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Adriatic Metals provides 3Q21 activities report

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Global Mining Review,

Adriatic Metals PLC has provided its quarterly activities report (QAR) that summarises the progress made and reported during the three months ended 30 September 2021 (3Q21).

3Q21 highlights

  • Vares Silver Project, Bosnia & Herzegovina:
    • Exploitation permit for the Rupice Underground Deposit received – final permit required to commence construction.
    • Definitive feasibility study (DFS) completed, with improved economics from the PFS: NPV8 of US$1062 million, IRR of 134% and CAPEX of US$168 million.
    • Step-out exploration drilling intersected high-grade mineralisation 80 m northwest of the Rupice Underground Deposit.
  • Cash balance at 30 September 2021 is £16.7 million.
  • Post quarter end, the company announced a project finance package of approximately US$244.5 million:
    • Term sheet signed with Orion for US$142.5 million debt financing (Orion debt financing) package:
      • US$120 million senior secured debt.
      • US$22.5 million copper stream.
  • In addition, the company completed an equity raise of approximately US$102 million, consisting of:
    • A conditional equity subscription for US$50 million by Orion.
    • A conditional placing of US$52 million, conducted through an accelerated bookbuild process.
  • Together, the Orion debt financing of US$142.5 million, the Orion equity subscription of US$52 million and the placing of US$50 million form the US$244.5 million project finance package.
  • Concurrently, Sandfire Resources Ltd sold 34 600 780 CHESS depositary interests (CDIs), representing its entire holding in the company.
  • Canaccord Genuity, RBC Europe and Stifel Nicolaus Europe acted as joint bookrunners in connection with the placing and the secondary sale.

Paul Cronin, Adriatic’s Managing Director and CEO, commented: “3Q21 was another transformational period for the company. We delivered a number of significant milestones, most notably the Rupice Exploitation Permit and the DFS. The 2021 DFS confirms the robust economics of the Vares Silver Project, while simplifying many aspects of the project compared with the 2020 PFS.

“The award of the Rupice Exploitation Permit, which is the final permit required for construction of the Vares Project, is testament to the support for all aspects of both community and government. It was a complex and multi-faceted process and I am extremely proud of our team for executing it within such a short period of time.

“The discovery of a new mineralised zone beyond the northwest extents of the Rupice orebody is very exciting and we will continue to focus on this area to better determine its potential.”

Final key permit for Vares Project: Rupice Exploitation Permit

On 19 July 2021, the company announced that it had received the exploitation permit for the Rupice underground deposit, from the Bosnian Federal Ministry for Energy, Mining and Industry (FMERI). The approval reflects the continued support for the Vares Project from both government and local stakeholders, which were actively engaged throughout the application process.

The application for the exploitation permit was a technically focused procedure, representing the last remaining permit required in order for construction to commence and gives Eastern Mining, the company’s wholly owned Bosnian subsidiary, the right to mine and process ore, from Rupice, in accordance with the concession agreement and elaborate of ore reserves. The company previously received from FMERI the Veovaca Exploitation Permit on 28 January 2021, which covers the proposed site of the Vares Processing Plant.

Adriatic Metals upgrades to OTCQX

On 21 July 2021, the company announced that it had qualified to upgrade onto the OTCQX® Best Market, the OTC Markets Group’s premier market for established companies seeking US investors. Adriatic will commence trading on the OTCQX under the symbol ‘ADMLF’ on 25 October 2021. By upgrading to the OTCQX, Adriatic enables its current and prospective US investors improved market visibility, increased trading liquidity and the most up-to-date information otherwise not found on the Pink® market.

Approximately 20% of the company’s investor base is in North America. Adriatic has upgraded to the OTCQX from the Pink market, where it has traded for just over 12 months. The company will continue to trade under the same ticker symbol, ADMLF. ADMLF represents the company’s CDIs listed on the Australian Stock Exchange (ASX). Therefore, trading volume in ADMLF on the OTCQX will be shown as volume traded in ADT shares on the ASX.

Step out drill results northwest of Rupice

On 10 August 2021, Adriatic reported assay results from drill hole BR-02-21 at Rupice. Drilling yielded a 21 m thick interval, stepping out 80 m northwest of the existing Rupice mineral resource:

  • 21.1 m at 576 g/t silver equivalent (AgEq) or 17.8% zinc equivalent (ZnEq) (296 g/t Ag, 5.5% Zn, 3.7% lead [Pb], 1.2 g/t gold [Au], 0.2% copper [Cu], 80% barium sulfate [BaSO4], 0.1% antimony [Sb]) from 338.6 m, including;
  • 6.8 m at 655 g/t AgEq or 20.2% ZnEq (387 g/t Ag, 6.2% Zn, 4.2% Pb, 0.8 g/t Au, 0.2% Cu, 79% BaSO4, 0.1% Sb) from 339.2 m.

Drilling continues to be focused in the northern area surrounding the high-grade intersection encountered in drill hole BR-02-21 at Rupice. Due to the size of the step-out, it is yet to be determined whether this reported mineralisation is the extension of the previously defined Rupice orebody or a separate ore zone. The reported interval is a massive sulfide replacement of dolomitic breccia, which is analogous with the primary mineralisation style of the Rupice orebody.

Vares Project DFS

On 19 August 2021, the company announced the results of the 2021 DFS for the Vares Silver Project in Bosnia & Herzegovina, which had been completed by a number of international consultants and coordinated by Ausenco Pty Ltd.


  • Simplified process design de-risks project execution:
    • Veovaca opencast removed from scope of study.
    • Reduction of concentrate products from four to two; recovery of barite and sulfide (pyrite) concentrates deferred.
    • Veovaca opencast, barite recovery and sulfide (pyrite) recovery to be considered in a future development phase.
  • 48% of revenues from payable silver and gold.
  • Completion of 2021 DFS paves the way for Adriatic to be the first publicly listed mining company in Bosnia & Herzegovina.
  • Metallurgical and geo-metallurgical test work ongoing post-DFS, targeting continuing improvement in recoveries.
  • ESIA and concentrate offtake work streams well advanced and progressing in line with the company’s expectations.

The principal considerations at the outset of the 2021 DFS were:

  • Optimise the mine plan to maintain consistent high-grade feed for as long as possible.
  • Take into consideration the prevailing market conditions.
  • Maximise revenue received from concentrate sales.
  • Optimise operational efficiency and reduce costs.
  • Reduce potentially adverse environmental, social, and economic impacts.
  • Minimise project execution risks.

The resulting simplified process design de-risks the project execution. This has included the removal of the Veovaca opencasts from scope of study; the reduction of concentrate products from four to two, with the recovery of barite and sulfide (pyrite) concentrates deferred. The Veovaca opencast, barite recovery and sulfide (pyrite) recovery to be considered in a future development phase.

Modified underground mine plan

The 2021 DFS mine plan is focused on mining the high-grade sections of the Rupice deposit as early as possible and delivering consistent high-grade feed to the Vares Processing Plant for as long as possible. As a result, the mine plan was modified to accommodate new lower (ingress) and upper (egress) declines for optimised access, which also improves operational flexibility and safety.

The ore reserve tonnage of Rupice has decreased from 8.4 million t to 7.3 million t, while the ore reserve grade increased from 463 g/t AgEq to 485 g/t AgEq. This was due to the application of updated net smelter return cut-offs by ore type determined during geo-metallurgical domaining and metallurgical testwork. The average dilution factor increased from 10% to 13%, taking into account the potential spalling of backfill from adjacent primary stopes when mining secondary stopes.

An additional third decline will be built, replacing the previously considered raisebore, dedicated solely for ventilation. Use of a ventilation decline rather than the vent-raisebore removes the risks associated in the near-surface ground conditions and provides an improved emergency egress. The third decline can also provide additional access for ore-haulage later in the mine life by relocating the ventilation fans.

Removal of Veovaca opencast from the mine plan

The Vares Processing Plant has been designed around the ore from the Rupice Underground Mine, as this is the highest value ore. Processing of ore from the Veovaca opencast, without modifying this process design, is anticipated to produce concentrates with marginal project economics. Further metallurgical test work and engineering will be undertaken to better understand how a higher value concentrate can be produced. Therefore, it was decided to defer the Veovaca opencast from the DFS mine plan until further work has been completed.

As the DFS does not include the mining of the Veovaca opencast, this reduces the tonnage of tailings that will require storage in the TSF by 1.91 million t over life of mine. Additionally, mining the Veovaca opencast would have also required stripping waste rock to access the ore, which would also require a dump area with a capacity to store 8.64 million t of waste rock. Total tailings and waste from mining Veovaca would have been 10.6 million t.

Removal of the barite concentrate circuit

Market research conducted by an independent barite marketing expert concluded that, while the barite concentrate produced by the Vares Processing Plant had a suitable end-market, the current weak demand for and prices of barite and the high shipping rates negatively affected its contribution to the project. The price for barite is correlated in oil and gas exploration activity, due to its primary use as a drilling mud.

By not recovering the barite concentrate, reduces the project execution risk by removing 200 000 t of concentrate movement in the first year of commercial production and in excess of 1.1 million t over first five years.

Removal of the sulfide (pyrite) concentrate circuit

The sulfide (pyrite) concentrate was developed and introduced as a process to remove sulfide minerals from the barite concentrate to improve the quality of the barite. It was a preceding flotation stage to the barite flotation, and it followed the silver-lead and zinc flotation stages. The sulfide (pyrite) concentrate produced was found to contain reasonable quantities of gold and silver and the marketing team found potential buyers. Further validation of the detailed market during the DFS, resulted in a lack of confidence in the marketability of the sulfide (pyrite) concentrate. Therefore, the company took the decision to remove the sulfide (pyrite) concentrate from the DFS taking into account that the barite was also not going to be included at this time.

Optimised comminution design

The process flow sheet was optimised with the introduction of a three-stage crushing plant processing ore for the Vares Processing Plant, as well as waste rock for aggregates for the backfill plant. This eliminated the need for the semi-autogenous grinding mill in the Vares Processing Plant saving US$1.8 million and further reducing project execution risk.

Project finance package for the Vares Silver Project

Post quarter end, on 13 October 2021, the company announced a project finance package of approximately US$244.5 million, before expenses, for the construction of the company’s flagship Vares Silver Project.


  • Adriatic Metals and Orion Resource Partners (UK) LLP have signed a term sheet for a US$142.5 million Orion debt financing package, comprising of:
    • US$120 million senior secured debt.
    • US$22.5 million copper stream.
  • The Orion debt financing remains subject to ongoing due diligence and definitive legally binding documentation, which is expected to be completed during 4Q21.
  • In addition to the Orion debt financing, the company completed an equity raise of approximately US$102 million, consisting of:
    • A conditional placing of approximately US$52 million (the placing), conducted through an accelerated bookbuild process.
    • A conditional equity subscription for US$50 million by Orion (the Oion equity subscription).
  • Together, the Orion debt financing of US$142.5 million, the Orion equity subscription of US$52 million and the placing of US$50 million form the US$244.5 million project finance package.
  • The net proceeds of the Orion equity subscription and placing is £72.2 million (approximately US$97.8 million) and will be used to commence construction of the Vares Silver Project. A notice of a general meeting to approve the resolution required to implement the Orion equity subscription and the placing (together, the equity fundraise) which is set out in a circular that was dispatched to shareholders on 13 October 2021 (the circular).. In addition, the company published a prospectus in connection with the equity fundraise.
  • Concurrent with the equity fundraise, Sandfire Resources Limited sold 34 600 780 CDIs, representing its entire holding in the company (secondary sale).
  • The equity fundraise and secondary sale were priced at £1.5174 per new ordinary share (AU$2.801 per CDI representing such new ordinary shares), representing a discount of approximately 10.7% to the 10-day volume weighted average price on the ASX to 12 October 2021.
  • Canaccord Genuity Limited, RBC Europe Limited and Stifel Nicolaus Europe Limited acted as joint bookrunners in connection with the placing and the secondary sale.

Other related news

Work continues on the development of the Vares Silver Project with ongoing site preparatory activities, as well as finalising the detailed engineering for the underground mine, processing plant and associated surface infrastructure.

Collin Ellison has joined the company as Project Director and is responsible for the construction and commissioning of the Vares Silver Project. Ellison brings over 40 years of experience managing, building, implementing and operating multiple opencast and underground mines globally. During his career, he has built and operated resource projects and companies in Africa, Australia, SouthEast Asia, Central Asia and North America. He was previously President and CEO of Goldbelt Resources that developed the Inata Gold Project in Burkina Faso and President and CEO of PMI Gold Corporation that developed the Obatan Gold Project in Ghana. Prior to this, Ellison was Project Director at Olympic Dam, and Operations Manager at Newmont and Mine Manager at Freeport McMoran.

Negotiations are advanced for the engineering, procurement and construction (EPC) contractor, as well as the underground mining contractor. In addition, several other key positions have been recruited in the project development and operations team.

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