372,829 | 72,309,059 | |||||||
| Days past due | ||||||||||||||||||||||||||||
| Current | 31-60 | 61-90 | 91-120 | >120 | Impairment | Total | ||||||||||||||||||||||
| At September 30, 2023 | ||||||||||||||||||||||||||||
| Cash and cash equivalent | 73,258,538 | - | - | - | - | - | 73,258,538 | |||||||||||||||||||||
| Other receivables | 111,165 | 315,836 | - | - | - | 427,001 | ||||||||||||||||||||||
| Receivable from affiliated entities | 1,273,724 | - | - | - | 338,567 | - | 1,612,291 | |||||||||||||||||||||
| Related party receivables | 75,000 | - | - | - | - | - | 75,000 | |||||||||||||||||||||
| 74,718,427 | 315,836 | - | - | 338,567 | - | 75,372,830 | ||||||||||||||||||||||
| Days past due | ||||||||||||||||||||||||||||
| Current | 31-60 | 61-90 | 91-120 | >120 | Impairment | Total | ||||||||||||||||||||||
| At December 31, 2022 | ||||||||||||||||||||||||||||
| Cash and cash equivalent | 20,535,210 | - | - | - | - | - | 20,535,210 | |||||||||||||||||||||
| Subscription receivable | 50,000,000 | - | - | - | - | - | 50,000,000 | |||||||||||||||||||||
| Other receivables | 79,648 | 66,861 | - | 11,722 | - | - | 158,231 | |||||||||||||||||||||
| Receivable from affiliated entities | 748,836 | - | - | - | 211,099 | - | 959,935 | |||||||||||||||||||||
| Related party receivables | 655,683 | - | - | - | - | - | 655,683 | |||||||||||||||||||||
| 72,019,377 | 66,861 | - | 11,722 | 211,099 | - | 72,309,059 | ||||||||||||||||||||||
| c) | Liquidity risk |
Liquidity risk arises from the possibility that Lifezone will not be able to meet its financial liability obligations as they fall due. Lifezone has historically been supported financially by its shareholders. The risk of its shareholders discontinuing the provision of financing was historically regarded as low. Lifezone expects to fund its capital requirements and ongoing operations through current cash reserves, equity, mezzanine, debt funding or monetizing the offtake from the Kabanga Nickel project.
48
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 24. | Financial risk review (continued) |
| c) | Liquidity risk (continued) |
| September 30 | December 31 | |||||||
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| <=30 days | 9,873,501 | 16,029,218 | ||||||
| 30-60 days | 79,039 | - | ||||||
| 61-90 days | 118,558 | 23,018 | ||||||
| 91-120 days | 158,527 | - | ||||||
| >=121 days | 5,592,010 | 4,691,328 | ||||||
| Total | 15,821,635 | 20,743,564 | ||||||
The above largely consists of group lease obligations, contingent consideration, long term asset retirement obligation provision and trade and other payables.
| d) | Foreign currency risk |
Lifezone has financial instruments which are denominated in currencies other than USD, its reporting currency. Lifezone mostly incurs expenditures for which it owes money denominated in non-U.S. dollar currencies, including GBP, TZS, ZAR, and AUD. As a result, the movement of such currencies could adversely affect Lifezone’s results of operations and financial position.
The following table includes financial instruments which are denominated in foreign currencies:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| GBP £ | GBP £ | |||||||
| Cash in banks | 2,060,483 | 359,021 | ||||||
| Prepaid expenses | 127,329 | - | ||||||
| Trade and other payables | 179,563 | 77,301 | ||||||
| AUD $ | AUD $ | |||||||
| Cash in banks | 2,927,508 | 1,456,988 | ||||||
| Trade receivables | 171,878 | - | ||||||
| Prepaid expenses | 205,319 | - | ||||||
| Trade and other payables | 528,513 | 919,785 | ||||||
| EUR € | EUR $ | |||||||
| Cash in banks | 133,247 | - | ||||||
| TZS $ | TZS $ | |||||||
| Cash in banks | 666,823,660 | 600,859,075 | ||||||
| ZAR $ | ZAR $ | |||||||
| Cash in banks | 850,570 | - | ||||||
| * | Lifezone held no ZAR or EUR as on December 31, 2022. |
49
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 24. | Financial risk review (continued) |
| d) | Foreign currency risk (continued) |
Sensitivity analysis
The following table demonstrates the estimated sensitivity to a reasonably possible change in the GBP, TZS, ZAR, and AUD exchange rates, with all other variables held constant. The impact on Lifezone’s profit is due to changes in the fair value of monetary assets and liabilities. Lifezone’s exposure to foreign currency changes for all other currencies is not considered material.
| September 30, | December 31, | |||||||
| Effect on Profit | 2023 | 2022 | ||||||
| Change in GBP Rate | ||||||||
| 10% | 251,203 | 43,204 | ||||||
| -10% | (251,203 | ) | 43,204 | |||||
| Change in AUD Rate | ||||||||
| 10% | (189,044 | ) | (97,851 | ) | ||||
| -10% | 189,044 | 97,851 | ||||||
| Change in EUR Rate | ||||||||
| 10% | 14,036 | - | ||||||
| -10% | (14,036 | ) | - | |||||
| Change in TZS Rate | ||||||||
| 10% | (26,620 | ) | (25,744 | ) | ||||
| -10% | 26,620 | 25,744 | ||||||
| Change in ZAR Rate | ||||||||
| 10% | (4,489 | ) | - | |||||
| -10% | 4,489 | - | ||||||
| * | There were no ZAR or EUR held currencies as at December 31, 2022 |
| e) | Capital management. |
For the purpose of Lifezone’s capital management, capital includes issued capital, share premium and other equity reserves attributable to the equity holders of Lifezone metals Limited, as the parent entity of Lifezone. The primary objective of Lifezone’s capital management is to maximize the shareholder value.
Management assesses Lifezone’s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. Lifezone manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust its capital structure, Lifezone expects to fund its capital requirements and ongoing operations through current cash reserves, equity, mezzanine, debt funding or monetizing the offtake from the Kabanga Nickel project.
50
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 25. | Contingent liabilities |
In 2020, Kabanga Nickel Company Ltd, a subsidiary of Lifezone, filed a tax appeal at the Tax Revenue Appeals Tribunal of Tanzania to dispute a tax assessment regarding withholding tax imposed on services imported by Kabanga Nickel Company Ltd. The services were provided by non-resident entities while Kabanga Nickel Company Ltd was owned by previous joint owners, Barrick Gold, and Glencore. The amount of tax in dispute as at December 31, 2020 was $3,664,624 (TZS 8,426,336,706) and has not changed since then. As at September 30, 2023, the appeal is still pending at the Tax Revenue Appeals Tribunal awaiting a hearing date.
Additionally, in 2021, Kabanga Nickel Company Ltd also filed an appeal before the Tax Revenue Appeals Tribunal against the Tax Revenue Authority (“TRA”) to challenge the TRA’s claim for withholding tax. The nature of tax assessment is the same as above. The amount of tax in dispute is $183,396 (TZS 421,811,314). As at September 30, 2023, Lifezone is still negotiating an out-of-court settlement with the TRA for all matters under dispute.
In the opinion of management and in consultation with its legal counsel, the probability that the tax appeals will result in an adverse outcome is low.
| 26. | Significant events during the interim period |
On September 5, 2022, Lifezone Limited entered into a non-binding term sheet with Harmony Minerals Limited and Dutwa Minerals Limited for the acquisition of all the tangible assets and all registered and unregistered IP relating to the Dutwa Nickel project (excluding the Ngasamo deposit in the Dutwa Nickel project area). The Dutwa Nickel project hosts a laterite nickel deposit located in northern central Tanzania. It is envisioned that excess sulfuric acid generated by future processing of Kabanga mineralization could be used in processing the laterite mineralization at Dutwa, providing potential synergies between both operations.
On April 27, 2023 the term sheet was amended with exclusivity expiring on 27 July, 2023. The acquisition remains subject to the parties entering into definitive documentation, with detailed negotiations still outstanding.
In the event Lifezone Limited proceeds with the current form of the term sheet for the acquisition, pursuant to the terms of the amended term sheet, Lifezone Limited will have to make payments cumulatively amounting to initially $12.6 million on the satisfaction of various conditions, in addition to the non-refundable deposit of $0.4 million which Lifezone Limited paid on September 12, 2022.
As at the date of these Condensed Consolidated Interim Financial Statements discussion between the Government of Tanzania and the sellers were ongoing and the transaction had not completed.
On July 6, 2023 Lifezone, Lifezone Holdings and GoGreen consummated the SPAC Transaction pursuant to the BCA, refer to SPAC Transaction, as described in detail in Note 1.
On July 18, 2023 Metprotech, a wholly owned subsidiary of Lifezone, completed the Simulus acquisition, refer to Simulus acquisition, as described in detail in Notes 1 and 22.
51
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
for the nine months ended September 30, 2023
| 27. | Subsequent events |
Exercise of warrants
On October 23, 2023 Lifezone received $878,025 from the exercise of 76,300 public warrants at the exercise price of $11.50 per warrant for the right to one ordinary share in Lifezone. 14,391,200 warrants remain outstanding as at December 13, 2023 translating into potential gross proceeds of $165,498,800.
There were no other significant events to note subsequent to September 30, 2023 which require adjustments to, or disclosures in these Unaudited Condensed Consolidated Interim Financial Statements.
52
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Lifezone Metals Limited
Results of Review of Interim Financial Statements
We have reviewed the accompanying unaudited condensed consolidated interim financial statements of Lifezone Metals Limited (the “Company”) and consolidated subsidiaries as of September 30, 2023, and for the three and nine-month period then ended, and the related notes (collectively referred to as the “interim financial statements”). Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with International Financial Reporting Standards.
Basis for Review Results
These unaudited condensed consolidated interim financial statements are the responsibility of the Company’s management. We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ GRANT THORNTON
GRANT THORNTON
Dublin, Ireland
December 14, 2023
53
Exhibit 99.2
Management’s Discussion and Analysis of financial condition and results of operations
You should read the following discussion and analysis of our financial condition and results of operations together with the Unaudited Condensed Interim Consolidated Financial Statements and related notes included in Item 1 of Part I of this Interim Financial Report for the nine months of 2023 (this “Interim Report”) and with our Audited Consolidated Financial Statements and the related notes for the fiscal year ended December 31, 2022 included in our Form F-1 filed with the SEC on September 25, 2023 and in our Form 6-K, which included the financial information for the period ending June 30, 2023, which was furnished with the SEC on September 20, 2023.
Special note regarding forward-looking statements
Some of the statements contained in this Interim Report (including information incorporated by reference herein) include “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), and the Exchange Act of 1934, as amended (the “Exchange Act”) regarding, amongst other things, the plans, strategies, and prospects, both business and financial, of Lifezone Metals Limited and its subsidiaries and/or affiliates. These statements are based on the beliefs and assumptions of management. Although we believe that the plans, strategies, intentions, and expectations reflected in, or suggested by, these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, strategies, intentions, or expectations.
Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “predicts,” “projects,” “forecasts,” “may,” “might,” “will,” “could,” “should,” “would,” “seeks,” “plans,” “scheduled,” “possible,” “continue,” “potential,” “anticipates” or “intends” or similar expressions; provided that the absence of these does not means that a statement is not forward-looking.
These statements are based on the current expectations of Management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on, by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of Lifezone Metals Limited and its subsidiaries. These statements are subject to a number of risks and uncertainties regarding Lifezone’s business, and actual results may differ materially.
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Management’s Discussion and Analysis of financial condition and results of operations
Special note regarding forward-looking statements (continued)
These risks and uncertainties include, but are not limited to: general economic, political and business conditions, including but not limited to the economic and operational disruptions, global inflation and cost increases for materials and services; failure to establish mineral reserves and mineral resources, the grade and recovery of metals and/or minerals which are mined, success of future exploration, reliability of sampling and data, success of any test-work, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, changes in government regulations, legislation and rates of taxation, inflation, changes in exchange rates and the availability of foreign exchange, fluctuations in commodity prices, delays in the development of projects and other factors; the outcome of any legal proceedings that may be instituted against Lifezone in connection with the SPAC Transaction or otherwise; failure to realize the anticipated benefits of the SPAC Transaction, including difficulty in integrating the businesses of Lifezone Holdings and GoGreen; the risks related to the rollout of Lifezone’s business, the efficacy of the Hydromet Technology, and the timing of expected business milestones; Lifezone’s development of, and processing of mineral resources at, the Kabanga Nickel project; the effects of competition on Lifezone’s business; the ability of Lifezone to execute its growth strategy, manage growth profitably and retain its key employees; the ability of Lifezone to reach and maintain profitability; enhancing future operating and financial results; complying with laws and regulations applicable to Lifezone’s business; the volatility of the trading price of Lifezone’s ordinary shares; Lifezone’s ability to continue to comply with applicable listing standards of the NYSE; the ability of Lifezone to maintain the listing of its securities on a U.S. national securities exchange; costs related to the SPAC Transaction and the PIPE transactions; and other risks that will be detailed from time to time in filings with the U.S. Securities and Exchange Commission (the “SEC”).
The foregoing list of risk factors is not exhaustive. There may be additional risks that management presently does not know or that Management currently believes are immaterial that could also cause actual results to differ from those contained in forward-looking statements. In addition, forward-looking statements provide expectations, plans or forecasts of future events and views as of the date of this Interim Report. Lifezone and Lifezone anticipate that subsequent events and developments will cause assessments to change. However, while Lifezone may elect to update these forward-looking statements in the future, Lifezone specifically disclaims any obligation to do so.
You should not put undue reliance on these statements. Nothing herein should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that any of the contemplated results in such forward-looking statements will be achieved. You should not place undue reliance on forward-looking statements in this Interim Report, which are based upon information available to us as of the date of this Interim Report, and such statements should not be read to indicate that our management has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Certain statements made herein include references to “clean” or “green” metals, methods of production of such metals, energy, or the future in general. Such references relate to environmental benefits such as lower green-house gas (“GHG”) emissions and energy consumption involved in the production of metals using the Hydromet Technology relative to the use of traditional methods of production and the use of metals such as nickel in the batteries used in electric vehicles.
While studies by third parties (commissioned by Lifezone) have shown that the Hydromet Technology, under certain conditions, results in lower GHG emissions and lower consumption of electricity compared to smelting with respect to refining platinum group metals, no active refinery currently licenses the Hydromet Technology. Accordingly, the Hydromet Technology and the resultant metals may not achieve the environmental benefits to the extent Lifezone expects or at all. Any overstatement of the environmental benefits in this regard may have adverse implications for Lifezone and its stakeholders. Except as otherwise required by applicable law, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data, or methods, future events, or other changes after the date of this Interim Report, except as required by applicable law.
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Management’s Discussion and Analysis of financial condition and results of operations
Special note regarding forward-looking statements (continued)
Third quarter highlights
| ● | High-grade drill results received from infill drilling at the Kabanga Nickel project | Campaign designed to enhance the mineral resource estimates for the Tembo and North Zones. |
| ● | Multiple technical work programs continue | Activities will inform the ongoing definitive feasibility study, expected by the end of Q3 2024. |
| ● | Safety is the top priority at Kabanga | The site has achieved a milestone of more than one million hours worked without a lost time injury. |
| ● | Positive engagement continues with local stakeholders and Tanzanian government | Lifezone Metals’ teams performed activities such as financial literacy training, hosted multiple site visits with senior government officials and furthered social and environmental studies. |
| ● | Integration of the Simulus Group in Perth well underway | A fully integrated laboratory and engineering study team allows for shortened testing times and meets the specific requirements of our Hydromet Technology. |
| ● | Well capitalized with proceeds from PIPE transaction | Consolidated cash and cash equivalents of $73 million as of September 30, 2023. |
| ● | NYSE Listing Complete | Lifezone began trading with the ticker symbol LZM on the NYSE on July 6, 2023, creating the first pure-play NYSE publicly traded nickel resource and cleaner technology company. |
Subsequent to the quarter end, on December 7, 2023, Lifezone reported the November 2023 Mineral Resource Update for the Kabanga Nickel Project. The November 2023 Mineral Resource Update reflected the results of Lifezone Metals’ 2021-2023 drilling programs and an updated mineralization interpretation. The November 2023 Mineral Resource Update included a significant increase in Mineral Resources tonnages and contained metals.
Business overview
Lifezone is a cleaner metals company focused on supplying critical metals with low levels of associated carbon dioxide emissions, to support the global energy transition. This is expected to be achieved through the adoption of its patented Hydromet Technology, which offers a cleaner and cheaper alternative to traditional downstream smelting and refining.
The Hydromet Technology is currently amenable to processing and refining metals from sulfide minerals containing nickel and cobalt (for the production of batteries for electric vehicles), copper (for electrification), platinum group metals (for expanding the hydrogen economy) and gold without the use of cyanide for processing. Lifezone’s management has technical expertise in hydrometallurgical refining, a track record of building and operating mines and commercial capabilities to finance projects.
Lifezone is domiciled in the Isle of Man and listed on the NYSE with the ticker LZM.
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Management’s Discussion and Analysis of financial condition and results of operations
Kabanga Nickel project overview
Lifezone’s primary metals asset is the Kabanga Nickel project in Tanzania, believed to be one of the world’s largest and highest-grade undeveloped nickel sulfide deposits. The Kabanga Nickel project could become a direct-to-metal operation bringing together potential future mining operations and a Hydromet Technology refinery.
Approximately 350 kilometers from the Kabanga mine site, at a brownfield site in Kahama with existing infrastructure and nearby rail, a refinery is anticipated to be constructed that will utilize Lifezone’s Hydromet Technology. The refinery site in Kahama is expected to be located within a Special Economic Zone, which could include fiscal benefits. Lifezone envisions that the refinery will process nickel, copper, and cobalt delivered from the Kabanga Nickel project, enabling fully traceable refined metals to be sold to global customers.
The refined end products are expected to carry a significantly lower carbon dioxide emissions footprint compared to industry averages, particularly with regards to nickel as most of future global nickel supply is coming from Indonesia where energy-intensive refining technologies utilize electricity predominantly from coal-fired power stations.
The Kabanga Nickel project deposit has historically been constrained by lack of infrastructure (rail and grid power) and distance from international smelters. However, Lifezone plans to unlock this large, high-grade project primarily through leveraging capital and operating cost efficiencies expected to be achieved through the use of its Hydromet Technology when compared to smelting, with a proposed vertically integrated operation within Tanzania. In-country beneficiation is an important social benefit allowing Tanzania to recognize the full economic and social value of its national resources.
Lifezone formally acquired the Kabanga Nickel project in April 2021 from previous joint owners, Barrick Gold and Glencore who had spent over $293 million on the project and completed 577 kilometers of diamond drilling. In December 2021, Lifezone Limited brought BHP, the world’s largest mining company by market capitalization, as a funding partner into the Kabanga Nickel project. Since then, BHP has invested $90 million into the Kabanga Nickel project and $10 million into Lifezone Limited, which holds Lifezone’s Hydromet Technology patents.
A Framework Agreement with the Government of Tanzania was signed in January 2021 between KNL and the Government of Tanzania, which stipulates the principles of sharing of economic benefits and its 16% free-carried interest in the Kabanga Nickel project. Subsequently, a Special Mining License (“SML”) was issued to KNL in October 2021 that is valid for a period covering the estimated productive life of the deposit. The Kabanga Nickel project is not subject to any commercial metals streaming or royalty arrangements with related or third parties.
BHP’s current look-through ownership of the Kabanga Nickel project is 14.3%. Upon completion of the DFS, BHP have the option to increase their look-through ownership to 51%. The option consideration will be calculated by applying a 0.7 multiple to the net asset value of the KNL determined by 3 independent valuation experts. Proceeds will be used to fund the development of the Kabanga Nickel project. KNL has agreed with BHP a royalty rate in return for licensing its Hydromet Technology to the refinery. Lifezone will retain 40% of the marketing rights of the refined end products from the refinery, under certain conditions.
Lifezone has commenced a competitive process to monetize a portion of its 40% allocation of the marketing rights. Lifezone has engaged with several global original equipment car manufacturers and battery producers who have expressed an interest in purchasing refined nickel cathode that could be produced from the Kahama refinery in the future. The scale and quality of the project, and the potential low carbon dioxide emissions footprint of the metal have been well received. As at September 30, 2023, Lifezone has yet to enter into significant revenue contracts or forward looking commitments with potential customers of products produced by the Kabanga Nickel project.
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Management’s Discussion and Analysis of financial condition and results of operations
Kabanga Nickel project overview (continued)
During Q3 2023, the infill drilling program continued with a goal of increasing the geological confidence of nickel mineralization. An average of five drill rigs were employed onsite and a total of 12 drill holes totaling 8,955 meters were completed during the period. Infill drilling concluded at the Tembo Zone in June and then shifted focus to the North Zone. Approximately 33,443 new meters have been added into the resource model from the infill drilling campaign since it commenced in December 2021 to the end of September 2023. The results of the successful infill drill program and an updated mineralization interpretation led to the publication of the November 2023 Mineral Resource Update on December 7, 2023, which included a significant increase in Mineral Resources tonnages and contained metals.
Geotechnical studies remain ongoing, water monitoring bores are informing onsite hydrology studies, and metallurgical testing is also underway with variability samples drilled and collected. Engineering work has been focusing on the underground mine design, the placement of surface infrastructure and the positioning of tailings storage facility. The preparation of the DFS remains on track for completion by the end of Q3 2024.
The Kabanga Nickel project site had a successful quarter with no lost time injury occurrences. As a result, the project recorded more than one million hours worked without a lost time injury. The “Your Safety is My Safety” campaign continues its successful implementation and training continued with employees and contractors.
As continued demonstration of Lifezone’s commitment to local stakeholders and the Government of Tanzania, Lifezone’s teams performed activities such as financial literacy training, hosted multiple site visits with senior government officials and furthered social and environmental studies.
Hydromet Technology overview
Lifezone is also focused on commercializing its Hydromet Technology in the metals recycling market, which is expected to grow substantially in the future as an alternative supply of critical minerals. Currently over 20% of the global supply of PGMs comes from the secondary market with the large majority being processed by smelters. Lifezone intends to break energy-intensive and polluting smelting from the recycling chain and provide a cleaner solution for the circular economy. Utilizing the Lifezone’s existing processing knowledge relating to PGMs, the perceived route to market is to install a hydrometallurgical recycling facility to process and refine PGMs from spent autocatalytic converters in North America or Europe. On June 15, 2023, Lifezone Limited signed a Memorandum of Understanding with a global PGM customer to establish a commercial scale PGM recycling facility.
Research and development and further broadening the Lifezone’s IP with additional patents is a continuous exercise to ensure its Hydromet Technology is protected and can be applied to processing additional metal groups and deposit types. On July 18, 2023, Lifezone closed the acquisition of Simulus in Perth, Australia. As a result, Lifezone now has an in-house laboratory to undertake additional test work and engineering design to further streamline project timelines; advance our research and development initiatives to current projects and importantly potentially widen our portfolio of patents; and undertake metallurgical test work for potential clients that may wish to adopt Lifezone’s Hydromet Technology in return for licensing fees.
5
Management’s Discussion and Analysis of financial condition and results of operations
Explanatory note relating to the SPAC Transaction and listing on the NYSE.
As described in detail in Note 1 of Lifezone’s Unaudited Condensed Consolidated Interim Financial Statements, at Closing, Lifezone consummated the previously announced SPAC Transaction pursuant to the BCA, dated as of December 13, 2022, by and among Lifezone, GoGreen Investments Corporation, an exempted blank check company incorporated under the laws of the Cayman Islands, GoGreen Sponsor 1 LP, a Delaware limited partnership, Aqua Merger Sub, a Cayman Islands exempted company and Lifezone Holdings, and Keith Liddell, solely in his capacity as Lifezone Holdings shareholder representative, and the shareholders of Lifezone Holdings party thereto.
Pursuant to the BCA, among other things, closing mechanics of the SPAC Transaction comprised:
| 1. | GoGreen merged with and into the Merger Sub, with the Merger Sub surviving the merger and the shareholders of GoGreen (other than shareholders of GoGreen who elected to redeem their GoGreen ordinary shares and dissenting shareholders) receiving ordinary shares, with $0.0001 par value per share, of Lifezone (“ordinary shares”); and |
| 2. | each issued and outstanding GoGreen public warrant converted into, and was exchanged for, the right to receive one Lifezone public warrant and (ii) each issued and outstanding GoGreen private warrant converted into and was exchanged for the right to receive one Lifezone private warrant (in the case of each GoGreen public warrant and GoGreen private warrant, rounded down to the nearest whole number of warrants without cash settlement for such rounded fraction in accordance with the terms of the BCA) (the Lifezone public warrants and the Lifezone private warrants, together, the “warrants”); |
The SPAC Transaction was consummated on the Closing Date. The transaction was unanimously approved by GoGreen’s board of directors and was approved at the EGM. GoGreen’s shareholders also voted to approve all the other proposals presented at the EGM.
As a result of the SPAC Transaction, Merger Sub, as the surviving entity, and Lifezone Holdings each became wholly owned subsidiaries of Lifezone.
On the Closing Date, ordinary shares and the warrants commenced trading on the NYSE, under the new ticker symbols “LZM” and “LZMW,” respectively.
Foreign Private Issuer status
Given the Company is incorporated in the Isle of Man, it is considered a Foreign Private Issuer (“FPI”) under the securities laws of the U.S. and the rules of the NYSE.
In our capacity as an FPI, we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information. NYSE listing rules include certain accommodations in the corporate governance requirements that allow FPI, such as us, to follow “home country” corporate governance practices in lieu of the otherwise applicable corporate governance standards of NYSE.
FPIs may prepare their financial statements using US GAAP; or IFRS pursuant to Regulation S-X Rule 4-01(a)(2). In the case of FPIs that use the English-language version of IFRS as issued by the International Accounting Standards Board, or IASB IFRS, no reconciliation to US GAAP is needed.
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Management’s Discussion and Analysis of financial condition and results of operations
Business overview (continued)
Foreign Private Issuer status (continued)
We may take advantage of these exemptions until such time as we are no longer an FPI. We are required to determine our status as an FPI on an annual basis at the end of each second fiscal quarter.
We would cease to be an FPI at such time as more than 50% of our outstanding voting securities are held by United States residents and any of the following three circumstances applies:
| 1. | the majority of our executive officers or directors are United States citizens or residents. |
| 2. | more than 50% of our assets are located in the United States; or |
| 3. | our business is administered principally in the United States. |
If we lose our FPI status we would be required to comply with Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for FPIs.
Emerging Growth Company status
We are an Emerging Growth Company (“EGC”), as defined in the Jumpstart Our Business Startups Act of 2012 (the (“JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. This includes, but is not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in their periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
We will continue to qualify as an EGC until the earliest to occur of:
| 1. | the last day of the fiscal year during which we had total annual gross revenues of US$1,235,000,000 (as such amount is indexed for inflation every 5 years by the SEC or more; |
| 2. | the last day of our fiscal year following the fifth anniversary of the date of the first sale of equity securities pursuant to an effective registration statement under the Securities Act; |
| 3. | the date on which we have, during the previous 3-year period, issued more than US$1,000,000,000 in non-convertible debt; or |
| 4. | the date on which we are deemed to be a “Large Accelerated Filer”, as defined in Exchange Act Rule 12b-2. Lifezone would become a Large Accelerated Filer if Lifezone has a public float of greater than $700 million, has been filing periodic reports for at least 12 months, has previously filed at least one annual report, and is not a smaller reporting company. |
Section 103 of the JOBS Act provides that an EGC is not required to comply with the requirement to provide an auditor’s report on ICFR under Section 404(b) of the Sarbanes-Oxley Act. An EGC still has to perform management’s assessment of internal control over financial reporting (SOX 404(a)) and the disclosure requirement of Item 308(a) of Regulation S-K). As Lifezone is a newly public company, a SOX phase-in exception applies whereby the management report is not required until the second annual report.
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Management’s Discussion and Analysis of financial condition and results of operations
Business overview (continued)
Emerging Growth Company status (continued)
On September 21, 2023 Lifezone engaged Mazars LLP, a specialist SOX compliance knowledge and internal controls expert to support the implementation of SOX compliance requirements to assist Lifezone to be SOX compliant by end of financial reporting December 31, 2024. The companies excluded from the scope are companies that have no material impact on Lifezone as they have no employees, no active operation or are in voluntary liquidation.
We expect to continue to be an EGC for the foreseeable future.
Recycling market update
On December 13, 2023, Lifezone announced that it has entered into a non-binding term sheet with a subsidiary of Glencore plc (the world’s fourth largest mining company by market capitalization) for the two-phased implementation of a recycling joint venture to recover platinum group metals from spent automotive catalytic converters utilizing Lifezone’s Hydromet Technology. The business model will involve the purchase of catalytic converter feed material to process and deliver high-purity, refined PGMs on site from 100% recycled sources.
At incorporation, Lifezone Recycling US, LLC is registered in the US and 100% owned by Lifezone. Upon completion of the first phase investment, Glencore and Lifezone will both invest $1.5 million into Lifezone Recycling US, LLC for new units and pro-forma equity ownerships of 94% and 6% (Lifezone and Glencore, respectively).
Proceeds from the first stage investment will primarily be allocated to funding a confirmatory pilot plant and feasibility study to take place in Lifezone’s laboratory in Perth, Australia. The results of the piloting and study are expected to conclude by the end of H1 2024 and the second stage investment decision will be dictated by the outcomes of the first stage.
Segments
See Note 4 of Lifezone’s Unaudited Condensed Consolidated Interim Financial Statements for the nine months ended September 30, 2023 for further details.
Significant components of results of operations
Revenue, Cost of Sales, and Gross Profit
Lifezone has generated significant losses from its operations as reflected in Lifezone’s accumulated deficit of $403.4 million as of September 30, 2023. Additionally, Lifezone has generated significant negative cash flows from operations and investing activities as we continue to support the development of our business and the Kabanga Nickel project. For a discussion of our expected spending on capital expenditures to support our continued commercialization and growth objectives as we strategically invest in studies, test work, equipment, and infrastructure, see “Liquidity and capital resources”. In addition to our capital expenditure, we expect our operating expenses to increase for both infrastructure and workforce-related costs as we seek to expand our patent portfolio, continue to invest in research and development activities, seek to expand the market penetration of our Hydromet Technology and develop the Kabanga Nickel project.
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Management’s Discussion and Analysis of financial condition and results of operations
Business overview (continued)
Significant components of results of operations (continued)
Revenue, Cost of Sales, and Gross Profit (continued)
We generate revenue from our IP licensing business.
Lifezone Limited has granted the Kell license to Kelltech Limited (50% owned by Lifezone Limited) to exclusively use its Hydromet Technology across the SADC License Area. The Kell License relates to Lifezone Limited’s Hydromet Technology applicable to just precious metals projects. In turn, Kelltech Limited has exclusively sub-licensed the Kell License to KTSA (66.67% owned by Kelltech Limited). Kellplant is a wholly owned subsidiary of KTSA. For more information refer to Note 23
IP licensing revenue received by Lifezone Limited under the Kell license are shown below.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Kellplant Proprietary Ltd | 56,140 | 130,583 | 129,680 | 1,133,122 | ||||||||||||
| Kelltechnology SA Proprietary Ltd | 159,520 | 377,707 | 524,888 | 440,330 | ||||||||||||
| 215,660 | 508,290 | 654,568 | 1,573,452 | |||||||||||||
As of September 30, 2023, Lifezone did not have any material non-cancellable commitments relating to capital expenditures that it cannot cancel without a significant penalty.
Other than the $4 million contingent payment due to the sellers of the Kabanga Nickel project upon the earlier of the completion of the DFS and the fifth anniversary of the contract from the date of signing, but no later than December 2024, we did not have any material commitments or contingencies as at September 30, 2023.
We have not generated any revenue from our mining project because the Kabanga Nickel project is in the exploration and evaluation stage. We do not expect to generate any revenue from our mining projects in the foreseeable future.
9
Management’s Discussion and Analysis of financial condition and results of operations
Business overview (continued)
Significant components of results of operations (continued)
Revenue, Cost of Sales, and Gross Profit (continued)
| Three months ended September 30, | Q3 change | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Revenue | 556,271 | 531,739 | 24,532 | 5 | % | |||||||||||
| Loss on foreign exchange | (228,619 | ) | (114,441 | ) | (114,178 | ) | (100 | )% | ||||||||
| General and administrative expenses | (347,843,080 | ) | (4,613,327 | ) | (343,229,753 | ) | (7,440 | )% | ||||||||
| Operating loss | (347,515,428 | ) | (4,196,029 | ) | (343,319,399 | ) | (8,182 | )% | ||||||||
| Interest income | 87,678 | 99,237 | (11,559 | ) | (12 | )% | ||||||||||
| Interest expense | (58,974 | ) | (68,306 | ) | 9,332 | 14 | % | |||||||||
| Loss before tax | (347,486,724 | ) | (4,165,098 | ) | (343,321,626 | ) | (8,243 | )% | ||||||||
| Income tax | - | - | - | 0 | % | |||||||||||
| Loss for the financial period | (347,486,724 | ) | (4,165,098 | ) | (343,321,626 | ) | (8,243 | )% | ||||||||
| Other comprehensive income | ||||||||||||||||
| Exchange gain on translation of foreign operations | (213,406 | ) | 5,699 | (219,105 | ) | (3,845 | )% | |||||||||
| Total other comprehensive income for the period | (213,406 | ) | 5,699 | (219,105 | ) | (3,845 | )% | |||||||||
| Total comprehensive loss for the financial period | (347,700,130 | ) | (4,159,399 | ) | (343,540,731 | ) | (8,259 | )% | ||||||||
Revenue, Cost of Sales, and Gross Profit
Comparison of Lifezone’s combined unaudited proforma condensed consolidated results of operations for Q3 2023 and Q3 2022.
Revenue
Revenue for Q3 2023 was $556,271, compared to $531,739 for Q3 2022, an increase of $24,532. The increase in revenue was primarily on account of increase revenue from consultancy services provided to third parties offset by a decrease in revenue services provided to the development of the Kellplant Hydromet Technology refinery project which is on hold and will need to be rescoped following SRL’s decision to update their mine plan and scope the refinery to process its underground mining operations, which have not been developed yet.
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Management’s Discussion and Analysis of financial condition and results of operations
Business overview (continued)
Revenue, Cost of Sales, and Gross Profit (continued)
Exchange loss on translation of foreign operations
The loss on foreign exchange at Lifezone for Q3 2023 was $228,619, as compared to $114,441 in Q3 2022, an increase of $114,178. The increase in the loss on foreign exchange was primarily due to movements in exchange rates in subsidiary operations.
Interest income
Interest income represents the income earned by Lifezone pursuant to the interest on the financial instruments and cash held with banks.
Interest expense is the interest accretion related to contingent consideration in relation to the KNL legacy acquisition, interest on leases and other interest expense.
| Three months ended September 30, | Q3 change | |||||||||||||||
| 2023 | 2022 | 2023 v 2022 | ||||||||||||||
| General and Administrative expenses | $ | $ | $ | $ | ||||||||||||
| Wages & employee benefits | 2,070,172 | 925,602 | 1,144,570 | 124 | % | |||||||||||
| Professional fees | 1,181,725 | 1,075,535 | 106,190 | 10 | % | |||||||||||
| Directors’ fees | 262,179 | 43,604 | 218,575 | 501 | % | |||||||||||
| Legal expenses | 80,357 | 118,982 | (38,625 | ) | (32 | )% | ||||||||||
| Mining expenses | - | 351,578 | (351,578 | ) | (100 | )% | ||||||||||
| Depreciation of property and equipment | 534,589 | 30,929 | 503,660 | 1,628 | % | |||||||||||
| Depreciation of right of use asset | 144,641 | 9,887 | 134,754 | 1,363 | % | |||||||||||
| Amortization of intangible assets | 84,973 | - | 84,973 | 0 | % | |||||||||||
| Share-based expense - Lifezone Holdings shareholder earnout | 248,464,035 | - | 248,464,035 | 0 | % | |||||||||||
| Share-based expense - Sponsor earnout | 17,094,750 | - | 17,094,750 | 0 | % | |||||||||||
| SPAC Transaction expenses | 76,857,484 | - | 76,857,484 | 0 | % | |||||||||||
| Audit & accountancy fees | 194,021 | 116,002 | 78,019 | 67 | % | |||||||||||
| Drilling and site costs | - | 28,622 | (28,622 | ) | (100 | )% | ||||||||||
| Insurance | 515,932 | 37,662 | 478,270 | 1,270 | % | |||||||||||
| Other administrative expenses | 31,483 | 187,891 | (156,408 | ) | (83 | )% | ||||||||||
| Taxes & licenses | - | 1,486,749 | (1,486,749 | ) | (100 | )% | ||||||||||
| Travel | 326,739 | 200,284 | 126,455 | 63 | % | |||||||||||
| 347,843,080 | 4,613,327 | 343,229,753 | 7,440 | % | ||||||||||||
| Loss on foreign exchange | 228,619 | 114,441 | 114,178 | 100 | % | |||||||||||
| 347,071,699 | 4,727,768 | 343,343,931 | 7,262 | % | ||||||||||||
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Management’s Discussion and Analysis of financial condition and results of operations
Business overview (continued)
Revenue, Cost of Sales, and Gross Profit (continued)
General and administrative expenses
Total general and administrative expenses for the three months ending September 30, 2023 were $347,843,080 compared to $4,613,327 for the three months ending September 30, 2022, an increase of $343,229,753. The increase in recurring general and administrative expenses was primarily due to the addition of 98 new employees on top of the closing 75 employee headcount as of September 30, 2022. This amounts to an increase of $1,144,570 in wages and employee benefits resulting in a total employee headcount of 173 as of September 30, 2023 and an increase of $67,565 in professional and legal expenses. Increase in travel expenses of $126,455 was primarily caused by travel to the Kabanga Nickel project site (within Tanzania by local employees) and increased travel by the owner’s team and consultants to Tanzania.
Audit & Accountancy fees have increased $78,019, largely due to additional external audit fees associated with the BCA. Excluding the increase in audit related costs, following the hiring of internal accounting resources compared to the period ended September 30, 2022 where accounting services were externally sourced, costs related to external accounting services are reducing.
Share-based expenses of $265,558,785 under the SPAC Transaction have been recognized in accordance with IFRS 2 Share-based Payment, the earnouts have market performance vesting conditions. These earnouts relate to shares granted to previous Lifezone Holdings shareholders and Sponsor shareholders.
Furthermore, Lifezone has recognized $76,857,484 in SPAC Transaction expenses to account for the excess of fair value of equity issued to participating GoGreen shareholders over the value of GoGreen’s identifiable net assets acquired as part of the SPAC Transaction. The SPAC Transaction expenses are considered compensation for the service of a stock exchange listing in accordance with IFRS 2 paragraph 10.
Exploration and evaluation assets and mining data
Lifezone capitalized mining expenses in Q3 2023 to exploration and evaluation assets following advancement in its exploration and study program.
Nine months ended September 30, 2023, compared to the September 30, 2022
| $ | ||||
| Carrying amount at September 30, 2022 | 16,274,121 | |||
| Movements during the quarter | 2,181,185 | |||
| Carrying amount at December 31, 2022 | 18,455,306 | |||
| Movements during the period | 30,109,241 | |||
| Carrying amount at September 30, 2023 | 48,564,547 | |||
See Note 12 of our unaudited condensed consolidated interim financial statements for the nine months ended September 30, 2023.
12
Management’s Discussion and Analysis of financial condition and results of operations
Kabanga Nickel project – Tanzania
Management considers exploration and evaluation costs linked to the Kabanga Nickel project meeting the criteria of exploration and evaluation assets under IFRS 6. The ongoing work is focused on the SML area granted October 27, 2021, which is owned by Tembo Nickel, a joint-venture company incorporated in Tanzania of which the Government of Tanzania is a 16% shareholder.
Furthermore, the outcome of the ongoing exploration work and studies are expected to be captured in a DFS, which is yet to be published. Earlier studies are more than 5 years old and are considered outdated in a commercial and technical sense. Lifezone aims to release the DFS in the next 12 months and to maintain the good standing of the licenses and permits linked to the Kabanga Nickel SML area. A key part of the business plan is an extensive exploration program that is intended to expand the areas of known mineralization and to increase the geological confidence of previously defined mineral resources. The expected completion of the DFS will allow for the declaration of a mineral reserve.
Exploration costs arising following the issuance of a prospecting and mining license are capitalized on a project-by-project basis as exploration and evaluation assets. Management considers the following exploration and evaluation costs (but not exhaustive) meeting the criteria under IFRS 6 for capitalization:
| ● | purchase of legal rights to explore for natural resources; |
| ● | to conduct topographical, geochemical, geophysical investigations and related technical services; |
| ● | trenching, pitting and soil sampling; |
| ● | any type of exploratory drilling and assaying and related consulting services; |
| ● | generation of any geotechnical information; |
| ● | related costs to access the site and provide accommodation and basic services including security and transport for employees and contractors; |
| ● | statutory reporting requirements, |
| ● | license fees and other cost to keep the licenses in good standing, including external affairs, government relationship and community work related to an exploration asset; |
| ● | costs related to feasibility studies, including trade-off and commercial studies; |
| ● | metallurgical tests including testing of mineralization for processing and refining, stacking and storage, acid mine drainage or transport; |
| ● | all labour and contractor costs related to the activities above; |
| ● | finance costs to the extent they are directly attributable to financing these activities, following IFRS 7; and |
| ● | costs incurred as part of exploration activities include appropriate technical and administrative overheads, that might be provided by offshore and holding entities. |
It can be assumed, that if a legal entity only holds one exploration and evaluation assets, most if not all costs are related to that exploration and evaluation asset and these costs get capitalized in relation to that single asset.
13
Management’s Discussion and Analysis of financial condition and results of operations
Liquidity, capital resources and capital requirements
Liquidity refers to Lifezone’s ability to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital and capital expenditure needs, contractual obligations, any debt service, and other commitments.
Through our wholly owned subsidiary, Lifezone Limited, we own a family of Hydromet patents for metal beneficiation. Our business model for the IP licensing business is to generate income from consulting fees and licensing our proprietary technology in return for royalties. We may also own interests in and/or operate processing refineries, that use our patented Hydromet Technology and accumulated IP and skills, to economically beneficiate metals to produce refined products for sale with significantly reduced carbon dioxide emissions intensity and cost when compared to traditional smelting and refining methods.
We estimate that our Kabanga Nickel project mining and refining operations will require significant capital expenditures to build out the required infrastructure and procure equipment ahead of commencing operations. Pursuant to the initial BHP’s investment in KNL in 2021 and the Tranche 2 Investment, BHP currently owns 17.0% of the shareholding of KNL, having cumulatively invested $90 million directly into KNL.
Further, pursuant to the Tranche 3 Option Agreement entered into between BHP, Lifezone Limited and KNL, BHP has the option to consummate a further investment in KNL, subject to the satisfaction of certain conditions, in particular, the satisfactory completion of, and agreement on, the DFS, agreement on the joint financial model with the Government of Tanzanian in respect of the Kabanga Nickel project, the amendment of the articles of association and share capital of the subsidiaries of Tembo Nickel to remove the free-carried interest rights of the Government of Tanzania in the subsidiaries of Tembo Nickel and receipt of any necessary regulatory and tax approvals. In the event such investment is consummated, BHP would own a 60.7% majority stake in KNL providing a 51% indirect interest in Tembo Nickel. The proceeds of such investment will be used to further advance the Kabanga Nickel project by taking the project through into formal construction. If the Tranche 3 investment is not made by BHP, we expect that we would continue developing the Kabanga Nickel project with additional funding through traditional project debt and/or equity financing sources, monetizing the offtake from the project and/or royalty streams, and we may also explore other strategic partners for the project or sell certain of our assets. Lifezone is seeking to monetize our portion of the marketing rights with an offtake agreement. If Lifezone is unable to monetize its portion of the marketing rights through an offtake agreement, then other funding avenues will need to be pursued.
14
Management’s Discussion and Analysis of financial condition and results of operations
Liquidity, capital resources and capital requirements (continued)
As of September 30, 2023, Lifezone’s non-cancellable commitments, as disclosed below, do not include any commitments related to capital expenditures as Lifezone does not have any material commitments related to capital expenditures that it cannot cancel without a significant penalty.
Other than the $4 million contingent payment due to the sellers of the Kabanga Nickel project upon the completion of the DFS or on December 9, 2024, whatever is earlier, Lifezone did not have any material commitments or contingencies as at September 30, 2023.
To enhance our liquidity position or increase our cash reserve for future investments or operations, we may in the future seek equity or debt financing. The issuance and sale of additional equity would result in further dilution to our shareholders, and any issuance and sale of additional equity at our subsidiaries, including in connection with the Tranche 3 investment in KNL by BHP, would dilute our interest in KNL. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations.
Cashflow results
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Operating activities | (17,575,389 | ) | (4,580,412 | ) | (23,631,684 | ) | (9,355,054 | ) | ||||||||
| Investing activities | (21,138,737 | ) | (1,539,828 | ) | (38,644,145 | ) | (3,491,871 | ) | ||||||||
| Financing activities | 67,587,304 | (27,613 | ) | 115,024,529 | (66,223 | ) | ||||||||||
| Net increase (decrease) in cash and cash equivalents | 28,873,178 | (6,147,853 | ) | 52,748,700 | (12,913,148 | ) | ||||||||||
Comparison of Lifezone’s results of operations for Q3 2023 and Q3 2022
| a) | Cash flow from operating activities |
Net cash used in operating activities of Lifezone was $17,575,389 for Q3 2023, primarily consisting of $347,700,130 of comprehensive loss for the period, adjusted for (i) items such as expenses for share-based payments, issuance of common stock under the SPAC Transaction cumulatively amounting to $342,416,269, interest income, movements in amortization of intangibles, foreign exchange loss, interest income, interest expense and depreciation of property and equipment and right-of-use assets cumulatively amounting to $964,118 and (ii) working capital changes, primarily consisting of an decrease in trade and other receivables of $235,925, increase in fuel inventories of $37,714, decrease in related party receivables of $1,309,343, decrease in prepaid expenses of $578,340, changes in prepaid mining license of $254,850 and an decrease in trade and other payables of $15,596,390.
15
Management’s Discussion and Analysis of financial condition and results of operations
Cashflow results (continued)
| a) | Cash flow from operating activities (continued) |
Net cash used in operating activities of Lifezone was $4,580,412 for Q3 2022, primarily consisting of $4,159,399 of consolidated loss for the period, adjusted for (i) items such as interest income, amortization of intangibles, foreign exchange loss, interest income, interest expense, loss on disposal of property and equipment, and depreciation of property and equipment and right-of-use assets cumulatively amounting to $124,326 and (ii) working capital changes, primarily consisting of an increase in trade and other receivables of $356,463, increase in fuel inventories of $14,653, decrease in related party receivables of $8,004, increase in prepaid expenses of $390,326, changes in prepaid mining license of $255,299 and an increase in trade and other payables of $47,200.
| b) | Cash flow from investing activities |
Net cash used in investing activities of Lifezone was $21,138,737 for Q3 2023, of which $12,643,426 related to the investment in exploration and evaluation assets, the acquisition of subsidiaries (in connection with the Simulus acquisitions, net of cash acquired) amounting to $8,085,255, expenditures relating to the acquisition of property and equipment amounting to $287,366 and patent costs incurred amounting to $32,053, which were partially offset by interest received from banks amounting to $87,678.
Net cash used in investing activities of Lifezone was $1,539,828 for Q3 2022, of which $1,529,927 related to the investment in exploration and evaluation assets, patent costs incurred amounting to $33,619, expenditures on property and equipment amounting to $72,863 offset by interest received from banks amounting to $96,581.
| c) | Cash flow from financing activities |
Net cash provided by financing activities of Lifezone was $67,587,304 for Q3 2023, primarily on account of the $70,173,170 of proceeds from PIPE transaction, net cash from proceeds from SPAC acquisition of $3,104,056, exercise of Lifezone Holdings share options $110,504, offset by account of payment of lease liabilities of $179,222 and share issuance cost of $5,683,979.
Net cash provided by financing activities of Lifezone was $27,615 for Q3 2022, on account of payment of lease liabilities of $27,613.
Capital expenditures.
Lifezone’s capital expenditure for Q3 2023 was $21.2 million while Lifezone capital expenditure in Q3 2022 was $1.6 million. The capital expenditure relates largely to exploration and evaluation activities, transportation, office, and computer equipment and Lifezone costs relating to legal and professional services required to expand and maintain Lifezone Limited’s six active IP patent families.
16
Management’s Discussion and Analysis of financial condition and results of operations
Research and development, patents, and licenses
Existing IP and the experience of an internal technical team of skilled chemical engineers and metallurgists is a core competence of Lifezone’s ability to successfully commercialize its proprietary Hydromet Technology for the Kabanga Nickel project, other projects and across the broader downstream metals processing industry as a cleaner and cheaper alternative to smelting.
Along with trade secret protection, non-disclosure, and licensing agreements, Lifezone’s IP comprises a collection of global patents focused on the economic processing and recovery of metals from sulfide minerals and concentrates. As of September 30, 2023, Lifezone Limited has been granted or issued 98 patents and has 7 applications pending in 59 jurisdictions relating to Lifezone’s suite of Hydromet Technology and associated processes. These are categorized into six families of principal patents.
Research and development costs for the nine months ended September 30, 2023 were $81,100 (September 30, 2022: $69,014) which focused on the application of the Lifezone’s Hydromet Technology to process and recover nickel derived from lateritic mineralization and recovering platinum group metals from spent autocatalytic converters, as well as optimization and value engineering of primary nickel sulfide and PGM applications.
We estimate that our IP licensing business will require capital expenditure over the next 24 months for research and development, patent applications and laboratory equipment.
Following the closing of the acquisition of Simulus on July 18, 2023, Lifezone owns an in-house laboratory to undertake additional test work and engineering design to further streamline timelines, advance its research and development initiatives to current projects, and potentially widen the portfolio of its IP with new additional patents.
Through its Tanzanian subsidiary, Tembo Nickel, Lifezone currently holds an SML over the Kabanga Nickel deposit project area with an approximate area of 201.85 square kilometers. An SML is the type of license required to develop large-scale mining operations in Tanzania requiring a capital investment of not less than $100 million. The SML was issued on October 25, 2021 and shall remain valid for a period of the productive life of the Kabanga Nickel deposit indicated in a feasibility study report or such period as the applicant may request unless it is cancelled, suspended, or surrendered in accordance with the law.
The SML carries an annual rent of $1,009,250. In addition, the Lifezone holds 5 Prospecting Licenses surrounding the Kabanga SML. An Environmental Impact Assessment certificate was transferred from the legacy Kabanga acquisition entities to Tembo Nickel on June 16, 2021. Subsequently an updated Environmental and Social Management Plan was submitted to the Tanzanian National Environmental Management Council and approved on June 19, 2023.
17
Management’s Discussion and Analysis of financial condition and results of operations
Tabular disclosure of contractual arrangements
| USD | USD | USD | USD | USD | ||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||
| Long-Term Debt Obligations | - | - | - | - | - | |||||||||||||||
| Capital (Finance) Leases | - | - | - | - | - | |||||||||||||||
| Operating Lease Obligations | 1,684,653 | 521,768 | 1,162,885 | - | - | |||||||||||||||
| Purchase Obligations | 3,080,989 | 3,080,000 | - | - | - | |||||||||||||||
| Other Long-Term Liabilities | 4,000,000 | - | 4,000,000 | - | - | |||||||||||||||
| Total | 8,765,642 | 3,602,757 | 5,162,885 | - | - | |||||||||||||||
Long-Term Debt Obligations, Capital (Finance) Leases, Operating Lease Obligations and Other Long-Term Liabilities are IFRS required reporting disclosures. Lifezone does not have contractual arrangements covering Long-Term Debt Obligations and Capital (Finance) Leases.
Management defines Purchase Obligations as agreements to purchase goods and services that are enforceable and legally binding across the business. Management assesses existing agreements by focusing on the largest agreements in place at the end of the reporting period. Lifezone does not have take-or-pay agreements, long-term constructions, or supply contracts in place as of September 30, 2023. Most of the agreements are for exploration services or technical services related to the feasibility study for the Kabanga Nickel project and the majority of these contracts can be terminated by Lifezone and its subsidiaries with four weeks’ notice, with the amount shown under Purchase Obligations reflecting that termination right based on historical spending.
Off-balance sheet arrangements and legal proceedings
As of September 30, 2023, Lifezone did not have or was not involved in any off-balance sheet arrangements that have or are reasonably likely to have a material effect on our financial condition, results of operations, expenses, or liquidity and capital resources.
Lifezone is not engaged in any capacity in any material litigation, arbitration, prosecution or other legal proceedings (which means with a value of in excess of $100,000) or in any material proceedings or hearings before any statutory or governmental body, department, board or agency or other dispute resolution proceedings (“Legal Proceedings”), nor has Lifezone been involved in any such Legal Proceedings during the 12 months prior to September 30, 2023 and the date of this Interim Report.
No such litigation, arbitration, prosecution, or other proceedings are pending, and no facts or circumstance exist which are likely to result in any Legal Proceedings.
So far as Lifezone is aware, there is no outstanding judgment, order, decree, arbitral award or decision of any court, tribunal, arbitrator, or governmental agency against any Lifezone group entity or any person for whose acts Lifezone may be vicariously liable.
So far as Lifezone is aware, no material dispute with the employees of the Lifezone exists or is threatened and Lifezone is not aware of any existing or threatened labor disturbance by such employees or those of any of its significant suppliers, manufacturers, contractors, or customers.
18
Management’s Discussion and Analysis of financial condition and results of operations
Related Party Transactions
See Note 17.
Management
Executive Officers and Directors
The following table lists the names, ages as of September 30, 2023 and positions of the individuals who currently serve as directors and officers of Lifezone:
| Name | Age | Position(s) | ||
| Keith Liddell | 64 | Chairman, Director | ||
| Chris Showalter | 48 | Chief Executive Officer, Director | ||
| Ingo Hofmaier | 47 | Chief Financial Officer | ||
| Gerick Mouton | 46 | Chief Operating Officer | ||
| Dr. Mike Adams | 63 | Chief Technical Officer | ||
| Spencer Davis | 45 | Group General Counsel | ||
| Natasha Liddell | 39 | Chief Sustainability Officer | ||
| Anthony von Christierson | 35 | Senior Vice President: Commercial and Business Development | ||
| Govind Friedland | 48 | Director | ||
| John Dowd | 55 | Director | ||
| Robert Edwards | 57 | Director | ||
| Beatriz Orrantia | 52 | Director | ||
| Jennifer Houghton | 61 | Director | ||
| Mwanaidi Maajar | 69 | Director |
Note: - Evan Young (age 38) joined the Company as Senior Vice President: Investor Relations and Capital Markets on October 10, 2023. Evan Young has more than 15 years of metals and mining capital markets experience and will lead the investor relations program.
19
Exhibit 99.3
Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.