TIDMADT1

RNS Number : 4589F

Adriatic Metals PLC

16 July 2021

Adriatic Metals PLC

('Adriatic Metals' or the 'Company')

QUARTERLY ACTIVITIES REPORT

For the 3 months ended 30 June 2021 ("Q2" or "Quarter")

HIGHLIGHTS

   --      Vares Silver Project, Bosnia & Herzegovina: 

o Urban Planning Permit for the Rupice underground deposit received.

o Demolition of the historic processing plant surface infrastructure and geotechnical drilling program to test the structural integrity of the original concrete pad completed.

o Rupice Exploitation Permit on course to be received during Q3 2021.

o Exploration drilling has re-commenced at Rupice.

o Exploration permit received for the additional 32km2 of concession area granted to the Company in September 2020 and initial results were received from an airborne geophysical survey across this area.

-- Adriatic Foundation established as a charitable trust in Bosnia & Herzegovina with the objective of supporting the communities around the Vares Silver Project to create a positive long-term legacy.

   --      Raska Project, Serbia: 

o Completed more than 6,500 meters of exploration drilling.

Paul Cronin, Adriatic's Managing Director and CEO commented:

"During the second quarter of 2021, we received the Urban Planning Permit for the Rupice underground deposit, which is an important permit and significant step forward in the development of the Vares Silver Project. This marked the penultimate step in completing the permitting requirements to commence construction. In addition, we received an Exploration Licence for 32km(2) of additional concession areas along the 22km of strike length, which we look forward to systematically exploring.

One of our key values at Adriatic Metals is to align the Company with the aspirations of our communities. The establishment of the Adriatic Foundation shows a strong commitment to those values by our Board, management and staff. We hope that the Foundation will draw support from our key partners in-country and global suppliers to promote development across our communities.

This is a transformational year for the Vares Silver Project and we look forward to the completion of the Definitive Feasibility Study within a matter of weeks."

Adriatic Metals PLC (ASX:ADT, LSE:ADT1) is pleased to provide the following Quarterly Activities Report ("QAR") that summarises the progress made and reported during the three months ended 30 June 2021 ("Q2" or "Quarter").

1. Vares Silver Project Operations and Corporate Update

On 19 April 2021, the Company provided a Vares Silver Project Operations and Corporate Update, which included the following highlights:

-- Demolition of the Old Processing Plant Site nears completion. A geotechnical drilling program to test the structural integrity of the original concrete pad has been completed.

   --      Exploration drilling has now re-commenced at Rupice. 

-- Adriatic Metals Chief Geologist, Phil Fox, hosted a Vares Project Geology Webinar on Tuesday, 20 April 2021. A recording of the webinar is available, see link: https://www.adriaticmetals.com/news/the-vares-project-geology-presentation/

-- The webinar's Vares Project Geology Presentation is available on the ASX announcements page of the Company's website , see link: https://www.adriaticmetals.com/investors/asx-announcements/

   --      The Company has received several non-binding term sheets for the Vares Project Financing. 
   --      Appointment of Thomas Horton as Head of Corporate Development & Investor Relations. 

-- Appointment of RBC Capital Markets as the Company's Joint Corporate Broker, effective 30 March 2021.

2. Vares Project Further Permitting Approval

On 4 June 2021, the Company announced that it had received the Urban Planning Permit ("UPP") for the Rupice underground deposit ("Rupice"), from the Bosnian Federal Ministry of Spatial Planning. The approval reflects the strong support for the Vares Silver Project from both Government and local stakeholders, which were actively engaged throughout the application process.

The Company has since applied to the Federal Ministry of Energy, Mines and Infrastructure ("FMERI") for the Rupice Exploitation Permit, which is a technically focussed 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 and Veovaca, in accordance with the Concession Agreement and Elaborate of Ore Reserves.

3. Vares Project New Concession Area Exploration Permit & Project-Wide Geophysical Survey Results

On 7 June 2021, the Company announced that it had received the exploration permit in respect of the 32km(2) extension to the concession, which had been awarded in September 2020, comprising of Semizova Ponikva, Brezik and Vares East.

Additionally, the Company advised that the initial results from the recent heliborne magnetics and radiometric survey covering the total concession area had been received with data analysis and interpretation ongoing.

4. Formation of the Adriatic Foundation

On 9 June 2021, the Company announced the incorporation of a charitable trust registered in the Federation of Bosnia and Herzegovina, called the Adriatic Foundation (the "Foundation").

Objective of the Foundation

The Foundation has been set up with the objective of supporting the communities around the Vares Silver Project through initiatives designed to create a positive long-term legacy, as well as alignment between the Company and the communities that the Foundation supports. The initiatives are specifically focussed on improving education, healthcare and environmental protection (collectively, the "Foundation Objectives").

Education

The Foundation will support local youth education programmes with courses and activities to support further education, as well as developing the broader set of skills required for the job market and professional development.

Healthcare

The Foundation will promote the awareness of disease prevention and improve local primary healthcare.

Environment

The Foundation will improve awareness of the importance of conservation and environmental protection. It will do this by supporting initiatives focussed on the transition to technologies and renewable energy resources that reduce pollution, as well as support projects that address key environmental issues of common interest.

Management of the Foundation

The Foundation will be managed by a Board of Trustees, who are representatives of the local communities surrounding the Vares Silver Project. The Trustees will each have a tenure of 4 years. The Board of Trustees will meet quarterly to discuss and approve submitted proposals that meet the Foundation Objectives.

Funding of the Foundation

The Foundation's programme funding will be primarily received through grants - i.e. non-repayable funding. Adriatic Metals will provide an initial sum of EUR100,000 to the Foundation, as well as an ongoing commitment of 0.25% of profits from its operations in Bosnia & Herzegovina. Sanela Karic, Non-Executive Director of Adriatic Metals, as referred to in Adriatic Metal's 2020 Annual Report, has pledged her Directors fees from March to June 2021, and Paul Cronin, CEO and MD of Adriatic has also pledged to give 250,000 of his personal shares in Adriatic Metals to the Foundation. The Foundation will seek contributions from other individuals, companies and institutions to co-fund programmes that support the Foundations Objectives. To date, the Foundation has received additional soft commitments of over EUR400,000.

5. Summary of Expenditure

A summary of operating and investing expenditure made by Adriatic on a consolidated basis during the Quarter in relation to operating and investing activities reported in the Appendix 5B Cash Flow Report is as follows:

 
                                                       GBP'000 
 
       Exploration & Evaluation (capitalised)             2,546 
       Exploration & Evaluation (expensed)                  708 
       Staff costs                                          597 
       Administration and corporate 
        costs                                               684 
       Property, plant and equipment 
        acquisitions                                         25 
       Interest paid                                        307 
       Other - VAT Refunds                                 (35) 
 
       Total                                          GBP 4,832 
 
 

6. Payments to Related Parties

During the Quarter, Adriatic paid an aggregate total of GBP105k to Directors, or companies controlled by them, comprised of salaries, fees and reimbursement / recharge of corporate office facilities & associated services used / provided by the Company. This is disclosed in Item 6 of the accompanying Appendix 5B Cash Flow Report.

7. Tenement Holdings

In accordance with ASX Listing Rule 5.3.3 please find below the Company's tenements as at 30 June 2021. The Company holds a 100% interest in all concession agreements and licences via its wholly owned subsidiaries, with the exception of the Raska (Suva Ruda) licence held by Deep Research d.o.o.. The Company does not hold an equity interest in Deep Research d.o.o. but has an option agreement pursuant to which it may acquire the entire share capital of Deep Research d.o.o..

 
                                                                                                            Area 
                                   Concession                             License                          (km(2)           Date 
                                   document        Registration number     holder      Concession name       )           granted      Expiry date 
------------------------------  --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                  Concession      No.:04-18-21389-1/13    Eastern         Veovaca1          1.08     12-Mar-2013      11-Mar-2038 
                                  Agreement                                Mining 
                                                                           d.o.o. 
==============================  --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                                                                          Veovaca 2         0.91     12-Mar-2013      11-Mar-2038 
                                --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                                                                      Rupice-Jurasevac,     0.83     12-Mar-2013      13-Mar-2038 
                                                                                           Brestic 
                                --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                  Annex 3 -                       No.:    Eastern     Rupice - Borovica     4.52     14-Nov-2018      13-Nov-2038 
                                  Area                04-18-21389-3/18     Mining 
                                  Extension                                d.o.o. 
                                --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                                                                      Veovaca - Orti -      1.32     14-Nov-2018      13-Nov-2038 
                                                                                      Seliste - Mekuse 
                                --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                  Annex 5 -       No: 04-18-14461-1/20    Eastern     Barice- Smajlova     19.45     03-Dec-2020      03-Dec-2050 
                                  Area                                     Mining        Suma-Macak 
                                  Extension                                d.o.o. 
                                --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                                                                         Droskovac -        2.88     03-Dec-2020      03-Dec-2050 
                                                                                           Brezik 
                                --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                  Bosnia and                                                             Borovica -         9.91     03-Dec-2020      03-Dec-2050 
                  Herzegovina                                                         Semizova Ponikva 
==============================  --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                                                            Ras 
                                                                           Metals 
   Exploration License                             310-02-1721/2018-02     d.o.o.          Kizevak          1.84     03-Oct-2019      03-Oct-2022 
 ---------------------------------------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                                                            Ras 
                                                                           Metals 
   Exploration License                             310-02-1722/2018-02     d.o.o.         Sastavci          1.44     12-Mar-2013      03-Oct-2022 
 ---------------------------------------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                                                            Taor 
   Exploration License                             310-02-1114/2015-02     d.o.o.          Kremice          8.54     21-Apr-2016    21-April-2022 
 ---------------------------------------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
                                                                            Deep 
                                  Exploration                             Research 
               Serbia              License        310-02-00060/2015-02     d.o.o.     Raska (Suva Ruda)    87.17     28-Dec-2015      18-Feb-2022 
==============================  --------------  ----------------------  ----------  -------------------  --------  -------------  --------------- 
 

**S **

For further information please visit www.adriaticmetals.com or @adriaticmetals visit on Twitter; or contact:

 
 Adriatic Metals PLC 
 Paul Cronin / Thomas Horton                          Tel: +44 (0) 7866 
                                                       913207 
 
 Canaccord Genuity Limited (Joint Corporate Broker) 
 Jeremy Dunlop (Australia)                            Tel: +61 2 9263 2700 
 James Asensio (UK)                                   Tel: +44 (0) 207 
                                                       523 8000 
 
 RBC Capital Markets (Joint Corporate Broker) 
 Marcus Jackson / Jamil Miah                          Tel: +44 (0) 20 7653 
                                                       4000 
 
 Stifel Nicolaus Europe Limited (Joint Corporate 
  Broker) 
 Ashton Clanfield / Callum Stewart                    Tel: +44 (0) 20 7710 
                                                       7600 
 
 Tavistock Communications Limited 
 Charles Vivian                                       Tel: +44 (0) 7977 
                                                       297 903 
 
 The Capital Network 
 Julia Maguire / Lelde Smits                          Tel: +61 2 8999 3699 
 
 

ABOUT ADRIATIC METALS

Adriatic Metals PLC (ASX:ADT, LSE:ADT1) is a precious and base metals developer that is advancing the world-class Vares Silver Project in Bosnia & Herzegovina, as well as the Raska Zinc-Silver Project in Serbia.

The Vares Project Pre-Feasibility Study boasts robust economics of US$1,040 million post-tax NPV(8) , 113% post-tax IRR and a capex of US$173 million. Adriatic is the only publicly listed mining company exploring in Bosnia and is leveraging its first-mover advantage. The Company is well-funded and concurrent with the advancing Definitive Feasibility Study, continues to explore across its large, highly prospective 41km(2) concession package.

Adriatic Metals completed the acquisition TSX-listed Tethyan Resource Corp. in Q4 2020, which contained the Raska Zinc-Silver Project in southern Serbia. The Company is exploring across its 99km(2) highly prospective concession area, which includes around the formerly operating Kizevak and Sastavci polymetallic mines.

There have been no material changes to the assumptions underpinning the forecast financial information derived from the production target in the 15 October 2020 announcement and these assumptions continue to apply and have not materially changed. Adriatic Metals is not aware of any new information or data that materially affects the information included in the announcement of the updated Mineral Resource Estimate announced on 1 September 2020 and all material assumptions and technical parameters underpinning the Mineral Resource Estimate continue to apply and have not materially changed.

Appendix 5B

Mining exploration entity or oil and gas exploration entity

quarterly cash flow report

 
 Name of entity 
-------------------------------------------------- 
 ADRIATIC METALS PLC 
 ABN             Quarter ended ("current quarter") 
------------    ---------------------------------- 
 624 403 163     30 JUNE 2021 
                ---------------------------------- 
 
 
 Consolidated statement of cash              (a) Current     (b) Year to 
  flows                                        quarter      date (6 months) 
                                               GBP'000          GBP'000 
 1.     Cash flows from operating 
         activities 
 1.1    Receipts from customers                        0                  0 
 1.2    Payments for 
        (a) exploration & evaluation 
         (if expensed)                             (708)            (1,199) 
        (b) development                                0                  0 
        (c) production                                 0                  0 
        (d) staff costs                            (597)            (1,094) 
        (e) administration and corporate 
         costs                                     (684)            (2,024) 
        Dividends received (see note 
 1.3     3)                                            0                  0 
 1.4    Interest received                              0                  0 
        Interest and other costs of 
 1.5     finance paid                              (307)              (718) 
 1.6    Income taxes paid                              0                  0 
        Government grants and tax 
 1.7     incentives                                    0                  0 
 1.8    Other - VAT refund                            35                 59 
                                            ------------  ----------------- 
        Net cash from / (used in) 
 1.9     operating activities                    (2,261)            (4,976) 
-----  -----------------------------------  ------------  ----------------- 
 
 2.     Cash flows from investing 
         activities 
 2.1    Payments to acquire: 
        (a) entities                                   0            (1,189) 
        (b) tenements                                  0                  0 
        (c) property, plant and equipment           (25)              (163) 
        (d) exploration & evaluation 
         (if capitalised)                        (2,546)            (3,859) 
        (e) investments                                0                  0 
        (f) other non-current assets                   0                  0 
 2.2    Proceeds from the disposal 
         of: 
        (a) entities                                   0                  0 
        (b) tenements                                  0                  0 
        (c) property, plant and equipment              0                  0 
        (d) investments                                0                  0 
        (e) other non-current assets                   0                  0 
        Cash flows from loans to other 
 2.3     entities                                      0                  0 
        Dividends received (see note 
 2.4     3)                                            0                  0 
 2.5    Other                                          0                  0 
                                            ------------  ----------------- 
        Net cash from / (used in) 
 2.6     investing activities                    (2,571)            (5,211) 
-----  -----------------------------------  ------------  ----------------- 
 
 3.     Cash flows from financing 
         activities 
        Proceeds from issues of equity 
         securities (excluding convertible 
 3.1     debt securities)                            605                605 
        Proceeds from issue of convertible 
 3.2     debt securities                               0                  0 
        Proceeds from exercise of 
 3.3     options and warrants                        705              1,191 
        Transaction costs related 
         to issues of equity securities 
 3.4     or convertible debt securities             (36)              (156) 
 3.5    Proceeds from borrowings                       0                  0 
 3.6    Repayment of borrowings                        0                  0 
        Transaction costs related 
 3.7     to loans and borrowings                       0              (143) 
 3.8    Dividends paid                                 0                  0 
        Other (Pre-acquisition loan 
 3.9     to Tethyan)                                   0                  0 
                                            ------------  ----------------- 
        Net cash from / (used in) 
 3.10    financing activities                      1,274              1,497 
-----  -----------------------------------  ------------  ----------------- 
 
 4.     Net increase / (decrease) 
         in cash and cash equivalents 
         for the period 
        Cash and cash equivalents 
 4.1     at beginning of period                   24,031             29,249 
        Net cash from / (used in) 
         operating activities (item 
 4.2     1.9 above)                              (2,261)            (4,976) 
        Net cash from / (used in) 
         investing activities (item 
 4.3     2.6 above)                              (2,571)            (5,211) 
        Net cash from / (used in) 
         financing activities (item 
 4.4     3.10 above)                               1,274              1,497 
        Effect of movement in exchange 
 4.5     rates on cash held                          364                278 
                                            ------------  ----------------- 
        Cash and cash equivalents 
 4.6     at end of period                         20,837             20,837 
-----  -----------------------------------  ------------  ----------------- 
 
 
 5.    Reconciliation of cash and           (c) Current   (d) Previous 
        cash equivalents                      quarter        quarter 
        at the end of the quarter             GBP'000        GBP'000 
        (as shown in the consolidated 
        statement of cash flows) to 
        the related items in the accounts 
 5.1   Bank balances                             20,837         24,031 
 5.2   Call deposits                                  0              0 
 5.3   Bank overdrafts                                0              0 
 5.4   Other (provide details)                        0              0 
                                           ------------  ------------- 
       Cash and cash equivalents 
        at end of quarter (should 
 5.5    equal item 4.6 above)                    20,837         24,031 
----  -----------------------------------  ------------  ------------- 
 
 
 6.      Payments to related parties of the entity           (e) Current 
          and their associates                                  quarter 
                                                                GBP'000 
         Aggregate amount of payments to related 
          parties and their associates included in 
 6.1      item 1                                                      105 
                                                            ------------- 
 6.2     Aggregate amount of payments to related                        0 
          parties and their associates included in 
          item 2 
------  --------------------------------------------------  ------------- 
 Note: if any amounts are shown in items 6.1 or 6.2, your quarterly 
  activity report must include a description of, and an explanation 
  for, such payments 
 
 
 7.    Financing facilities               (f) Total facility   (g) Amount drawn 
        Note: the term "facility'          amount at quarter    at quarter end 
        includes all forms of financing           end               GBP'000 
        arrangements available to               GBP'000 
        the entity. 
        Add notes as necessary for 
        an understanding of the sources 
        of finance available to the 
        entity. 
 7.1   Loan facilities                                14,510             14,510 
                                         -------------------  ----------------- 
 7.2   Credit standby arrangements                         0                  0 
                                         -------------------  ----------------- 
 7.3   Other (please specify)                              0                  0 
                                         -------------------  ----------------- 
 7.4   Total financing facilities                     14,510             14,510 
                                         -------------------  ----------------- 
 
       Unused financing facilities available at 
 7.5    quarter end                                                           0 
                                                              ----------------- 
 7.6   Include in the box below a description of each facility 
        above, including the lender, interest rate, maturity date 
        and whether it is secured or unsecured. If any additional 
        financing facilities have been entered into or are proposed 
        to be entered into after quarter end, include a note providing 
        details of those facilities as well. 
----  ------------------------------------------------------------------------- 
 The loan facilities comprise USD 20 million unsecured convertible 
  debentures at 8.5% interest and a maturity date of December 
  2024 issued to Queen's Road Capital Investment Ltd. For further 
  details see announcement dated 27 October 2020. 
 
 
 8.    Estimated cash available for future operating         (h) GBP'000 
        activities 
       Net cash from / (used in) operating activities 
 8.1    (Item 1.9)                                                (2,261) 
 8.2   Capitalised exploration & evaluation (Item                 (2,546) 
        2.1(d)) 
 8.3   Total relevant outgoings (Item 8.1 + Item                  (4,807) 
        8.2) 
 8.4   Cash and cash equivalents at quarter end                    20,837 
        (Item 4.6) 
 8.5   Unused finance facilities available at quarter                   0 
        end (Item 7.5) 
 8.6   Total available funding (Item 8.4 + Item                    20,837 
        8.5) 
       Estimated quarters of funding available 
 8.7    (Item 8.6 divided by Item 8.3)                                4.3 
----  ---------------------------------------------------- 
 8.8   If Item 8.7 is less than 2 quarters, please provide answers 
        to the following questions: 
       1. Does the entity expect that it will continue to have 
        the current level of net operating cash flows for the 
        time being and, if not, why not? 
      ------------------------------------------------------------------- 
       Answer: 
      ------------------------------------------------------------------- 
       2. Has the entity taken any steps, or does it propose 
        to take any steps, to raise further cash to fund its operations 
        and, if so, what are those steps and how likely does it 
        believe that they will be successful? 
      ------------------------------------------------------------------- 
       Answer: 
      ------------------------------------------------------------------- 
       3. Does the entity expect to be able to continue its operations 
        and to meet its business objectives and, if so, on what 
        basis? 
      ------------------------------------------------------------------- 
       Answer: 
      ------------------------------------------------------------------- 
 

Compliance statement

1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

   2        This statement gives a true and fair view of the matters disclosed. 
   Date:                     15 July 2021 
   Authorised by:       Audit and Risk Committee 

(Name of body or officer authorising release - see note 4)

Notes

1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2. If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

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