Adriatic Metals (ADT) - Silver focused PFS as Balkan Developer Grows

Adriatic Metals is a precious and base metals explorer and developer that owns the 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 andSilver 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. 

Adriatic Metals has released a summary of its PFS report and on the surface of it the numbers support the findings of the PEA. 

The company says it may report some more detail in the coming weeks in its various marketing presentations and releases. We question the Barite contribution and costs, and also the full value commodity prices used in the PFS. And Cronin explains why the copper concentrate plans have changed since PEA.  

We Discuss:  

• 1:28 - Company Overview 
• 2:39 - PFS Summary, Where's the Full Document? 
• 4:31 - Barite VS Metals: Market Concerns & Potential to Overproduce 
• 8:44 - Aggressive Forward Pricing & Effects on Financing 
• 12:27 - More Details from the PFS; No Separation of Copper from Concentrate 
• 15:58 - Polymetallic Companies and Forward View Construction 
• 20:23 - PEA VS PFS, Not Much Has Changed? 
• 22:37 - Mining in Bosnia & Herzegovina: Relationships & Support 
• 29:11 - Tethyan Resource Corp. Fully On Board? 
• 30:50 - EBRD Announcement 
• 32:53 - What's Coming Next from Adriatic Metals? 

Company Overview 

Adriatic Metals is a Balkan-focused precious and base metals explorer, now developer. Their prime asset is the Vares project near Boznia-Herzegovina with high grades, Silver dominant, but polymetallic. They also have the Raska project in Southern Serbia, which is Lead, Zinc, Silver, Gold exploration that they have recently acquired and are currently drilling very aggressively.  

Adriatic Metals in Bosnia & Herzegovina and Serbia - Adriatic Metals Corporate Presentation Sept. '20.

The Vares project is very much Silver dominant and Silver has by far the biggest revenue contribution, followed by the Zinc, then Gold, Lead, Copper, Barite and Antimony. 

Paul Cronin tells us that Australian and London companies aren’t required to disclose the full PFS technical report and their report is being written in a JORC format to comply with JORC in Australia and the UK. They are not planning to publish the full report and have published a press release with detail of the study, the risks and opportunities that were identified during that and the key financial metrics behind it. Over the coming weeks they will provide some more detail in presentations and corporate communications. Cronin says that they have had some constructive feedback from investors saying they would like to see some more granular information. They will be doing that and are also trying to separate out the metals from the industrial minerals: Gold, Silver, Copper, Zinc from Barite.  

Adriatic Metals Vares Project - Adriatic Metals Corporate Presentation Sept. '20.

Barite  

Barite is such a huge tonnage on a unit-cost basis, it skews the numbers a little bit. Barite has quite high transportation costs because of its quantity, and the processing cost per ton is quite high too. It is reasonably capital-intensive due to the quantity of tons that are going through the plant: 240,000t pa Barite production versus about 220,000t pa Silver and Zinc concentrate. Cronin says that the Barite market is quite opaque, and they rely on averages. They know that the European average price for API-grade Barite, drilling-grade Barite is about AUD$200/t, and that's delivered. The headline number was AUD$150/t, but they also factored in AUD$70 in transport and handling charges. Transportation is about AUD$30, by Seaborn up into Northern Europe, and then another AUD$40 from Vares to Ploce and about another AUD$20. Half of that was purely for port storage of vast quantities. This creates opportunities for Adriatic to look at logistics and identify whether they can do more just-in-time shipments to port.  

Regional Geology Map in Bosnia - Adriatic Metals Corporate Presentation Sept. '20.

In Vares, Adriatic has a large area next to the railway which may present some opportunities. They are interested in talking to shipping companies about working in partnership to minimise the number of containers that we have stored in port at any one time. There are about 2,000 shipping containers being moved at any one point in time from Vares which is a big logistical operation. They need some help with logistics and think there will be some cost savings for the future.  

Copper Concentrate 

Adriatic did some test work on creating a Copper concentrate. They created a high-grade Copper concentrate and did the sequential test work as they have to produce a Lead-Silver concentrate and also a Zinc concentrate. They found that, as a result of reducing the Copper first, there was degradation in the subsequent concentrates. When studied in the aggregate, they were better off sticking to Lead-Silver and Zinc concentrates. They have also introduced a pyrite concentrate, basically a Gold-Silver concentrate in small quantities. Then they also have their Barite product as well at the back end.  

Adriatic has received some criticism on this subject, suggesting that they should separate the project into metals and industrial minerals, so that the Barite is separated. Because of its tonnages, the Barite does tend to skew the numbers, but it is difficult to separate because the metal is contained in the Barite. The Barite does have to be mined, but the Barite margins are miniscule, and it would be easier for Adriatic if the Barite wasn’t there, but it is. And the challenge is to sell it as otherwise it will have to be stored.  

Polymetallic issues 

Adriatic has done some market research which suggests the pay ability will be lower if the Copper goes into the Lead-Silver concentrate but if they can get the Copper above certain grades then it helps. They have looked at the mine plan and carried out test work on variability of metal assemblage and grade and run multiple regression analysis. They have come up with metallurgical curbs based on the mineralogical domain of the deposit, and  have designed a mine plan that in the early years means they can just mine and send it straight to plant, but in the latter years, they will be stockpiling and are blending some of those ores. They want to create a consistent concentrate product throughout the entire mine line which they can sell for every year of the mine life. This has had an impact on cost, but it’s a big de-risking of the project. Adriatic will be able to create very saleable products right through the mine length.  

Since the PEA 

Since the PEA, Adriatic has reduced their mining costs by 22%-24%. The processing costs have gone up, largely because of the Barite, but also because of some of the ore sorting. Transportation costs were disappointing and that's been a big increase, but Metallurgical recoveries are up, so that’s a big positive for the company. They have also incorporated the Pyrite concentrate, which adds more revenue, and their Gold pay ability has gone from 48% up to 70%.  

Cronin says that they still have more cost localisation to do and are developing a procurement policy to encourage and incentivise local suppliers to create the products that they need in Bosnia which will lower the cost.  

Bosnian Economy 

Adriatic recently had a visit from the Prime Minister of the Federation of Bosnia & Herzegovina and the Minister for Mines, Energy and Industry which was a strong endorsement of the company. Through the major CAPEX, Adriatic will be contributing about 10% of foreign direct investment into Bosnia and will have quite a substantial GDP impact during the life of the mine which is quite significant in the scale of the Bosnian economy. 

Cronin explains that there is a mining history in the region of Vares, from the Saxons, through the Ottomans the Austro-Hungarians and into Yugoslavia. The Vares coat of arms has 2 miners and there are 11 operating coal mines and one base metals mine operating within the same canton as Adriatic. He says that people came here initially looking for exploration licenses and realised how difficult they were to get. Municipal consent is required to apply for a concession to the canton then an exploration license is required from the Federation which is a long process and a big barrier to entry. 

Adriatic has done a lot of work and invested a lot of money and time in the area. They have invested in their team and are involved with indirect investment via sponsorships of local football, rugby clubs, buying covid equipment for the school and hospital etc. This means they have now secured the largest mineral concession in Bosnia and have also got the entire mineral belts around Vares, which they were awarded a few weeks ago. This will give them more opportunities. It's an 11-year exploration concession which gives them opportunities for the future. 

Tethyan  

Tethyan is now fully on board and Cronin says that Fabian Baker, CEO of Tethyan is quite popular with some of their young geologists here who are keen to pick his brains! Baker has joined Adriatic in Corporate Development and is going to be helping with the expansion strategy in Bosnia & Serbia. They completed on the Tethyan acquisition last week and are drilling there with 2 rigs and the 3rd rig is coming this weekend. There is a 12,000m expansion programme planned where they will be drilling in areas that have not been drilled before and the results will be coming out consistently. Current results are at the lab and should be out in 2-3 weeks.  

Cronin says that he has been there for 5-weeks and is heading home next week but will be back again in November. He confirms that things are going really well and that he is really pleased with the team and the work that they've done continue to do. 

To find out more, go to Adriatic Metals Website.