Adriatic Metals (ADT) - Each Year LOM Extension Could Add $100M pa

Adriatic Metals is a precious and base metals explorer and developer that owns the world-class Vares silver project in Bosnia & Herzegovina and the Raska zinc deposit in Serbia.

The Vares silver project consists of 2 polymetallic deposits, located at Rupice and Veovaca. Located within the Raska Zinc deposit are Kizevak and Sastavci, 2 past-producing zinc, lead and silver open-pit mines.

Both Bosnia & Herzegovina and Serbia are well-positioned in central Europe and boast a strong mining history, pro-mining environment, highly-skilled workforce as well as extensive existing infrastructure and logistics.

We caught up with Paul Cronin, CEO of Adriatic Metals for a progress report since we last spoke in October. 

Company Overview: Progress since October 

The exploration effort for Adriatic Metals started to wind down at the end of last year. They now have the extension to their concession and exploration will recommence in April on that large area. There are a number of targets that they're ready to explore, but are waiting for additional geophysics and geochemical data to return to confirm those plans. The drilling programme in Serbia is going well and the company is getting the permits which are coming through slowly but importantly, they're coming through on the critical path. They haven't seen anything that would force them to defer the commencement of construction this summer. Adriatic has some new supportive investors with EBRD and Queens Road Capital.

Financing, Allocation, & Meaningful ESG: Convertible Deal with Queen's Road Capital

Adriatic Metals raised USD$20M from Queen’s Road Capital (QRC) and USD$8M from EBRD. The QRC deal was designed specifically to give a little bit of breathing room in terms of the exploration work at Raska and the upcoming exploration at Vares, without having to worry what the share price might do or what short-term impacts there might be on Covid or any other economic or macro-level disruptions. 

EBRD is a sophisticated organization, particularly in the resource investment space. They hire competent consultants to perform technical reviews and also do a detailed review on how the company is operating in terms of ESG platforms. Adriatic Metals has received their environmental permit, and are now doing land acquisition in line with EBRD’s guidelines. EBRD seems to like the way the company is building their social license, and their symbiotic relationship with the local community. They're finalizing their ‘local’ procurement policy to create more sustainability in terms of the economy, more jobs and more growth in the region.

Adriatic Metals has done the same with their human resources policy and plan to hire graduates from University and train them within the company by the more experienced employees. Additionally, just last week they announced locally that Adriatic Metals, with EBRD’s help and with a group in the UK called Globe 24/7, have started Bosnia's first High School mining course, to study mining as a subject at the Vares High School which will be a vocational course for students with subsequent job prospects in Vares with Adriatic.

2021 Goals: Economics & Growth

Adriatic Metals is doing a complete mineralogical assessment of multiple mine units in conjunction with their geo-metallurgical work. The testing work started in early December and will take about 70-days. It will help with the commissioning as they will be more certain about their recoveries. Gold recoveries are better than they were, but are still not great. They are only recovering about 69%-70% of the Gold in the resource with the rest of it, unfortunately, going into backfill.

With Copper, they get great recoveries, but terrible Copper payability because they are selling it inside a Silver concentrate. They are in discussions with the smelters about how improvements can be made and there is a team working on the concentrate sales to try and maximize those revenues and make some decisions. The quoted costs that are coming through, particularly the Bosnian-generated costs, are a lot lower than they had anticipated.

Adriatic Metals has Bosnia's biggest-ever mineral concession, an exploration team with a big budget and a lot of capability and are planning to be very busy this year. The 2021 exploration budget in Vares alone is £8.6M and in Raska, it is £6.3M which are big budgets designed to add lots of tons and years of mine life. At the moment they have a 15-year mine life, but are aiming to extend it for another 15-20 years. If they manage that, that's when it gets exciting. Our work suggests that for each year that you can extend the life of mine, you're adding another USD$100M to the value of the company, depending on the grades. Adriatic Metals can deliver a lot of value this year through the drill bit, through not just extending the life of mine (LOM) but the exploration component too. 

Starting in April, as soon as there is enough snow melt, they are going to fly in. The airborne and geochemical work that they've been doing over the last 3-months, has identified a number of good targets. They now know what to look for and are confident. They have the staff, the contracts with the drillers, the relationship with the government and most importantly, they have the land holdings to deliver. The exploration concession is a 10-year  concession, which is plenty of time to add value for the company.

Exploration: Acquisition of Tethyan Resources, Changes Made, & Plans Going Forward

Adriatic Metals are building up their team, they have a new head of business development just started and a plant manager, responsible for commissioning, starting in the first week of April. They are actively recruiting a technical director and a number of other senior roles for the company. They are trying to build up the team early so that when they finish the Feasibility Study and start construction, everybody will know exactly what they've got to do on the day they turn the switch on the plant.

With the Tethyan asset, they have taken on the team as well as the asset and have a £6.3M exploration project planned this year. They have started the environmental baseline at Raska and deployed their social team from Vares, to Raska to start scoping it out and are also about to hire a social coordinator in Raska to work with the local community. 

There is very strong support at the top of the Serbian government for their type of company which employs local people and looks to build local economies around those projects. To be successful, they need that support at a local level, and that is where they will initially focus. 

ESG in More Detail: Benefiting the Community Benefits the Business

Adriatic Metals is in collaboration with EBRD who is providing development funding to set-up the school initiatives. Vares was historically a mining town and in 1990 it was thriving and had a population of 30,000 people. Over the past 25 years that population has gone down by ¾ and as a result, there is now an aging population, a younger population with few opportunities, and an environmental legacy from historical mining and logging that needs some attention. Adriatic Metals does lots of small things to help address these problems. They are involved in sponsorship and help in the  community but they wanted to do something more robust to help fill those gaps in the local community, so have now established a charity called ‘The Adriatic Foundation’. Paul Cronin is transferring 250,000 of his shares in Adriatic into that foundation. In addition to that, they will invest with other NGOs and with the government on addressing the key issues of education, environment and health. The Vares municipality will receive a lot of money in tax revenue as a result of the project, but that tax revenue won't come in until 2024-2025 so there's a need to start addressing some of these issues now and create opportunities for the local people.

Vares is a very beautiful part of the world but there is a legacy of forestry tracks that have never been reforested, of rubbish from previous industrial operations, going all the way back to the Austro-Hungarian Empire. The Adriatic Foundation charity will be run by the community with four independent trustees from the local community who are supported with administration, etc, but they're going to make the decisions based on a set of criteria outlined by Critical Resource on how that charity is going to do best, and that is ESG in practice.

ESG is the big buzzword in the mining industry and Adriatic Metals don't just want to be a part of that cliche. They want to actually show it working and in practice to demonstrate that mining companies and local communities can not only co-exist, but they can actually benefit each other too. This is what they're trying to demonstrate on the Vares project, and ultimately, they will do the same on the Raska project.

Adriatic Minerals has an ESG committee at board level which is chaired by Sanela Karic, the non-exec Bosnian director who lives in Sarajevo. They're also working with EBRD on ESG and with other charities in and around Vares. They have a public liaison committee now with the local community who give feedback on what they're doing and what the community is doing. They've got very strong relationships through the various levels of government in terms of the plans for that part of Bosnia. 

2021 is going to be a big year for Adriatic Metals. They are working very hard on the DFS and will have a lot of news flow coming out on that. Project financing and exploration, both in Vares and in Raska, is fully funded to run all of that work. The company hopes to be able to demonstrate that they can put their cornerstone project into production fairly quickly and will have a pipeline of assets in Serbia that they will be continuing to advance.  

It was good to catch up with Adriatic Metals as there seems to be a lot going on. They will be putting a lot of announcements out around the economic metrics which gives us a good sense of where they are going and in which direction they are pushing the optionality. It’s a great project and we hope 2021 is as good for them as 2020 was.

To find out more, go to Adriatic Metal's Website.