21 September 2018

Savannah Resources Plc

Interim Results

Savannah Resources plc (AIM: SAV, FWB: AFM and SWB: SAV) ('Savannah' or the 'Company'), the AIM quoted resource development company, is pleased to announce its interim financial results for the six months ended 30 June 2018.

HIGHLIGHTS

•      Portugal:

o  Mineral Resource at the Mina do Barroso Lithium Project ("the MdB Project") increased to over 20Mt (over 200,000t contained Li₂O) underpinning the project as the largest of its kind in Western Europe

o  Positive Scoping Study completed on the MdB Project - study reports a base case pre-tax NPV_8% of US$356m and pre-tax IRR of 63% generated from 175,000tpa of 6% spodumene concentrate production over an 11 year life of mine

o  Feasibility Study for the MdB Project on track for completion Q2-2019

o  MdB Project development decision expected Q2-2019

o  Strong expansion potential - due diligence underway on option to acquire Mining Lease application adjacent to the MdB Project and rolling drill programme underway targeting resource upgrades and expansions at the MdB Project

•      Oman: Awaiting anticipated decisions for Mining Lease applications - Letters of No Objection received from all eight Ministries for development of the Mahab 4 and Maqail South copper projects

•      Mozambique: Mining Lease Applications submitted for Heavy Mineral Sands project, and scoping phase of Pre-Feasibility Study progressing

•      Corporate:

o  Investments in intangible and exploration project assets of £3.98m, primarily related to the MdB Project in Portugal

o  Greatly strengthened cash position following £2.1m (gross) equity raise completed at 5.5p per share in April 2018 and record £12.5m (gross) equity raise at 9.0p per share in July 2018, which included funds from existing shareholders and Tier 1 institutional investors (Current cash position £11.4m)

o  SAV now fully financed to development decision point for the MdB Project

o  Operating loss of £1.20m reflects the continued high tempo of mine development activities

o  Secondary listing completed on the Frankfurt Stock Exchange in September 2018 to support increased European marketing activities

CHAIRMAN'S STATEMENT

2018 to date has been a pivotal period for Savannah with the acceleration of our work programmes at the Mina do Barroso lithium Project ("the MdB Project"), culminating in a highly positive Scoping Study on the asset and a 500% increase in its resource base. The momentum created by this rapid and successful appraisal programme allowed us to complete a record £12.5m equity financing in July raised principally from existing shareholders and new institutional investors. This will provide funding for the work necessary to reach a mine development decision on the MdB Project, and to progress our projects in Mozambique and Oman.

Mina do Barroso, Portugal

As the recent Scoping Study showed, the MdB Project's lithium mineralogy and grade, along with its scale, near surface position and geographical location combine to produce a very attractive opportunity. Following the July 2018 fundraise, Savannah is now fully financed past the expected mine development decision point in Q2-2019 which is when the recently commissioned Feasibility Study is due to have been completed.

This project is taking shape at a time of increasing pressure to replace petrol and diesel cars with electric vehicles. For example, the UK Government has set a target that three-fifths of new cars should be electric by 2030 and that sales of conventional petrol and diesel vehicles should be phased out by 2040. To deliver on these targets, locking in supplies of key battery raw materials such as lithium is critical.

With no current European producer of spodumene concentrate, the dominant lithium mineral product traded internationally, we believe the fast-tracked development of the MdB Project could help Savannah become Western Europe's first major domestic spodumene supplier, giving us a strong commercial advantage. Our recent secondary listing on the Frankfurt Stock Exchange is the latest step in our strategy to build our brand and investor base on the continent. 

Critical to the viability of any mining project is its deposit.  The MdB Project has been proven to host Western Europe's largest new spodumene (hard rock) lithium discovery. The Company recently published its fourth Mineral Resource Estimate since acquiring the project in May 2017. In that time Savannah has been able to increase the overall Mineral Resource Estimate at the project by over 500% to 20.1Mt with the contained lithium (Li₂O) inventory growing by a similar percentage to 209,000t. This significant increase in overall Mineral Resource Estimate tonnage and contained metal has been accompanied by an equally significant increase in the statistical confidence of the Mineral Resource Estimate. For example, the latest estimate, announced on 10 September 2018, placed over 50% of the 20.1Mt total in the higher, Measured and Indicated JORC Resource categories, including 90% of the mining inventory of Stage 1 of the Grandao pit as defined in the June 2018 Scoping Study. This bodes well for the maiden JORC-2012 Mineral Reserve Estimate that will be taken from the Measured and Indicated Resource Estimate as part of the Feasibility Study due for completion in Q2-2019. Furthermore, the current JORC Exploration Target* of 9-15Mt only includes the Grandao and Reservatorio deposits. There is further upside potential from the other high priority exploration targets within the project area.

*Cautionary Statement: The potential quantity and grade of the Exploration Targets is conceptual in nature, there has been insufficient exploration work to estimate a mineral resource and it is uncertain if further exploration will result in defining a mineral resource.

In June 2018, we completed a Scoping Study based on the then current resource estimate of 13.9Mt. The study returned a base case pre-tax NPV_8% of US$356m and pre-tax IRR of 63%, with a Life of Mine ('LOM') EBITDA of US$805m, annual average EBITDA of US$72m and a pre-tax payback period of 1.7 years. These results are a very positive indication of the project's commercial potential, particularly given the increase in the resource estimate to 20.1 Mt since the Scoping Study was carried out.

Drilling continues to advance across all three of our primary target areas from which we have delineated the Mineral Resource Estimate to date - Grandao, Reservatorio and NOA.  In particular, drilling results to date at Grandao have been very encouraging with lithium mineralisation intersected over significant widths and extensions to the known mineralised pegmatites, leading to the discovery of a new Grandao Extended area.  These extensions support our belief in the potential for further increases in the Mineral Resource Estimate. Experienced lithium consulting engineers, Primero Group have been commissioned to lead a Feasibility Study which is now underway to advance the project to the next point of economic confidence so that a development decision can be made in Q2-2019. Primero is a global leader in the evaluation, design and construction of hard rock, open-cut, spodumene mines such as Mina do Barroso. 

In support of development, the project's estimated C1 cash costs of US$210/t spodumene concentrate produced in the first four years and US$271/t LOM average, put the project at the lower end of the spodumene lithium cost curve. The initial CAPEX is estimated to be US$109m. Based on these results, we are on track to become a low-cost producer of quality spodumene lithium concentrate by early-2020.  We are working hard to deliver on this objective and maximise shareholder value. 

Looking at wider market dynamics, while some commentators have suggested lithium prices will be affected by supply outweighing demand, we remain confident in the commodity's prospects.  We see a need for several new mines to come into operation to meet projected demand now and in the future. Even with new supply this year, global contract prices for lithium salts remain strong. It is also noteworthy that 28% of world's cumulative EV sales in H1-2018 have been in Europe, but the continent currently has no lithium production for battery grade chemicals, meaning all materials are imported.  Additionally, leading battery producers, like LG Chem and Samsung SDI have opened or are planning to open battery plants in Europe this year.  Whilst there are a number of new lithium projects vying to come on stream internationally, we believe our near-term production potential, low cost profile, high quality product and strategic location gives us a competitive edge. 

Finally, looking at further growth opportunities, in July 2018 we entered into an exclusive due diligence and option agreement with Aldeia & Irmão, S.A. ('Aldeia'), a private Portuguese company, with a view to increasing our tenement holdings in the MdB Project area.  Under the terms of the agreement, we are looking to acquire a Mining Lease, which, once granted, will include over 2.94km² of land abutting the southern end of the Reservatorio target area.  At least five known spodumene bearing lithium pegmatites occur on these areas, and if acquired, this tenement not only provides further resource expansion potential but also further space to optimise the layout for any potential mine development.  Due diligence is now underway.  All payments for the potential acquisition will be on a staged basis and are expected to be made principally from anticipated revenues generated from the MdB Project mine, once developed.

Copper Projects, Oman

In Oman two high-grade, low CAPEX copper mine developments are currently awaiting final licencing approval. Letters of approval or "No Objection" have been received from all eight Ministries and we are now working on concluding the mine licencing process with the Public Authority of Mining for the issuance of the two Mining Licences.  In support of the overall strategy of developing a hub and spoke copper development in Oman we have a drilling programme underway on the promising Bayda and Hara Kilab copper deposits on respectively Block 4 and Block 5 in Oman. These deposits could provide further tonnages for the overall development.

Heavy Mineral Sands Projects, Mozambique

In Mozambique we are continuing to work on the world class Mutamba Mineral Sands Project under a Consortium Agreement with Rio Tinto.  Three mining lease applications, covering a total area of 417km² for the Jangamo, Dongane, Ravene and Chilubane deposits, are currently being considered by the Mozambican mines department.  Alongside this, work continues on several fronts in the lead up to the anticipated grant of mining leases, with the scoping phase of the Pre-Feasibility Study ('PFS') now well advanced and the initial key studies underway.  These studies include hydrology studies, port options and the collection of a 10 tonne bulk sample, which will be processed at our recently constructed and commissioned pilot plant.  The results from this test work and the PFS will guide us in the infrastructure, power, mine planning and process plant requirements, allowing us to progress to the next stage of commercialisation.

Financial Summary

As is to be expected for an active and expanding resource development group, Savannah is reporting a loss for the period of £1.20m (30 June 2017: £1.53m) (31 December 2017: £2.84m), which reflects the continued high tempo of mine development activities. The decrease compared to the prior year is mainly due to the non-cash costs relating to share options issued as long-term incentives in H1-2017 amounting to £0.28m. Net assets have increased to £15.68m (30 June 2017: £9.26m) (31 December 2017: £13.14m) due to the increase in exploration activity during the period, predominantly with the lithium project in Portugal, which also saw the first of two milestones at the MdB Project being triggered and settled, with additions to non-current assets amounting to £3.61m.

In April 2018 Savannah raised £2.10m cash (before expenses) that contributed towards the ongoing development of the Company's projects in Portugal, Oman and Mozambique. After the reporting date, in July 2018 the Company raised £12.5m cash (before expenses). This has provided a current cash balance of £11.4m. The Company's strong cash position means Savannah is fully funded to deliver on the feasibility study of a mine development and to add to the Mineral Resource inventory via a continuing programme of resource drilling at the MdB Project, and to progress our projects in Mozambique and Oman.

Outlook

The upcoming six months will be active for Savannah as we finalise key economic studies at our MdB lithium project so that we are able to make a development decision in Q2-2019.  With low technical risk thanks to its open pit mining and conventional processing model, a quality resource that is proven to be highly sought after by electric vehicle manufacturers, and a defined development schedule that will see us commence concentrate production in 2020, we are firmly focused on realising the full value potential of this significant, near-term production asset. 

We believe that the MdB Project's spodumene lithium concentrate will be highly sought after by end-users and look forward to progressing discussions currently being undertaken with potential offtake partners as part of our commercialisation process.  Alongside this, we will continue to prove up the resource potential of the project, with drilling continuing to progress at pace, and we are also completing due diligence with a view to increasing the project area further via the proposed Aldeia acquisition.  Both of these work programmes have the potential to extend the current 11-year life of mine as defined in the Scoping Study and enhance the already attractive economics of the project.

We look forward to updating shareholders on progress as we advance the MdB Project further, maintaining the active development approach we have implemented since first acquiring the project in May 2017.

Finally, I would like to thank our long-term shareholders for their continued support and also welcome the new investors to Savannah's share register following our recent fundraise.  We look forward to continuing to build the value of our company for the benefit of all stakeholders.

I would also like to give my thanks to our highly committed management and operational team who have already proven their ability to execute multiple fast-track work programmes to rapidly build the value of our resource portfolio. 

We look forward to delivering on the next commercial milestones in the upcoming months.

Chairman

Matthew King

20 September 2018