Consolidated Statement of Cash Flows

FOR THE YEAR ENDED 31 DECEMBER 2023

(In USD)	Note	Year Ended 31 December 2023	Year Ended 31 December 2022
Cash flows from operating activities:
Loss for the year		(28,932,859)	(47,142,818)
Adjustments for:
Depreciation of property, plant and equipment	7	475,950	232,206
Depreciation of right-of-use assets	10	390,192	1,059,717
Share-based payment expense	13F	1,561,020	1,295,293
Finance Income	17	(948,775)	(334,497)
Finance expense	17	5,461,991	7,072,693
Fair value movements in derivative liabilities	6	3,540,640	4,081,401
Revaluation of deferred consideration		-	(151,339)
Exploration and evaluation asset impairment	8	-	23,186,959
Changes in working capital items:
Increase in receivables and prepayments		(4,815,690)	(171,789)
Increase in inventory		(1,552,781)	-
Increase/(decrease) in accounts payable and accrued liabilities		1,933,899	(360,894)
Net cash used in operating activities		(22,886,414)	(11,233,068)
Cash flows from investing activities:
Purchase of property, plant and equipment	7	(94,408,470)	(42,231,895)
Prepaid property, plant and equipment		(6,585,108)	(16,432,347)
Interest received on cash holdings		1,508,143	-
Net cash used in investing activities		(99,485,435)	(58,664,242)
Cash flows from financing activities:
Net proceeds from the issue of ordinary shares	13B, 13I	30,656,083	661,180
Proceeds from draw down of borrowings net of transaction costs	6	81,060,421	26,176,885
Settlement of deferred consideration		-	(525,785)
Interest paid on loans and borrowings	6	(1,895,000)	(1,700,000)
Interest received on cash holdings	5	-	277,383
Capital payments on leases	10	(1,719,291)	(1,890,191)
Interest paid on leases	10	(1,103,318)	(589,377)
Net cash generated from financing activities		106,998,895	22,410,095
Net decrease in cash and cash equivalents		(15,372,954)	(47,487,215)
Exchange losses on cash and cash equivalents		(356,108)	(4,433,976)
Cash and cash equivalents at beginning of the year		60,585,277	112,506,468
Cash and cash equivalents at end of the year		44,856,215	`

 

The accompanying notes are an integral part of these consolidated financial statements.

 

Notes to the Consolidated Financial Statements

1.   Corporate information

The consolidated financial statements present the financial information of Adriatic Metals PLC and its subsidiaries detailed in note 3 (collectively, the "Group") for the year ended 31 December 2023. Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England and Wales. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham GL50 1HX, United Kingdom.

The Group's principal activity is precious and base metals exploration and development. The Group owns the Vareš Project in Bosnia and Herzegovina and the Raska Project in Serbia.

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

2.   Basis of preparation

A Statement of compliance

The consolidated financial statements have been prepared in accordance with the recognition, measurement and presentation requirements of UK-adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 (the "Companies Act").

The consolidated financial statements were authorised for issue by the Board of Directors on 28 March 2024.

B Basis of preparation

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including derivative instruments), at fair value through profit or loss.  A summary of the Group's accounting policies is set out below in note 3.

The consolidated financial statements are presented in United States Dollars ("USD" or "$") which reflects the fact that the USD is a more widely recognised currency for the mining sector in which the Group operates and that its Project Finance Debt Package, offtake agreements and mining services contract are denominated in USD.

Unless otherwise stated, all amounts indicated by "$" represent USD.

C Going concern

The Vareš Feasibility Study was completed in August 2021 and an equity raise was successfully closed on 29 October 2021. Definitive documentation executed for the $142.5m Debt Finance Package with Orion was announced on 10 January 2022 to provide sufficient funds to complete the Vareš Project construction and cover ongoing owner costs until production commenced. Of this total, $112.5m was drawn down prior to 31 December 2023, including the $22.5m Copper Stream deposit,  and $30m was drawn down in January 2024. In August 2023 the Company raised $30m equity, net of costs. In March 2024, the QRC convertible debt was converted into shares.

As announced on 30 January 2024 in the Company's Quarterly Activity Report for the quarter ended 31 December 2023, the Project cost estimate was $188.9m, and on 28 February the Company announced that it had produced its first concentrate, with production scheduled to ramp up to its nameplate processing capacity of approximately 65,000t per month by Q4 2024.

Sensitivity analysis of production ramp up and potential revenue delays indicates that the Group and Company have sufficient cash resources to continue in operation for a period in excess of 12 months from the date of signing the consolidated and Parent Company financial statements. For a mining company at the start of its operating phase, uncertainty exists about operating results and cash flows. In a challenging operational scenario, the Company would have the option of reducing and/or deferring discretionary expenditure including overheads, sustaining capex and general and administrative costs, as well as raising equity capital in the event of a more severe impact on production and revenues.

A Debt-Service Coverage Ratio ("DSCR") covenant is included in the Orion Debt Finance Package, with the first DSCR testing period expected to be mid-2025, following the agreement in January 2024 to defer the first repayment under the Debt Finance Package from June 2024 to December 2024. The DSCR is required to be above 1.25x and the Company's forecasts show substantial headroom above this.

The Directors therefore believe there is not a material uncertainty regarding going concern and that it is appropriate to prepare the financial statements on a going concern basis.

3.   Accounting policies

The preparation of consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgement in applying the Group's accounting policies. Below are the principal accounting policies applied by management. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are material to the consolidated financial statements are disclosed in note 4.

A Basis of consolidation

The consolidated Group Financial Statements consist of the financial statements of the ultimate Parent Company (Adriatic Metals plc, a company registered in the UK), and all its subsidiary undertakings made up to the same accounting date. Subsidiary undertakings are those entities controlled by Adriatic Metals plc. Control exists where the Group is exposed to, or has the rights to, variable returns from its involvement with the investee and has the ability to use its power over the investee to affect its returns.

Subsidiaries are consolidated in the Group's financial statements from the date on which control is obtained. Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. The accounting policies of subsidiaries have been changed where necessary to ensure consistency with accounting policies adopted by the Group.

The consolidated financial statements comprise the financial statements of the Company and its following subsidiaries at 31 December 2023:

Name of subsidiary	Country of incorporation	Registered Address	Shareholding at 31 December 2023	Shareholding at 31 December 2022	Nature of business
Adriatic Metals BH d.o.o. (Formerly Eastern Mining d.o.o.)	Bosnia and Herzegovina	Tisovci bb, Vareš, 71 330, Bosnia and Herzegovina	100%	100%	Mineral exploration and development
Adriatik Metali d.o.o.	Bosnia and Herzegovina	Bulevar Meše Selimovića 81A, Sarajevo, 71 000, Bosnia and Herzegovina	100%	100%	Mineral exploration and development
Adriatic Metals Jersey Ltd (formerly Tethyan Resource Corp)	Jersey (formerly Canada)	35-37 New Street, St. Helier, Jersey, Channel Islands, JE2 3RA	100%	100%	Holding company - financing mining exploration of subsidiary
Adriatic Metals Services (UK) Limited (formerly Tethyan Resources Limited)	England and Wales	Regent House, 65 Rodney Road, Cheltenham, GL50 1HX, UK	100%	100%	Holding company and management services company - financing mining exploration of subsidiary and providing services to other group companies.
Adriatic Metals Trading and Finance Ltd	Jersey	35-37 New Street, St. Helier, Jersey, Channel Islands, JE2 3RA	100%	100%	Trading and finance company
Adriatic Metals Trading & Finance B.V.	The Netherlands	liquidated	n/a	100%	Trading and finance company (liquidated during year ended 31 December 2023)
Adriatic Metals Holdings BIH Limited	England and Wales	Regent House, 65 Rodney Road, Cheltenham, GL50 1HX, UK	100%	100%	Holding company - financing mining exploration of subsidiary
Tethyan Resources Jersey Ltd	Jersey	35-37 New Street, St. Helier, Jersey, Channel Islands, JE2 3RA	100%	100%	Holding company - financing mining exploration of subsidiary
Taor d.o.o.	Serbia	Kneza Milosa 93(street) /4 floor, Belgrade, Serbia	100%	100%	Mineral exploration and development
Tethyan Resources d.o.o.	Serbia	Kneza Milosa 93(street) /4 floor, Belgrade, Serbia	100%	100%	Mineral exploration and development
Global Mineral Resources d.o.o.	Serbia	Kneza Milosa 93(street) /4 floor, Belgrade, Serbia	100%	100%	Mineral exploration and development
Adriatic Metals d.o.o. (formerly RAS Metals d.o.o.)	Serbia	Kneza Milosa 93(street) /4 floor, Belgrade, Serbia	100%	100%	Mineral exploration and development

 

 

B Standards, amendments and interpretations adopted

The following amended standards and interpretations were adopted by the Group during the year ending 31 December 2023:

·      Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS 2 Practice Statement

·      Definition of Accounting Estimates - Amendments to IAS 8

·      Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12

These amended standards and interpretations have not had a significant impact on the consolidated Financial Statements. 

C Standards, amendments and interpretations effective in future years

At the date of authorisation of these consolidated financial statements, the following amendments to existing standards had been published and had not been adopted early by the Group:

The following amendments are effective for the year beginning 1 January 2024:

·      Lease Liability in a Sale and Leaseback - Amendments to IFRS 16

·      Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants - Amendments to IAS 1

·      Disclosures: Supplier Finance Arrangements - Amendments to IAS7 and IFRS 7

The following amendments are effective for the year beginning 1 January 2025:

·      Lack of exchangeability - Amendments to IAS 21

The Group anticipates that the above amendments will be adopted in its accounting policies for the first period beginning after their effective date and does not expect them to have a material impact on the consolidated financial statements.

D Foreign currency transactions and translations

The Group determines the functional currency of each entity as set out in note 4Ba and items included in the consolidated financial statements are measured using that functional currency.

I)    Transactions and balances

Transactions in foreign currencies are initially recorded using the spot exchange rates between the functional currency and the foreign currency, at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the spot rates at the reporting date.

Foreign exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.

II)    Group companies

On consolidation, the assets and liabilities of foreign operations are translated into USD at the rate of exchange prevailing at the reporting date and their income statements are translated at average exchange rates prevailing during the year. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. 

E Cash and cash equivalents

Cash and cash equivalents are comprised of cash held on deposit and other short term, highly liquid investments with original maturities of three months or less. These deposits and investments are readily convertible to known amounts of cash and subject to an insignificant risk of change in value.

F Receivables

All receivables are held at amortised cost less any provision for impairment. A loss allowance for expected credit losses is made to reflect changes in credit risk since the initial recognition.

G Exploration and evaluation assets

Pre-licence costs

Pre-licence costs relate to costs incurred before the Group has obtained legal rights to explore in a specific area. Such costs may include the acquisition of exploration data and the associated costs of analysing that data. These costs are expensed in the year in which they are incurred.

Exploration and evaluation expenditure

Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource.

Exploration and evaluation activity includes:

·      licence costs paid in connection with a right to explore;

·      researching and analysing historical exploration data;

·      gathering exploration data through geophysical studies;

·      exploratory drilling and sampling;

·      determining and examining the volume and grade of the resource;

·      surveying transportation and infrastructure requirements; and

·      conducting market studies.

Exploration and evaluation costs include directly attributable employee remuneration, materials and fuel used, surveying costs, drilling costs and payments made to contractors.

In evaluating whether the expenditures meet the criteria to be capitalised, several different sources of information are used. The information that is used to determine the probability of future benefits depends on the extent of exploration and evaluation that has been performed.

Exploration and evaluation expenditure in the year for activity on licences where a JORC-compliant resource has not yet been established is expensed as incurred until sufficient evaluation has occurred to establish a JORC-compliant resource. Costs expensed during this phase are included in exploration expenses and other operating expenses in the statement of profit or loss and other comprehensive income.

Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the licence as exploration and evaluation assets up to the point when a JORC-compliant reserve is established. Capitalised exploration and evaluation expenditure is considered to be an intangible asset and measured at cost less accumulated impairment.

Exploration and evaluation assets acquired in a business combination are initially recognised at fair value, including resources and exploration potential that is considered to represent value beyond proven and probable reserves. Similarly, the costs associated with acquiring an exploration and evaluation asset (that does not represent a business) are also capitalised and subsequently measured at cost less accumulated impairment.

Once a JORC-compliant reserve is established and development is sanctioned, exploration and evaluation assets are tested for impairment and transferred to mine under construction and amortised in line with the useful economic life of the mine or on a unit of depletion basis. Exploration and evaluation assets are not amortised during the exploration and evaluation phase and are considered to have an indefinite life until determined to be part of a mine plan.  

H Property, plant and equipment

I)    Land

Land is held at cost less accumulated impairment losses. Once a JORC-compliant reserve is established and development is sanctioned, land is tested for impairment and transferred to mine under construction and depreciated in line with the useful economic life of the mine or on a unit of depletion basis. Land is not depreciated during the exploration and evaluation phase and is considered to have an indefinite life until determined to be part of a mine plan.

II)    Short lived property, plant and equipment

Short lived property, plant and equipment consists of buildings, plant and machinery, office furniture and equipment, transportation assets and computer equipment. Short lived property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of short lived property, plant and equipment consists of the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use. Short-lived property, plant and equipment depreciation is provided at rates calculated to expense the cost, less estimated residual value, using the straight-line method over the estimated useful life of the asset at the following rates:

 

Buildings and Leasehold improvements	Shorter of 10% or lease term
Plant and equipment	15% - 33%

III) Mine under construction

Mine under construction includes construction costs as well as exploration and evaluation and land balances transferred as noted above once a JORC-compliant reserve is established and development is sanctioned. Expenditure which is necessarily incurred whilst commissioning the mine is also capitalised as a mine under construction cost. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.

Mine under construction costs are amortised in line with the useful economic life of the mine or rate of depletion of resources once the mine enters into production. The method of amortisation is determined taking into account all relevant factors at the point at which the mine enters into production.

Expenditure which is necessarily incurred whilst commissioning the mine under construction, in the period prior to being capable of operating in the manner intended by management, are capitalised. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.

IV) Depreciation and amortisation

The assets' residual values, useful lives and methods of depreciation and amortisation are reviewed at each financial year-end and adjusted prospectively if appropriate.

I Leases

The Group has various lease arrangements for buildings.  Lease terms are negotiated on an individual basis locally and subject to domestic rules and regulations.  At the inception of the lease contract, the Group assesses whether the contract conveys the right to control the use of an identified asset for a certain period in exchange for consideration, in which case it is identified as a lease.  The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets.  Low value leases are those with an underlying asset value of USD 5,000 or less.  For those leases, the Group recognized the lease payments as an operating expense on a straight-line basis over the term of the lease.

Right-of-use assets

At the commencement date of the lease right-of-use assets are measured at cost which comprises the following:

·      The initial measurement of the lease liability;

·      Prepayments before commencement date of the lease

·      Initial direct costs; and

·      Costs to restore.

Subsequent to initial recognition, right-of-use assets depreciated on a straight-line basis over the duration of the contract. The right-of-use assets are assessed for impairment where indicators of impairment are present.

Lease liabilities

At the commencement date of the lease, lease liabilities are measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

II)    Revision of lease term

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying amount of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying amount of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.

J Rehabilitation provision

The Group recognises provisions for contractual, constructive or legal obligations, including those associated with the reclamation of mineral interests and property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition of the liability, an amount equal to the corresponding provision is added to the carrying amount of the related asset and the cost is amortised as an expense over the economic life of the asset. Following the initial recognition of the rehabilitation provision, the carrying amount of the liability is increased for the passage of time as the discount is unwound, and adjusted for changes to the current market-based discount rate and amount or timing of the underlying cash flows needed to settle the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

K Finance income and finance expense

Finance income and Finance expense are recorded on an accrual basis using the effective interest method.

L Financial instruments

Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expired.

Except for trade and other receivables which do not contain a significant financing component, financial assets and financial liabilities are measured initially at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transactions costs that are directly attributable to the acquisition or issue of the financial instrument. Trade receivables which do not contain a significant financing component are recognised at their transaction price. Financial assets and financial liabilities are subsequently measured as described below.

i)    Financial assets

A financial asset is subsequently recognised at amortised cost under IFRS 9 if it meets both the hold to collect and contractual cash flow characteristics tests. A financial asset is measured at fair value through other comprehensive income if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

If neither of the above classifications are met the asset is classified as fair value through the profit and loss, with changes in fair value recognised in the profit and loss statement.  Even if an asset meets the above two requirements to be measured at fair value through other comprehensive income, IFRS 9 contains an option to designate, at initial recognition, a financial asset as measured at fair value through the profit and loss provided the classification eliminates or significantly reduces a measurement or recognition inconsistency.

Cash and cash equivalents and trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment, if any.

ii)   Financial liabilities

Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for financial liabilities designated at fair value through profit or loss, that are carried subsequently at fair value with gains and losses recognised in the profit and loss statement.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Where the movement in fair value is due to a change in the entity's credit risk, such gain or loss is recognised in other comprehensive income.

iii)  Convertible debt

The proceeds received on issue of the Group's convertible debt are allocated to their debt and derivative liability components. The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or maturity of the debt. The remainder of the proceeds is allocated to the conversion option and is recognised as a derivative liability.

M Impairment of assets

I)    Financial assets

A financial asset that is not carried at fair value through profit or loss is assessed at each reporting date to determine a loss allowance for expected credit losses. If the credit risk on a financial instrument has increased significantly since initial recognition, the loss allowance is equal to the lifetime expected credit losses. If the credit risk has not increased significantly, the loss allowance is equal to the twelve month expected credit losses.

The expected credit losses are measured in a way that reflects the unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information that is available about past events, current conditions and forecasts of future economic conditions.

II)    Non-financial assets

The carrying amounts of capitalised exploration and evaluation expenditure for undeveloped mining projects (projects for which the decision to mine has been not yet been deemed commercially viable and development has not yet been authorised) are reviewed at each reporting date for indicators of impairment in accordance with IFRS 6, and when indicators are identified are tested in accordance with IAS 36 Impairment of Assets.

Property, plant and equipment and intangible assets with finite lives are reviewed for impairment if there is an indication that the carrying amount may not be recoverable.

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that the assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate largely independent cash inflows, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

The recoverable amount is the higher of fair value less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the profit and loss statement. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Where an impairment loss is subsequently reversed, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior periods. A reversal of an impairment loss is recognised in the profit and loss statement.

N Income taxes

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.

Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not recognised on the initial recognition of goodwill, on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction, or on temporary differences relating to investments in subsidiaries and jointly controlled entities where the reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred income tax assets and liabilities are measured, without discounting, at the tax rates that are expected to apply when the assets are recovered, and the liabilities settled, based on tax rates that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities and assets are expected to be settled or recovered.

The Group has not recognised any deferred tax assets or liabilities.

O Earnings or Loss per share ("EPS")

Basic EPS is  calculated by dividing the earnings attributable to the owners of the parent by the weighted average number of common shares in issue during the year.

Diluted EPS is calculated by dividing the earnings attributable to the owners of the parent and the weighted average number of common shares in issue during the year plus the weighted average number of common shares that would be issued on the conversion of all potentially dilutive common shares, which comprise share options and warrants granted, except where these are anti-dilutive.

P Share capital, share premium and merger reserve

Ordinary shares are classified as share capital. Share premium represents the excess of proceeds received over the nominal value of new shares issued.

Incremental costs directly attributable to the issuance of new shares are shown in share premium as a deduction, net of tax, from the proceeds.

Merger reserve represents the difference between the value of shares issued by the Company in exchange for the value of shares acquired in respect of the acquisition of subsidiaries. Merger reserve only arises where the issuing company takes its interest in another body corporate from below a 90% equity holding to a 90% or above equity holding.

Q Share-based payments and warrants payments

I)    Share-based payment transactions

The Company grants share options and performance rights to Directors, officers, consultants and employees ("equity-settled transactions"). The Company may grant warrants to institutions in relation to an equity raise or other transaction. The Board of Directors determines the specific grant terms within the limits set by the Company's share option plans.

II)    Equity-settled transactions

The costs of equity-settled transactions are measured by reference to the fair value at the grant date and are recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled to the award (the "vesting date"). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the Company's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period and the corresponding amount is represented in share option reserve. No expense is recognised for awards that do not ultimately vest.

Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the date of modification.

Where equity-settled transactions are awarded to employees, the fair value of the options at the date of grant is charged to the profit and loss statement over the vesting period. Non-market performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of the options that will eventually vest. Market performance vesting conditions are incorporated into the fair value of the equity instrument at the grant date.

Where equity-settled transactions are entered into with non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the equity instruments issued. Otherwise equity-settled transactions with non-employees are measured at the fair value of the goods or services received.

Upon exercise of share options or warrants, the proceeds received are allocated to share capital, and share premium if applicable, and any associated balance in share-based payments reserve is transferred to retained earnings. The dilutive effect of outstanding options is reflected as additional dilution in the computation of diluted earnings per share.

The Group utilises the Black-Scholes option pricing model to estimate the fair value of share options and performance rights granted to Directors, officers and employees. The use of this model requires management to make various estimates and assumptions that impact the value assigned to the share options and performance rights including the forecast future volatility of the share price, the risk-free interest rate, dividend yield, the expected life of the share options and performance rights and the expected number of options and performance rights which will vest. See note 13F for further details regarding these inputs.

III)   STIP equity scheme

The Group operates an STIP scheme which runs on a calendar year basis, with employees receiving either cash or shares subsequent to year end based on to their performance during the year. An option pricing model is used to measure the Group's liability at each reporting date, taking into account the terms and conditions on which the bonus is awarded and the extent to which employees have rendered their service. Movements in the liability (other than cash payments) are recognised in the consolidated statement of comprehensive income.

R Other reserve accounts

Foreign currency translation reserve include gains or losses arising on retranslating the net assets of entities from their functional currencies into the Group presentation currency.

Retained earnings include all other net gains and losses and transactions with owners, including dividends, not recognised elsewhere.

S Segmental reporting

The reportable segments represent all of the Group's activities. The reportable segments are an aggregation of the operating segments within the Group as prescribed by IFRS 8. The reportable segments are based on the Group's management structures and the consequent reporting to the chief operating decision maker, the Board of Directors. These reportable segments also correspond to geographical locations such that each reportable segment is in a separate geographic location. Income and expenses included in profit or loss for the period are allocated directly or indirectly to the reportable segments.

The Group's operating segments are as follows:

·      Bosnia and Herzegovina (principally the Vareš Project);

·      Serbia (principally the Raska Project); and

·      Corporate (which supports the activities of the other two segments, principally the UK).

The Vareš and Raska Projects operate in two separate distinct jurisdictions and are at different points in their respective project life cycles.

Segment assets are those used directly for segment operations. Inter-company balances comprise transactions between operating segments making up the reportable segments. These balances are eliminated to arrive at the figures in the Consolidated Financial Statements.

T Adriatic Foundation

The Adriatic Foundation (the "Foundation") is a not-for-profit trust which was created in Bosnia and Herzegovina with the objective of supporting the communities around the Vareš Project. The Company provided the initial funding required for the formation of the Foundation.

The Company has the ability to appoint the Board of Trustees of the Foundation and hence transactions between the Company and the Foundation have been classified as related party on the basis of the company yielding significant influence.

An assessment has been performed to determine whether the Company controls the Adriatic Foundation in accordance with IFRS 10. The conclusion of this assessment is that whilst the company is able to yield significant administrative influence over the Foundation, it is not able to affect returns to the Company. The Foundation statute prevents the Company as the founder, and any other person associated with the Foundation, from directly or indirectly deriving profit, or any other material or financial benefit, from the activities of the Foundation. For the purposes of IFRS 10, the Directors have therefore concluded that the Company does not control the Foundation and as a result the Foundation is not included in the consolidated financial statements of the Group.

 

4.   Critical accounting estimates and judgements

The preparation of the consolidated financial statements in accordance with IFRS requires management to make certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from these estimates. The significant judgements, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are highlighted below.

A          Estimates

a          Exploration and evaluation asset impairment testing

The Group reviews and tests the carrying amount of assets when its judges that an indicator of impairment has occurred, including events or changes in circumstances that suggest that the carrying amount may not be recoverable.

When such indicators exist, management determines the recoverable amount by performing value in use and fair value calculations. These calculations require the use of estimates and assumptions. When it is not possible to determine the recoverable amount for an individual asset, management assesses the recoverable amount for the cash generating unit to which the asset belongs. The key estimates include discount rates, including the Group's weighted average cost of capital, future prices, future exploration and evaluation costs, production levels and foreign currency exchange rates.

Exploration and evaluation assets at 31 December 2023 comprised the Raska Project of $8,500,000, at a value based on the revised carrying value following the Company carried out a strategic review of the Raska Project in late 2022. See note 8 for details of the estimates made in establishing the revised carrying value. No further indicators of impairment or reversal of previous impairment have been identified in the year to 31 December 2023.   

b          Copper Stream

The Group entered into an agreement with Orion Partners under which it received a prepayment of $22.5m on 13 February 2023 in respect of future deliveries of copper warrants under the Copper Stream. Consideration as to the substance of the agreement and the value of the Copper Stream has been made in line with the requirements of IFRS. Regarding the accounting treatment reference has been made to IFRS9 and IFRS15 as the nature and substance of the agreement with the conclusion that IFRS9 is the most appropriate treatment of financial liability because the liability can be settled by cash or delivery of another financial instrument.

The fair value of the Copper Stream obligation was valued by management on a nominal basis. The significant assumptions included the nominal future copper curve prices, the latest mine plan and nominal weighted average cost of capital which was calculated by the company's nominated experts.

 

 

B          Judgements

a          Functional currency

The Group transacts in multiple currencies. The assessment of the functional currency of each entity within the consolidated Group involves the use of judgement in determining the primary economic environment in which each entity operates.

The Group first considers the currency that mainly influences sales prices for its concentrates, goods and services, and the currency that mainly influences labour, materials and other costs of providing goods or services. In determining functional currency, the Group also considers the currency from which funds from financing activities are generated, and the currency in which receipts from operating activities are usually retained.

When there is a change in functional currency, the Group exercises judgement in determining the date of change. This assessment is driven by the primary economic environment of each entity including products, labour, materials and professional services and the currency in which they are primarily transacted.

Name of entity	Country of incorporation	Functional currency at 31 December 2023	Functional currency at 31 December 2022
Adriatic Metals plc	England and Wales	USD	USD
Adriatic Metals BH d.o.o.	Bosnia and Herzegovina	USD	USD
Adriatik Metali d.o.o	Bosnia and Herzegovina	BAM	BAM
Adriatic Metals Jersey Ltd	Jersey (originally Canada)	USD	USD
Adriatic Metals Services (UK) Limited	England and Wales	USD	USD
Adriatic Metals Trading and Finance Ltd	Jersey	USD	USD
Adriatic Metals Holdings BIH Limited	England and Wales	USD	USD
Tethyan Resources Jersey Ltd	Jersey	GBP	GBP
Adriatic Metals d.o.o.	Serbia	RSD	RSD
Taor d.o.o.	Serbia	RSD	RSD
Tethyan Resources d.o.o.	Serbia	RSD	RSD
Global Mineral Resources d.o.o.	Serbia	RSD	RSD

 

b          Capitalisation of exploration costs

The Group uses its judgement to determine whether costs meet the capitalisation requirements in accordance with IFRS 6 and its accounting policy on exploration and evaluation assets, including whether the activities performed are directly attributable to increasing the value of the project.

Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the licence as exploration and evaluation assets. There is an element of judgement involved by management as to which costs are directly attributable to increasing the value of the project.  Broadly, activities in relation to scoping, exploration and development are deemed directly attributable, whilst activities in relation to supporting and administrative duties are deemed not to be directly attributable.

c          Indicators of impairment

The Group uses its judgement in assessing whether indicators of impairment have occurred.

 

The Group reviews and tests the carrying amount of exploration and evaluation assets when events or changes in circumstances suggest that the carrying amount may not be recoverable in accordance with IFRS 6. Indicators of impairment are as follows:

 

i) the period for which the entity has the right to explore in the specific area has expired or will expire in the near future, and is not expected to be renewed;

ii) substantive expenditure on further exploration for, and evaluation of, mineral resources in the specific area is neither budgeted nor planned;

iii) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and

iv) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

The Group also reviews property, plant and equipment and intangible assets with finite lives for impairment if there is an indication that the carrying amount may not be recoverable.

In assessing whether an indicator of impairment has occurred, the Group considers external sources of information including observable indications of decline in market value, actual or expected negative changes in the technological, market, economic or legal environment, changes in market interest rates or other market rates of return on investments, and whether the carrying amount of its net assets is greater than its market capitalisation. As external sources of information will typically be broader and less clearly linked to a specific asset or cash generating unit, for example, a decline in market capitalisation below the carrying value of the entity's net assets. This may then require the use of judgement to determine which assets or cash generating unit should be tested in response to an external source of information.

The Group also considers internal sources of information including changes in planned development of the assets, evidence of obsolescence or damage, changes in the expected use or life of an asset, and evidence from internal reporting that an asset's economic performance is, or will be, worse than expected.

No changes in circumstances or other indicators of impairment occurred during the year in respect of the Raska Project exploration and evaluation asset.

No changes in circumstances or other indicators of impairment occurred during the year in respect of the Vareš Project mine under construction.

d Rehabilitation provision

The Group recognises provisions for contractual, constructive or legal obligations, including those associated with the reclamation of mineral interests and property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition of the liability, an amount equal to the liability is added to the carrying amount of the related asset and this amount is amortised as an expense over the economic life of the asset. Following the initial recognition of the rehabilitation provision, the carrying amount of the liability is increased for the passage of time by unwinding the discount, and adjusted for changes to the current market-based discount rate and to the amount or timing of the underlying cash flows needed to settle the obligation.

Management uses its judgement and experience to determine the potential scope of closure rehabilitation work required to meet the Group's legal, statutory and constructive obligations, and any other commitments made to stakeholders, and the options and techniques available to meet those obligations and estimate the associated costs and the likely timing of those costs.

Significant judgement is also required to determine both the costs associated with that work and the other assumptions used to calculate the provision. External experts support the cost estimation process where appropriate but there remains significant estimation uncertainty. The key judgement in applying this accounting policy is determining when an estimate is sufficiently reliable to make or adjust a closure provision.

Management has previously engaged with experts Ausenco and Wardell Armstrong as part of the feasibility study to determine total costs of closure, restoration and environmental costs over the life of the mine. Management applied judgement to determine the impact of activity on the Vareš Project in the year ended 31 December 2023, which is a key factor in calculating the provision, and the Group recorded a provision based on the discounted value of the expected cashflows. See note 22 for further details.

e          Entities not consolidated

The Adriatic Foundation has not been consolidated, for reasons set out in note 3T.

Deep Research d.o.o. (DR) is determined to be outside of the control of the Group because although Adriatic Metals Jersey Ltd (the option agreement holder) has the ability to control DR via exercise of the option it does not have the intent to do so at present until further exploration work has been completed to determine the economic value of DR to the Group relative to the consideration that would be payable on exercise of the option.

 

 

 

5.   Receivables and prepayments

(In USD)	31 December 2023	31 December 2022
Current
Accrued interest income	59,321	57,114
Vareš Project prepayments and deposits	6,585,108	17,119,197
Unamortised deferral of day one fair value adjustment for Copper Stream	98,843	-
Taxes receivable	6,363,960	1,618,066
Other receivables	104,524	35,938
Non-Current
Unamortised deferral of day one fair value adjustment for Copper Stream	1,680,315	-
Total	14,892,071	18,830,315

 

Accrued interest income relates to interest earned on cash holdings. Of the total interest income recognised during the year of $1,567,464 (prior year: $334,497), $1,508,143 was received in cash during the year (prior year: $277,383) with the remaining $59,321 (prior year: $57,114) recognised as accrued interest income. $827,515 (prior year: $nil) has been capitalised within additions to the mine under construction asset.

Vareš Project prepayments and deposits represent advance payments in respect of equipment purchases, as well as mobilisation costs paid in respect of the mining services contractor equipment that had not reached site prior to the period end dates.

Copper Stream deposit was subject to a day 1 fair value adjustment of $1,871,124 with a corresponding day one deferral in other debtors, which will be amortised over the life of the stream. Amortisation at 31 December 2003 amounts to $91,966 (note 17), resulting in an unamortised balance of $1,779,158 at 31 December 2023 of which $98,843 is current.

The segmental analysis of receivables and prepayments is as follows:

31 December 2023

	Bosnia	Serbia	Corporate	Total
Accrued interest income	-	-	59,321	59,321
Prepayments and deposits	6,299,029	70,900	215,179	6,585,108
Unamortised deferral of day one fair value adjustment for Copper Stream	1,779,158	-	-	1,779,158
Taxes receivable	6,215,399	53,988	94,573	6,363,960
Other receivables	100,381	4,144	-	104,524
Total	14,393,967	129,031	369,073	14,892,071

 

31 December 2022

	Bosnia	Serbia	Corporate	Total
Accrued interest income	-	-	57,114	57,114
Prepayments and deposits	16,802,323	114,756	202,118	17,119,197
Taxes receivable	1,468,539	75,343	74,184	1,618,066
Other receivables	608	3,105	32,225	35,938
Total	18,271,470	193,204	365,641	18,830,315

 

 

 

 

 

 

 

 

 

 

6.   Borrowings and Derivative Liability

a)    Total borrowings and derivative liability

 

(In USD)	Orion Senior Secured Debt	Copper Stream	QRC Convertible Debt	Total Borrowings		Derivative Liability on QRC Convertible Debt
At 31 December 2020	-	-	(15,980,753)	(15,980,753)		(4,160,918)
Interest expense	-	-	(1,699,740)	(1,699,740)		-
Foreign Exchange gain	-	-	(232,240)	(232,240)		(104,823)
Payment of Interest	-	-	1,841,667	1,841,667		-
Revaluation of fair value embedded option	-	-	-	-		1,763,318
At 31 December 2021	-	-	(16,071,066)	(16,071,066)		(2,502,423)
Additions	(26,176,885)	-	-	(26,176,885)		-
Interest expense	(35,484)	-	(1,700,012)	(1,735,496)		-
Foreign Exchange gain	-	-	-	-		214,605
Payment of Interest	-	-	1,700,000	1,700,000		-
Revaluation on modification	-	-	(214,605)	(214,605)		-
Revaluation of fair value embedded option	-	-	-	-		(4,081,401)
At 31 December 2022	(26,212,369)	-	(16,285,683)	(42,498,052)		(6,369,219)
Additions	(58,560,421)	(22,500,000)	-	(81,060,421)		-
Interest expense	(12,999,260)	-	(1,718,284)	(14,717,544)		-
Foreign Exchange gain	-	-	-	-		-
Payment of Interest	-	-	1,895,000	1,895,000		-
Day one fair value adjustment	-	(1,871,124)	-	(1,871,124)		-
Fair value adjustment		(2,548,423)		(2,548,423)
Revaluation of fair value embedded option	-	-	-	-		(3,540,640)
At 31 December 2023	(97,772,050)	(26,919,547)	(16,108,967)	(140,800,564)		(9,909,859)

 

 

Year end balances are analysed below:

At 31 December 2022	Orion Senior Secured Debt	Copper Stream	QRC Convertible Debt	Total Borrowings		Derivative Liability on QRC Convertible Debt
Current liability	-	-	-	-		-
Non-current liability	(26,212,369)	-	(16,285,683)	(42,498,052)		(6,369,219)
	(26,212,369)	-	(16,285,683)	(42,498,052)		(6,369,219)

 

At 31 December 2023	Orion Senior Secured Debt	Copper Stream	QRC Convertible Debt	Total Borrowings		Derivative Liability on QRC Convertible Debt
Current liability	(30,177,441)	(1,086,789)	(16,108,967)	(47,373,197)		(9,909,859)
Non-current liability	(67,594,609)	(25,832,758)	-	(93,427,367)		--
	(97,772,050)	(26,919,547)	(16,108,967)	(140,800,564)		(9,909,859)

 

 

b)   Orion Senior Secured Debt

On 10 January 2022, the Group announced the completion of a $142.5m debt financing package ("Orion Debt Finance Package"), with Orion Resource Partners (UK) LLP ("Orion") comprising:

 

•           $120m Senior Secured Debt; and
•           $22.5m Copper Stream

 

Under the terms of this agreement, the Senior Secured Debt maturity date is 30 June 2027. Interest accrues daily at an annual rate equal to a margin of 7.5% plus the greater of (i) a floor of 0.26161% plus the CME Term SOFR for a period equal to three months and (ii) the floor of 0.26161%.  Interest is payable on each interest repayment date, on the final maturity date, and on any earlier date on which a loan is prepaid in full or in part.

 

The First Repayment Date is the earlier of the Project Completion Longstop Date of 30 June 2024 and the last business day of the quarter following the quarter in which the Project Completion Date falls.  The repayment schedule provides for the repayment of the loan in 10 equal quarterly installments in each of the 10 successive quarters, with the first such quarterly repayment occurring on the First Repayment Date and the repayment in each successive quarter occurring on the last Business Day of the relevant quarter.

 

The Orion Debt Finance Package contains covenants and restrictive covenants typical for a project financing, including in relation to financial reporting.  It also contains security customary for a project financing, principally security over the assets of Adriatic Metals BH and material project-related contracts held by the Adriatic Group.  A DSCR covenant of above 1.25x is included in the Orion Debt Finance Package.

 

Post year end, on 22 January 2024, the Group amended the terms of the original Senior Secured Debt agreement as below:

 

·      The Project Completion Longstop Date of 30 June 2024 is extended to 31 December 2024 and becomes the First Repayment Date;

·      A fee applicable to the amendment ("the Front End Fee") of $750,000 becomes payable immediately following the utilisation date for the fourth draw down and added to the principal amount of the loans then outstanding;

·      The Company is required to ensure that prior to 31 July 2024, the QRC Convertible Debt is finally, fully and irrevocably discharged or converted into equity without incurring financial indebtedness in relation to the same.

Secured Overnight Financing Rate ("SOFR") is a secured interbank overnight interest rate used as a reference rate by parties in commercial contracts, as an alternative to LIBOR which was discontinued in 2021. The CME SOFR is administered by the CME Group.

During 2023 the applicable CME Term SOFR has fluctuated between 4.560740% and 5.39482%, meaning that the total interest rate applicable has fluctuated between 12.32235% and 12.89482% during the year to 31 December 2023. The first DSCR testing period is expected to be late-2024, and six monthly thereafter.  The Company's forecasts show substantial headroom above the requirement of 1.25x.

 

During 2023, the Orion Senior Secured Debt second and third tranches totaling $60,000,000 were drawn net of associated $1,439,579 legal and other fees incurred by Orion as lender, with a net amount of $58,560,421 received. As at 31 December 2023, these Orion fees have been recognised as a deduction from the value of borrowings in accordance with IFRS 9, on the basis that they represent transaction costs directly attributable to the acquisition of the borrowings.

 

As a result of the total IFRS 9 deduction of $5,262,694, which will be amortised over the life of the facility using the effective interest rate method, the Orion Senior Secured Debt balance is reduced from $90,000,000 drawn down to $84,737,306. This impact will be reversed over the life of the facility as the deduction is unwound through amortisation of the deduction.

The Group is entitled to deduct the amount of any payment it makes to the Adriatic Foundation on behalf of the Lenders from any interest accrued in the last quarter of each year.

c)    Copper Stream

On 13 February 2023 the Company announced that all conditions precedent for the $22.5m Copper Stream had been satisfied and that the Copper Stream deposit funds had been received as a prepayment for the Copper Stream.

In accordance with the Copper Stream agreement signed on 8 January 2022, the Group will deliver to Orion copper warrants purchased on the London Metal Exchange with a value equal to 24.5% of the payable copper in concentrates sold at the official LME copper cash price. Orion will pay 30% of the value of copper warrants with the remaining 70% being credited to the prepayment. The agreement will be effective for an initial term of 40 years from the signing date and thereafter will automatically be extended for any successive 20 year additional periods unless there have been no active mining operations during the last 20 years of the initial term or throughout such additional periods, in which case the agreement will terminate at the end of the initial term or such additional period, as applicable. The agreement may also be terminated by the parties on mutual written consent or in the event of default.

The Group's obligations under the Copper Stream agreement are accounted for as a financial liability at fair value through profit or loss and comprise the following at 31 December 2023:

 

 

(In USD)	31 December 2023
Deposit funds received during the Year	22,500,000
Day one fair value adjustment in respect of future delivery of copper warrants	1,871,124
Fair value at initial recognition	24,371,124
Fair value adjustment at 31 December 2023	2,548,423
Balance at 31 December 2023	26,919,547

As the fair value of copper warrants depends on copper price volatilities and a risk-adjusted discount rate which are unobservable inputs, the financial liability above is classified within Level 3 of the fair value hierarchy.

A day one fair value adjustment has been made to recognise the initial fair value at the date on which the Copper Stream deposit was received during the Period. This adjustment has been deferred at 13^th February 2023 to reflect the fact that it will be amortised over the Vareš Mine production period which had not yet started at that date.

The valuation of the Copper Stream financial liability was prepared by management on a nominal basis.  The assumptions used were the life of mine, copper production, the nominal copper forward price curve and the nominal discount rate based on the Company's weighted average cost of capital.

The following table contains sensitivities showing the impact of a 10%, 20% and 25% discount factor compared with the companies weighted average cost of capital (WACC). The company used 20.5% for the calculation of the day one fair value adjustment and 18.9% for the fair value adjustment at 31 December 2023.

 

Discount Rate	15.00%	20.00%	25.00%
Day one fair value adjustment	29,738,197	24,768,916	21,015,051
At 31 December 2023	32,311,242	25,715,201	21,068,867

 

d)   QRC convertible debt

The Company issued $20m 8.5% convertible debt through a deed of covenant dated 30 November 2020. The debt was convertible into fully paid equity securities in the share capital of the issuer, subject to the conditions of the debt issue. The debt was converted into shares in March 2024.

Modification

In December 2022, concurrently with the first draw down of the Orion Senior Secured Debt, Adriatic and QRC executed an amendment to the 30 November 2020 deed of covenant, providing that the cash coupon had been increased from 8.5% to 9.5% per annum effective from 10 January 2023. The amendment also confirmed that Adriatic was not required to redeem the debt following completion of the Orion project financing. This was a change from the original terms of the convertible debt which provided that where the Company secured a project financing before the final maturity date of the debt, the bondholder could require the issuer to redeem the debt at its principal amount together with the accrued but unpaid interest to such date.  All other terms of the original deed remained unchanged.

Management considered the quantitative and qualitative nature of the amendment and concluded the changes constituted a non-substantial modification under IFRS 9 accounting standards.

The carrying amount of the liability was adjusted to the present value of the modified cashflows and a loss was recognised in the profit or loss in the year ended 31 December 2022. Subsequent interest expense was calculated based on the updated internal rate of return.

Key terms and conditions of the debt agreement dated 30 November 2020 between the Company and QRC are provided below.

Voluntary conversion

The debt shall be convertible into equity securities of the Company at the option of the bondholder at any time from the issue date 1 December 2020 until 30 November 2024. The number of equity securities to be issued will be determined by the conversion price in effect on the relevant conversion date. The initial conversion price is AUD 2.7976 per ordinary share.

Redemption and Purchase

a) Final redemption: Where the debt is not converted, redeemed, purchased, or cancelled by the Company prior to the final maturity date, the debt shall be redeemed by the Company at its principal amount;

b) Redemption at the option of the issuer: Option to the issuer to redeem all the debt outstanding, prior to the final maturity date, at its principal amount together with accrued but unpaid interest to such date if:

 

-     At any time prior to maturity date, the volume weighted average price of the equity securities for 20 consecutive days has exceeded 125% of the conversion price; or

-     The issuer delivers an optional redemption notice that contains an optional redemption date which falls on or after the third anniversary of the issue date;

c) Redemption at the option of bondholder if a change of control event occurs: the bondholder receives an option to require the issuer to redeem the debt prior to the final maturity date. In the event of a change of control, the debt shall be redeemed at:

-     130% of the principal amount, if the change of control event occurs on or prior to the second anniversary of the issuance date, together with accrued and unpaid interest till such date. This redemption ratio is no longer applicable as no change of control event occurred on or prior to the second anniversary of the issuance date; or

-     115% of the principal amount, if the change of control event occurs after the second anniversary of issuance date, together with accrued and unpaid interest till such date

d) Redemption at the option of the debt holder in the event of project financing: In any event where the Company secures a project financing before the final maturity date of the debt, the debt holder can require the issuer to redeem the debt at its principal amount together with the accrued but unpaid interest to such date. The amendment in December 2022 removed this option.

e)   Derivative liability on QRC convertible debt

QRC's option to convert the debt into equity and the associated potential issue of shares gave rise to a variable amount of cash receivable by the Company and therefore the debt fails to meet the requirements to be classified as equity. The conversion feature of the debt has therefore been accounted for as a derivative liability, with the value of the conversion feature dependent on factors as set out below.

Management engaged external experts to review the terms of the agreement and perform a valuation. It was concluded that the call option in the hands of the bondholder satisfied the conditions stipulated by IFRS 9 Financial Instrument - Recognition and Measurement for the recognition of a derivative liability in the Group and Company accounts and required a separate fair valuation.

The redemption options in the hands of the bondholder were concluded to fall outside the exemptions of IFRS 9 and to be closely related to the debt host contract. Therefore, the redemption options need not be separated from the debt host contract and hence need not be valued separately. The Group has accounted for both the embedded option and liability at fair value through profit and loss and  at amortised cost respectively.

Valuation Model

The Black Scholes model was chosen as the most appropriate pricing model to value QRC's option to convert the debt into equity and the valuation was updated at 31 December 2023 and 31 December 2022. The main assumptions and inputs used in the options pricing model were as follows:

−     Dividend yield - assumed to be nil because the Company has not declared or paid any dividends in prior years on ordinary shares.

−     Strike price - The initial conversion price of AUD 2.7976 per ordinary share.

−     Expected term - Judgement applied to assign probability to the various redemption and put options in the contract. Expected term of redemption calculated as 0.92 years from the valuation date.

−     Expected volatility - Weekly volatility over the 0.92 years (48 weeks) was calculated as 37.10% prevailing on ASX as of the valuation date.

−     Risk-free rate - Risk free yield obtained from Australian Treasury bond issues converted into continuous compound yields.

−     Value of underlying common stock price - The closing price of ordinary shares AUD 4.01 on the valuation date on the ASX.

Using the assumptions set out above, the Black Scholes value of the call option in the hands of the debt holder is $9,909,859.

Sensitivity Analysis

Inputs to the Black Scholes model are based on management estimates regarding probabilities of future events. The results are sensitive to changes in key assumptions, namely the expected term of the debt and the volatility of the Company's share price.

 

Sensitivity of the debt value to reasonably possible changes in the assumptions of expected term and volatility of the Company's share price are as follows:

 

		Change in volatility of Company's share price
		30%	Unchanged (37.10%)	45%
Change in expected term	26 Weeks	$0.8m Decrease	$0.6m Decrease	$0.4m Decrease
	Unchanged (48 weeks)	$0.3m Decrease	-	$0.6m Increase
	65 Weeks	$0.1m Increase	$0.5m Increase	$1.0m Increase

 

 

 

7.   Property, plant and equipment

 

Cost (In USD)	Note	Land & Buildings	Plant & Machinery	Mine under Construction	Total
31 December 2021		1,110,227	852,631	28,446,606	30,409,464
Additions		3,670,590	1,170,962	38,926,044	43,767,596
Recognition of rehabilitation provision		-	-	4,431,212	4,431,212
Foreign exchange difference		-	2,546	-	2,546
31 December 2022		4,780,817	2,026,139	71,803,862	78,610,818
Additions		828,149	2,061,572	119,035,126	121,924,847
Capitalised net interest	6,17	-	-	12,171,745	12,171,745
Capitalised depreciation	10	-	-	2,006,890	2,006,890
Reassessment of rehabilitation provision	22	-	-	(757,425)	(757,425)
31 December 2023		5,608,966	4,087,711	204,260,198	213,956,875

 

Additions of $121,924,847 (31 December 2023: $43,767,596) excludes prior year prepaid capex of $17,119,197 and creditor balances of $10,397,180 (31 December 2022: 1,535,701).  The investment in purchase of property, plant and equipment of $94,408,470 (31 December 2022: $42,231,895) in the consolidated statement of cash flows excludes these creditor balances.

Capitalised interest consists of accrued interest expense in the year of $12,999,260 on the Orion Senior Debt Finance Package as set out in note 6, less $827,515 interest income, as set out in note 17.

 

Depreciation (in USD)
31 December 2021	47,946	291,670	192,074	531,690
Charge for the year	13,173	219,033	-	232,206
Foreign exchange difference	-	(13,641)	-	(13,641)
31 December 2022	61,119	497,062	192,074	750,255
Charge for the year	23,892	452,058	-	475,950
31 December 2023	85,011	949,120	192,074	1,226,205
Net Book Value (in USD)
31 December 2022	4,719,698	1,529,077	71,611,788	77,860,563
31 December 2023	5,523,955	3,138,591	204,068,124	212,730,670

 

Mine under construction amounts relate to the Vareš Project, located in Bosnia and Herzegovina. The balance of exploration and evaluation asset was transferred to mine under construction at the completion of the Feasibility Study in 2021.

The segmental analysis of property, plant and equipment net book value is as follows:

 

Net Book Value (In USD)	Land & Buildings	Plant & Machinery	Mine under Construction	Total
31 December 2022
Bosnia and Herzegovina	4,703,342	1,420,191	71,611,788	77,735,321
Serbia	-	89,837	-	89,837
Corporate	16,356	19,049	-	35,405
Total	4,719,698	1,529,077	71,611,788	77,860,563
31 December 2023
Bosnia and Herzegovina	5,509,956	2,990,655	204,068,124	212,568,735
Serbia	-	102,119	-	102,119
Corporate	13,999	45,817	-	59,816
Total	5,523,955	3,138,591	204,068,124	212,730,670

 

 

8.   Exploration and evaluation assets

 

Cost (In USD)	Raska Project in Serbia	Total
31 December 2021	31,901,709	31,901,709
Foreign exchange difference	(214,750)	(214,750)
Impairment	(23,186,959)	(23,186,959)
31 December 2022	8,500,000	8,500,000
31 December 2023	8,500,000	8,500,000
Net Book Value
31 December 2022	8,500,000	8,500,000
31 December 2023	8,500,000	8,500,000

 

Exploration and evaluation assets relate to the Raska Project in Serbia.

The Raska exploration and evaluation balance at 31 December 2021 of $31,901,709 mainly reflects the $31,804,990 value recorded on the acquisition of the Tethyan group, by which the Company acquired the Kremice, Kizevak and Sastavci licences.

In late 2022 the Company carried out a strategic review of the Raska Project which resulted in changes to the development plan for the project. Focusing its resources on Vareš Project construction and on exploration at Rupice and Rupice NW meant that resources available for exploration in Serbia would be more focused and limited in 2023, with development taking place over a longer horizon, including advancing new prospects in the Company's tenement area during 2023 to complement Kizevak and Sastavci. In view of the longer horizon planned, the Company determined that it was appropriate to recognise an impairment of $23.2m against the project's carrying amount, reducing the carrying amount to $8.5m at 31 December 2022.

During 2023, there was successful intersection of mineralization at several of the new prospects from trench, surface and drill core sampling, while drilling results from the Rudnica prospect indicated the potential for an increase in the size of the historic Rudnica porphyry deposit. Nonetheless, further work is required before a maiden mineral resource may be established. All permits remain in good standing.

The Raska Project is managed as a single project and if advanced to the production stage, it is anticipated that there would be a single processing plant. The project is therefore treated as a single cash generating unit, with the post-impairment value of $8,500,000 attributed to the Raska Project as a whole instead of to specific tenements.

No further indicators of impairment or reversal of previous impairment have been identified in the year to 31 December 2023, the carrying value $8,500,000 remains unchanged from prior year.

 

9.   Accounts payable and accrued liabilities

 

(In USD)	31 December 2023	31 December 2022
Trade payables	13,719,583	2,585,755
Accrued liabilities	3,415,895	2,617,585
Other payables	537,342	138,400
	17,672,820	5,341,740

Trade payables increased during the year due to the increased activity on development/construction phase of Vareš project which went into production phase in Q1 2024.

 

10. Right-of-use assets and lease liabilities

Set out below are the carrying amounts of right-of-use assets accounted for in accordance with IFRS 16 and the movements during the year:

 

(In USD)	Land & buildings	Plant & Machinery	Total
31 December 2021	733,246	-	733,246
Additions	297,468	9,064,201	9,361,669
Modification	26,404	-	26,404
Depreciation	(155,602)	(904,115)	(1,059,717)
Foreign exchange difference	(107,937)	170	(107,767)
31 December 2022	793,579	8,160,256	8,953,835
Additions	1,097,289	599,552	1,696,841
Depreciation	(346,201)	(2,050,881)	(2,397,082)
Foreign exchange difference	64,327	1,905	66,232
31 December 2023	1,608,994	6,710,832	8,319,826

 

The largest right-of-use asset relates to mining equipment delivered under a five year mining services contract with Nova Mining & Construction d.o.o. Remaining leases relate to administrative buildings and coresheds for the Group.

Depreciation relating to right-of-use assets includes capitalised depreciation of $2,006,890 taken to Mine under construction, as set out in note 7 (31 December 2022: $nil).  The corresponding charge in the income statement is $390,192 (31 December 2022: $1,059,717).

 

Set out below are the carrying amounts of lease liabilities and the movements during the year:

(In USD)	Land & buildings	Plant & Machinery	Total
31 December 2021	767,098	-	767,098
Additions	297,468	9,062,598	9,360,066
Modification	16,850	-	16,850
Interest expense	130,771	458,606	589,377
Payments	(270,236)	(2,209,332)	(2,479,568)
Foreign exchange difference	(57,590)	(9,492)	(67,082)
31 December 2022	884,361	7,302,380	8,186,741
Additions	981,918	599,552	1,581,470
Interest expense	104,598	998,720	1,103,318
Payments	(465,643)	(2,356,966)	(2,822,609)
Foreign exchange difference	85,262	2,385	87,647
31 December 2023	1,590,496	6,546,071	8,136,567

 

Of the total amount at 31 December 2023, $1,495,296 (31 December 2022: $2,379,000) is recognised as a current liability and the remainder $6,641,271 is shown within non-current liabilities (31 December 2022: $5,807,741). The maturity analysis of contractual undiscounted cash-flows is in note 12b.

The following are the amounts recognised in the statement of comprehensive income:

Cost (In USD)	12 months to December 2023	12 months to December 2022
Depreciation expense of right-of-use assets	2,397,082	1,059,717
Less: right-of-use asset depreciation capitalised to mine under construction	(2,006,890)	-
Interest expense on lease liabilities	1,103,318	589,377
Total amount recognised in profit or loss	1,493,510	1,649,094

 

 

The following are the amounts recognised in statement of cashflow:

 

Cost (In USD)	12 months to December 2023	12 months to December 2022
Capital payments on leases	(1,719,291)	(1,890,191)
Interest paid on leases	(1,103,318)	(589,377)
Total amount paid in respect of lease liabilities	(2,822,609)	(2,479,568)

 

 

11. Financial instruments

IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy, depending on whether the fair value measurements are derived from:

·     quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

·     inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); or

·     inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction. Set out below are the financial instruments held at amortised cost and fair value through profit or loss and their fair value measurement hierarchy.

See note referenced for further detail on inputs to fair value for each financial instrument.

At 31 December 2023 (In USD)	Note	At amortised cost	At fair value through profit or loss	Total	Fair Value Hierarchy
Financial assets
Cash and cash equivalents		44,856,215	-	44,856,215	N/A
Accrued interest receivable	5	59,321	-	59,321	N/A
Total financial assets		44,915,536	-	44,915,536
Financial liabilities
Accounts payable and accrued liabilities	9	17,672,820	-	17,672,820	N/A
Borrowings	6	113,881,017	26,919,547	140,800,564	Level 3
Derivative liability	6	-	9,909,859	9,909,859	Level 3
Lease liabilities	10	8,136,567	-	8,136,567	Level 3
Total financial liabilities		139,690,404	36,829,406	176,519,810
Net financial assets/(liabilities)		(94,774,868)	(36,829,406)	(131,604,274)

 

At 31 December 2022 (In USD)	Note	At amortised cost	At fair value through profit or loss	Total	Fair Value Hierarchy
Financial assets
Cash and cash equivalents		60,585,277	-	60,585,277	N/A
Accrued interest receivable	5	35,938	-	35,938	N/A
Total financial assets		60,621,215	-	60,621,215
Financial liabilities
Accounts payable and accrued liabilities	9	5,341,740	-	5,341,740	N/A
Borrowings	6	42,498,052	-	42,498,052	Level 3
Derivative liability	6	-	6,369,219	6,369,219	Level 3
Lease liabilities	10	8,186,741	-	8,186,741	Level 3
Total financial liabilities		56,026,533	6,369,219	62,395,752
Net financial assets/(liabilities)		4,594,682	(6,369,219)	(1,774,537)

 

12. Financial risk management

a.   Credit risk

Credit risk arises from the risk that a counter party will fail to perform its obligations. Financial instruments that potentially subject the Group to concentrations of credit risk consist of cash and cash equivalents and receivables (excluding prepayments).

Due to the nature of the business, the Group's exposure to credit risk arising from routine operating activities is currently inherently low. However, the Audit & Risk Committee considers the risks associated with new material counterparties where applicable to ensure the associated credit risk is of an acceptable level.

The total carrying amount of cash and cash equivalents and receivables represents the Group's maximum credit exposure.

The Group's cash is held in major UK, Jersey, Australian, Serbian and Bosnian financial institutions, and as such the Group is exposed to credit risks of those financial institutions. The Group's main cash holdings are located in UK and Jersey A1 or A2 rated institutions and as such are considered to have low credit risk.

The Group's receivables primarily relate to value added tax receivables due from governments in the UK and Bosnia and Herzegovina. These amounts are excluded from the definition of financial instruments in the accounts and in any event are considered to have low credit risk. Of the remaining receivables and prepayments, any changes in management's estimate of the recoverability of the amount due will be recognised in the period of determination and any adjustment may be significant.

The Board of Directors, with input from the Audit & Risk Committee, is ultimately responsible for monitoring exposure to credit risk on an ongoing basis and does not consider such risk to be significant at this time. As such, the Group considers all of its financial assets to be fully collectible.

b.   Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses.

The following table analyses the Group's financial liabilities and derivatives into the relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The contractual gross financial liabilities shown below are undiscounted estimated cash outflows which, where applicable, include estimated future interest payments, and certain amounts therefore differ from the amounts presented in the consolidated financial statements and elsewhere in the accompanying notes.

 

 

 

At 31 December 2023 (In USD)	Within 30 days	30 days to 6 months	6 to 12 months	Over 12 months
Accounts payable and accrued liabilities	17,672,820	-	-	-
Borrowings	-	-	47,373,197	93,427,367
Derivative liability	-	-	9,909,859	-
Lease liabilities	124,608	623,040	747,648	7,946,031
	17,797,428	623,040	58,030,704	101,373,398

 

At 31 December 2022 (In USD)	Within 30 days	30 days to 6 months	6 to 12 months	Over 12 months
Accounts payable and accrued liabilities	5,341,740	-	-	-
Borrowings	-	-	-	46,316,489
Derivative liability	-	-	-	6,369,219
Lease liabilities	198,250	991,250	1,189,500	7,995,030
	5,539,990	991,250	1,189,500	60,680,738

 

 

c.   Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the value of the Group's financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximising long term returns.

The Group conducts development and exploration projects in Bosnia and Herzegovina and in Serbia. As a result, a portion of the Group's expenditures, receivables, cash and cash equivalents, accounts payable and accrued liabilities are denominated in Bosnian Marks, Serbian Dinar, Great Britain Pounds, Australian Dollars, and Euros and are therefore subject to fluctuation in exchange rates.

At 31 December 2023, a 10% change in the exchange rate between USD and the Euro, Bosnian Mark and Serbian Dinar, which is a reasonable estimation of volatility in exchange rates, would have an impact of approximately $1.4m on the Group's total comprehensive loss, and approximately $1.6m on the balance of cash and cash equivalents.

d.   Fair values

The fair value of cash, receivables, accounts payable and accrued liabilities approximate their carrying amounts due to the short term nature of the instruments.

As set out in note 11, fair value measurements recognised in the consolidated statement of financial position subsequent to their initial fair value recognition can be classified into Levels 1 to 3 based on the degree to which fair value is observable.

There were no transfers between any levels of the fair value hierarchy in the current or prior years.

e.   Capital management

The Group's objectives in managing capital are to safeguard its ability to operate as a going concern while pursuing exploration and development and opportunities for growth through identifying and evaluating potential acquisitions of assets or businesses. The Group defines capital as the equity attributable to equity shareholders of the Group which at 31 December 2023 was $110,657,966 (31 December 2022: $107,903,026).

The Group sets the amount of capital in proportion to its risk and corporate growth objectives. The Group manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets.

See note 6 for details of the Group's borrowings and derivative liability.

 

 

13. Equity

A Authorised share capital

The authorised share capital of the Company consists of an unlimited number of voting ordinary shares with a nominal value of £0.013355.

B Common shares issued

	Ordinary Shares (Number)	Share Capital (In USD)	Share Premium (In USD)	Merger Reserve (In USD)
31 December 2021	266,073,240	5,279,546	143,259,675	23,019,164
Shares issued as consideration for acquisition of subsidiary	332,000	5,579	-	478,566
Share Issue costs	-	-	(86,199)	-
Shares issued on exercise of options and performance rights	6,341,052	91,224	656,155	-
31 December 2022	272,746,292	5,376,349	143,829,631	23,497,730
Issue of share capital	14,807,632	251,055	31,427,918	-
Share Issue costs	-	-	(2,111,505)	-
Shares issued on exercise of options and performance rights	5,180,495	85,378	999,562	-
31 December 2023	292,734,419	5,712,782	174,145,606	23,497,730

The average price paid for shares issued in the year was $1.64 per share (31 December 2022: $0.19 per share).

C Share options and performance rights

All share options and performance rights are issued under the Group's share option plan.

The following table summarises movements of the Company's share option plan:

	Weighted average exercise price of options (USD)	Number of options	Number of performance rights	Total options and performance rights
31 December 2021	0.39	12,212,480	990,000	13,202,480
Granted	N/A	-	548,012	548,012
Exercised	0.12	(7,016,600)	(290,000)	(7,306,600)
Expired	1.28	(21,580)	(306,418)	(327,998)
31 December 2022	0.46	5,174,300	941,594	6,115,894
Granted	N/A	-	1,811,174	1,811,174
Exercised	0.13	(5,018,260)	(588,194)	(5,606,454)
Expired	1.47	(14,940)	(102,503)	(117,443)
31 December 2023	2.25	141,100	2,062,071	2,203,171

 

On exercise, holders of performance rights are required to pay £0.013355 for each performance right exercised, being the nominal value of one ordinary share.

No options were granted during the year or prior year. Performance rights granted in the year were valued using the Black-Scholes method (see note 13F).

Options outstanding:

 

 

At 31 December 2023
Grant date	Options outstanding	Exercise price	Weighted average remaining contractual life (Years)	Expiry date	Number exercisable
8 October 2020	91,300	£1.80	0.2	28 February 2024	91,300
8 October 2020	24,900	£2.22	0.2	7 March 2024	24,900
8 October 2020	24,900	£1.20	0.6	19 August 2024	24,900
	141,100				141,100

 

At 31 December 2022
Grant date	Options outstanding	Exercise price	Weighted average remaining contractual life (Years)	Expiry date	Number exercisable
27 April 2018	4,000,000	A$0.20	0.5	1 July 2023	4,000,000
8 October 2020 (1)	3,320	£1.06	-	5 December 2022	3,320
8 October 2020	29,880	£1.06	0.1	3 January 2023	29,880
8 October 2020	91,300	£1.80	1.2	28 February 2024	68,060
8 October 2020	24,900	£2.22	1.2	7 March 2024	14,940
8 October 2020	24,900	£1.20	1.6	19 August 2024	14,940
6 November 2020	1,000,000	A$2.20	0.9	7 November 2023	1,000,000
	5,174,300				5,131,140

 

(1)   The conditions to exercise were met prior to the expiry date of 5 December 2022 and the shares were subsequently issued on 17 January 2023.

 

 

Performance rights outstanding:
At 31 December 2023   Grant date	Performance rights outstanding	Weighted average remaining contractual life (Years)	Expiry date	Number exercisable
17 February 2022	100,000	0.0	31 December 2023	100,000
17 February 2022	100,000	0.5	30 June 2024	100,000
17 February 2022	23,765	2.0	31 December 2025	14,537
5 April 2022	100,000	0.0	31 December 2023	100,000
5 April 2022	25,000	1.0	31 December 2024	-
23 February 2023	225,189	3.0	31 December 2026	78,193
24 May 2023	142,778	4.0	1 January 2028	-
24 May 2023	434,272	4.4	24 May 2028	-
18 September 2023	911,067	4.4	24 May 2028	-
	2,062,071			392,730

 

At 31 December 2022   Grant date	Performance rights outstanding	Weighted average remaining contractual life (Years)	Expiry date	Number exercisable
6 August 2020	500,000	2.0	31 December 2024	-
17 February 2022	100,000	1.0	31 December 2023	-
17 February 2022	100,000	1.5	30 June 2024	-
17 February 2022	41,594	3.0	31 December 2025	-
5 April 2022	100,000	1.0	31 December 2023	-
5 April 2022	50,000	2.0	31 December 2024	-
5 April 2022	50,000	3.0	31 December 2025	-
	941,594			-

 

D Warrants reserve

Warrants were issued as part of Tethyan Resource Corp acquisition.

The following table presents movements in the Group's warrants reserve:

(In USD)			Warrants reserve
31 December 2021			2,743,303
Exercise of warrants			-
Expired warrants			-
31 December 2022			2,743,303
Exercise of warrants			-
Expired warrants			-
31 December 2023			2,743,303
At 31 December 2023   Grant date	Warrants outstanding	Exercise Price		Weighted average remaining contractual life (Years)	Expiry date		Number exercisable
29 November 2019	2,651,020	£0.88		0.1	30 January 2024		2,651,020
	2,651,020						2,651,020
At 31 December 2022   Grant date	Warrants outstanding	Exercise Price		Weighted average remaining contractual life (Years)	Expiry date		Number exercisable
29 November 2019	2,651,020	£0.88		1.1	30 January 2024		2,651,020
	2,651,020						2,651,020

E Share-based payment reserve

The following table presents changes in the Group's share-based payment reserve during the year ended 31 December 2023:

(In USD)	Share-based payment reserve
31 December 2021	5,778,882
Exercise of share options and performance rights	(2,130,739)
Issue of performance rights	873,155
Short term incentive plan awards	576,000
Expiry/cancellation of share options and performance rights	(153,862)
31 December 2022	4,943,436
Exercise of share options and performance rights	(2,337,235)
Short term incentive plan awards	(576,000)
Issue of performance rights	1,644,777
Expiry/cancellation of share options and performance rights	(83,758)
31 December 2023	3,591,220

By agreement with the Company, in the prior year certain members of the Company's executives elected to reinvest their short term incentive plan cash bonuses in respect of performance in the year ended 31 December 2022. In lieu of paying such cash bonuses, on 13 February 2023 the Company issued an aggregate of 258,760 new ordinary shares at an issue price of £1.70 per share. This transaction falls under the scope of IFRS 2 and for the year ended 31 December 2022, $576,000 has been recognised in the share-based payment reserve (current year; nil).

 

F Share-based payment expense

During the year ended 31 December 2023; the Group recognised share-based payment expenses of $1,561,020 (31 December 2022: $1,295,293).

(In USD)	Year ended  31 December 2023	Year ended  31 December 2022
Awards and expiry/cancellations during the year
Issue of options and performance rights	934,674	367,525
Short term incentive plan awards	-	576,000
Expiry/cancellation of options	(79,776),	(3,971)
	854,898	939,554
Awards and expiry/cancellations relating to prior years awards
Issue of options and performance rights	710,104	505,630
Expiry/cancellation of options	(3,982)	(149,891)
	706,122	355,739
	1,561,020	1,295,293

The issue of options and performance rights gives rise to a share-based payment expense which is based on the fair value of the share-based payment compensation, which is recognised over the expected vesting period.

The fair value of the share-based compensation was estimated on the dates of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	Year ended 31 December 2023	Year ended 31 December 2022
Risk-free interest rate	3.01% - 3.93%	0.33% -1.31%
Expected volatility (1)	39% - 56%	33% - 36%
Expected life (years)	3.85-5.01	1.7 - 3.9
Fair value per performance right	$1.03 - $2.23	$1.50 - $1.79

⁽¹⁾ Expected volatility is derived from the Company's historical share price volatility.

All options and performance rights have both market and non-market vesting conditions with the exception of those issued to Non-Executive Directors in prior periods. Non-market vesting conditions include Group and individual performance targets such as permitting milestones, exploration drilling rates or completion of business improvement projects. Details of the vesting condition relating to options and performance rights issued to executive Directors are included in the Remuneration & Nomination Committee Report.

 

G Per share amounts

	Year ended 31 December 2023	Year ended 31 December 2022
Loss for the year attributable to owners of the parent equity (In USD)	28,932,859	47,142,818
Weighted average number of common shares for the purposes of basic loss per share	282,504,794	267,970,085
Weighted average number of common shares for the purposes of diluted loss per share	282,504,794	267,970,085
Basic loss per share (cents)	(10.24)	(17.59)
Diluted loss per share (cents)	(10.24)	(17.59)

As at 31 December 2023, there are 2,792,478 potentially dilutive share options (31 December 2022: 14,201,426 potentially dilutive share options) which were not included in the calculation of diluted earnings per share as their conversion to ordinary shares would have decreased the loss per share.

H Foreign currency translation reserve

(In USD)	Foreign Currency Translation Reserve
31 December 2021	1,073,214
Other comprehensive income	187,119
31 December 2022	1,260,333
Other comprehensive income	50,372
31 December 2023	1,310,705

I Cash flow from financing activities

In the year to 31 December 2023, net cash flow proceeds from the issue of ordinary shares in the year were $32,767,588 (31 December 2022: $747,379). Transaction costs arising from equity financing activities totaled $2,111,505 (31 December 2022: $86,199), as set out in note 13B.

14. Taxation

A Current taxation

The tax credit/(charge) for the year comprises:

(In USD)	Year ended 31 December 2023	Year ended 31 December 2022
Current tax expense	-	-
Prior year tax expense	-	-
Overseas tax	-	-
Deferred tax expense	-	-
Adjustments to deferred tax liability	-	-
Total tax credit/(charge)	-	-

The table below reconciles the tax credit/(charge) on the Group's loss for the year with the standard rate of corporation tax in the United Kingdom:

(In USD)	Year ended 31 December 2023	Year ended 31 December 2022
Loss before tax	28,932,859	47,142,818
Tax credit on loss at standard UK rate of 23.52% (2022 - 19%)	6,805,008	8,957,135
Effects of:
Expenses not deductible for tax purposes	(1,463,970)	(4,405,522)
Income not taxable	58,545
Effects of overseas tax rates	(1,889,159)	(525,663)
Unrecognised taxable losses and timing differences	(3,510,424)	(4,025,950)
Total income taxes	-	-

B Deferred tax

Deferred tax assets on certain corporation tax losses and other short-term temporary differences totaling $75.6m (31 December 2022: $56.1m) have not been recognised because of uncertainty regarding recoverability against future taxable profits.  These assets will be recognised if utilization of the losses and other temporary differences becomes probable.

 

(In USD)	31 December 2023	31 December 2022
UK	44,923,652	37,864,738
Bosnia and Herzegovina	17,094,404	6,808,636
Serbia	13,582,218	11,377,330
	75,600,274	56,050,704

 

15. Exploration activities expensed

(In USD)	Year ended 31 December 2023	Year ended 31 December 2022
Exploration activities expensed	2,090,498	1,361,548

 

Exploration activities expensed during the year represent costs incurred at the Raska Project, for which a JORC-compliant resource has not yet been established.

 

16. General and administrative expenses

(In USD)	Note	Year ended 31 December 2023	Year ended 31 December 2022
Wages and salaries		6,459,385	4,446,812
Consultancy fees		1,128,926	1,009,655
Cash remuneration in respect of qualifying services		7,588,311	5,456,467
Professional fees		2,810,932	892,886
Amortisation	10	390,192	1,059,717
Depreciation	7	475,950	232,206
Audit fee		330,069	194,600
Non audit services		38,900	45,980
Marketing		557,497	777,612
Stock exchange fees		172,652	188,862
Property Costs		1,714,045	412,292
IT expense		609,299	218,407
Insurance		339,967	225,556
Transportation costs		1,312,956	324,626
Other costs		889,157	610,573
		17,229,927	10,639,784

 

17. Finance income and expense

(In USD)	Note	Year ended 31 December 2023	Year ended 31 December 2022
Interest income		1,567,464	334,497
Foreign exchange gain		208,826	-
Interest capitalised within property, plant and equipment	7	(827,515)	-
Finance income		948,775	334,497

Interest income of $827,515 above and accrued interest expense of $12,999,260 on the Orion Senior Debt Finance Package has been capitalised within additions to the mine under construction asset, a net capitalised amount of $12,171,745, as shown in note 7.

Interest income relates to interest earned on cash holdings.

(In USD)	Note	Year ended 31 December 2023	Year ended 31 December 2022
Interest expense	6	1,718,284	1,890,937
Interest expense on lease liabilities	10	1,103,318	589,377
Amortisation of day one fair value gain on Copper Stream	5	91,966	-
Fair value Copper Stream liability revaluation	6	2,548,423	-
Foreign exchange loss		-	4,592,379
Finance expense		5,461,991	7,072,693

 

$1,718,284 of interest expense above, as shown in note 6, relates to the QRC convertible bond. See note 6 d) for further details.

18. Segmental information

The segmental analysis of the Group's loss after tax and movement in non-current assets is as follows:

 

	Year ended 31 December 2023				Year ended 31 December 2022
(In USD)	Bosnia	Serbia	Corporate	Total	Bosnia	Serbia	Corporate	Total
Exploration costs	-	(2,090,498)	-	(2,090,498)	(775)	(1,360,773)	-	(1,361,548)
General and administrative expenses	(9,311,012)	(2,058,972)	(5,859,942)	(17,229,927)	(3,444,901)	(1,203,301)	(5,991,582)	(10,639,784)
Share-based payment expense	-	-	(1,561,020)	(1,561,020)	-	-	(1,295,293)	(1,295,293)
Exploration and evaluation impairment	-	-	-	-			(23,186,959)	(23,186,959)
Other income	-	-	2,442	2,442	-		9,024	9,024
Operating Loss	(9,311,012)	(4,149,470)	(7,418,520)	(20,879,003)	(3,445,676)	(2,564,074)	(30,464,810)	(36,474,560)
Finance income	-	-	948,775	948,775	-	-	334,497	334,497
Finance expense	(1,055,737)	(28,394)	(4,377,860)	(5,461,991)	(735,100)	(64,253)	(6,273,340)	(7,072,693)
Revaluation of derivative liability	-	-	(3,540,640)	(3,540,640)	-	-	(4,081,401)	(4,081,401)
Revaluation of deferred consideration	-	-	-	-	-	-	151,339	151,339
Loss before taxation	(10,366,749)	(4,177,864)	(14,388,245)	(28,932,859)	(4,180,776)	(2,628,327)	(40,333,715)	(47,142,818)
Tax charge	-	-	-	-	-	-	-	-
Loss for the year	(10,366,749)	(4,177,864)	(14,388,245)	(28,932,859)	(4,180,776)	(2,628,327)	(40,333,715)	(47,142,818)

 

	Year Ended 31 December 2023				Year Ended 31 December 2022
(In USD)	Bosnia	Serbia	Corporate	Total	Bosnia	Serbia	Corporate	Total
Purchase of mining under construction assets	108,637,946	-	-	108,637,946	37,390,342	-	-	37,390,342

 

 

19. Other income

 

(In USD)	Year ended 31 December 2023	Year ended 31 December 2022
Recharge of corporate office facilities and services	2,442	9,024
	2,442	9,024

Recharge of corporate office facilities and services relates to shared facilities of the Company's registered UK office address. See related party disclosures for further details.

 

20. Related party disclosures

A Related party transactions

The Group's related parties include key management personnel, companies which have directors in common and their subsidiaries and any entities over which the Company may exert significant influence. The Company has identified the following related parties:

- Swellcap Limited, an entity controlled by Paul Cronin;

- Black Dragon Gold Corp, an entity of which Paul Cronin is the Non Executive Chairman and substantial shareholder;

- Legal Solutions d.o.o., an entity of which Sanela Karic is Chief Executive Officer and substantial shareholder;

- OMF Fund III (F) Ltd an entity controlled by Orion Resource Partners (UK) LLP, a major shareholder in Adriatic Metals PLC and provider of the Senior Secured Debt to Adriatic Metals Trading and Finance Ltd.;

- Ventura Trustees Limited provides administration and accountancy services to Adriatic Metals Trading and Finance Ltd. Darren English and Stuart Hodgson are directors, and Paulina Harvey is an employee, of Ventura Trustees Limited, in which capacity they are also directors of subsidiary Adriatic Metals Trading and Finance Ltd.,

- Baccata Secretaries Limited provides company secretarial services to Adriatic Metals Trading and Finance Ltd. Darren English and Stuart Hodgson are directors of Baccata Secretaries Limited, in which capacity Darren English is a director, and Stuart Hodgson was a director until his resignation during the year, of Adriatic Metals Trading and Finance Ltd.; and

- The Adriatic Foundation is a not-for-profit trust which was created in Bosnia and Herzegovina with the objective of supporting the communities around the Vareš Project. Adriatic Metals PLC provided the initial funding required for the formation of the Foundation. The Company has the ability to appoint the Board of Trustees of the Foundation and the Foundation has therefore been classified as a related party on the basis that the Company is in a position to yield significant influence over it.

 

Transactions and balances with these related parties were as follows:

(In USD)	Year ended 31 December 2023		Year ended 31 December 2022
Related Party	(Paid to)/received from the related party	Balance (owed to)/due from the related party	(Paid to)/received from the related party	Balance (owed to)/due from the related party	Nature of transactions
Black Dragon Gold Corp	2,442	-	8,973	1,543	Corporate office facilities and services
Black Dragon Gold Corp	-	-	(6,276)	-	Travel Expenses
Legal Solutions d.o.o	(193,468)	(25,610)	(14,381)	(2,875)	Legal Services
OMF Fund III (F) Ltd	60,000,000	(100,591,470)	30,000,000	(30,030,806)	Senior Secured Debt
OMF Fund III (F) Ltd	22,500,000		-	-	Copper Stream
Ventura Trustees Limited	(16,930)	-	(10,242)	(15,813)	Administration and accountancy services
Baccata Secretaries Limited	(34,104)	(3,400)	396	(1,513)	Company secretarial services
Adriatic Foundation	-	-	-	-

 

The Company announced on 9 June 2021 its intention to donate 0.25% of the future profits from its operations in Bosnia and Herzegovina to the Foundation.

Transactions with key management personnel are disclosed in note 20b below.

B Key management personnel compensation

Compensation for key management personnel is shown in the table below. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. Key management personnel are considered to be the Non-Executive Directors and the Managing Director and Chief Executive Officer in the year ended 31 December 2023. The year ended 31 December 2022 key management personnel also included the previous Chief Financial Officer up until departure.

(In USD)	Year ended 31 December 2023	Year ended 31 December 2022
Board fees	441,662	385,455
Consultancy fees	444,737	465,257
Short term incentive plan bonus	329,904	272,597
Other	-	117,561
Cash remuneration in respect of qualifying services	1,216,303	1,240,870
Share-based payments expense	290,244	-
Social security costs	28,687	29,512
	1,535,234	1,270,382

Share-based payments expense is stated at fair value at the time of grant using the Black-Scholes option pricing model. Further details are available in note 13F of the accounts.

Consultancy fees above include amounts paid to related party companies controlled by key management personnel.

The balances owed at 31 December 2023 in respect of STIP bonuses was $329,738 to the Managing Director and Chief Executive Officer (prior year $279,887). There were no other balances outstanding with related parties at 31 December 2023 (31 December 2022: $nil)

 

21. Directors and employees

Employees of the Group are all employees including Directors, key management personnel and personnel in management positions engaged under management services contracts. The table below shows total costs for all employees, including costs capitalised during the year.

(In USD)	Year ended 31 December 2023	Year ended 31 December 2022
Wages and salaries	8,219,438	4,775,218
Consultancy fees	4,483,680	2,373,539
Cash remuneration in respect of qualifying services	12,703,118	7,148,757
Social security costs	4,758,788	2,365,912
Defined contribution pension cost	13,598	12,172
Share-based payments expense	1,561,020	1,295,293
Total	19,036,524	10,822,134
Average number of employees	296	158

Share-based payments expense is stated at fair value at the time of grant using the Black-Scholes option pricing model. Further details are available in note 13F of the accounts.

The average number of employees during the year increased to 296 in the year (31 December 2022 - 158 employees).  This is due to the progression of the Vareš Project.

	Serbia	Bosnia	UK
Exploration	23	39	-
Mining	-	156	-
Administration	8	60	10
Total	31	255	10

 

Directors' remuneration is set out below:

(In USD)	Year ended 31 December 2023	Year ended 31 December 2022
Board fees	441,662	385,455
Consultancy fees	444,737	380,542
Accrued cash bonus	329,904	272,597
Benefits	60,503	-
Cash remuneration in respect of qualifying services	1,276,806	1,038,594
Average number of Directors	6	6

There were no directors' share awards that vested in the year (31 December 2022: nil).

The highest paid Director in the year ended 31 December 2023 received cash remuneration, excluding notional gains on share options or performance rights, of $866,590 (31 December 2022: $601,303).

22. Rehabilitation provision

Based on construction activity on the Vareš Project during the year, the Group has recognised a provision for the discounted future costs of closure, restoration and environmental obligations of $3,673,787 (31 December 2022: $4,431,212). The main reason for the reduction in the provision is due to the increase in the mine life resulting in heavier discounting of future cashflows.

 

(In USD)	Note	31 December 2023	31 December 2022
At 1 January		4,431,212	-
Recognition of rehabilitation provision		-	4,431,212
Impact of life of mine extension	7	(757,425)	-
At 31 December		3,673,787	4,431,212

 

The provision represents the net present value of the Company's best estimate of the Vareš mine's future closure, restoration and environmental obligations, based on the extent of land and other disturbance at period end caused by construction and other activities.

The Vareš mine is not yet operational, and  the estimated mine life  has increased from ten to eighteen years to 2041. Expenditure for rehabilitation will therefore occur more than 5 years after the balance date.

The present value of the above provision is measured by unwinding the discount on expected future cash flows over the period up to closure, using a discount factor of 4.2% that reflects the risk-free rate of interest. The yield of US Treasury bonds with a maturity profile commensurate with the anticipated rehabilitation schedule has been used to determine the discount factor applied to anticipated future rehabilitation costs.

The sensitivity of the provision to a 1% change in the discount factor is shown below:

·      a decrease from 4.2% to 3.2% would increase the provision by $0.7m with a corresponding increase in Property, plant and equipment; and

·      an increase from 4.2% to 5.2% would decrease the provision by $0.6m with a corresponding decrease in Property, plant and equipment.

Future climate change risks could impact the rehabilitation provision both in terms of the nature of decommissioning and rehabilitation required, as well as the cost of these activities given its long-term nature. Climate change risks and mitigations have been considered in the TCFD Climate Disclosure within the Directors report, based on scenario analysis of potential future transition and physical risks.  Specific detailed analysis of the potential impacts of climate risks will be carried out in future periods, which could result in adjustments to the provision.

 

 

23. Commitments and contingencies

At 31 December 2023, the Group had entered into a number of supply and works contracts as part of the development of the Vareš Project.  The expected payments in relation to these contracts which were not required to be recognised as liabilities at 31 December 2023 amounted to approximately $11m.  Of this total, approximately $6m relates to contracts that the Group is able to terminate at any point in time. The amount payable following termination would be less than this total, with the precise amount depending on the timing of termination in each case.  In addition, of the same total of approximately $11m, all relate to contracts that can be suspended by the Company, with the Company paying only direct costs that are reasonably incurred and directly related to any such suspension for the time the supply of the goods is suspended.

 

At 31 December 2023, the Group has also entered into a five-year mining services contract with Nova Mining & Construction d.o.o. The Group is able to terminate the contract for convenience at any point in time. Amounts payable following such termination would include demobilisation and similar costs, as well as a compensation payment of up to $5m, depending on the timing of termination. As this amount reduces on a straight line basis over the life of the contract, the termination for convenience amount at 31 December 2023 would be $3.4m.  In addition, the Group has committed to purchase the mining equipment provided by Nova Mining & Construction d.o.o., in order to ensure continuity of operations.

 

24. Net cash and borrowings

An analysis of net cash and borrowings, including lease liabilities, and movements in each year is shown below. 

(In USD)			Note	31 December 2023		31 December 2022
Cash and cash equivalents				44,856,215		60,585,277
Borrowings			6	(140,800,564)		(42,498,052)
Lease liabilities			10	(8,136,567)		(8,186,741)
				(104,080,916)		9,900,484
	Borrowings	Lease liabilities		Cash and cash equivalents	Total
Net cash/(borrowings) at 1 January 2022	(16,071,066)	(767,098)		112,506,468	95,668,304
Net cash used in operating activities	-	-		(11,233,068)	(11,233,068)
Net cash used in investing activities	-	-		(58,664,242)	(58,664,242)
Net proceeds from loans and borrowings	(26,176,885)	-		26,176,885	-
Lease additions	-	(9,360,066)		-	(9,360,066)
Foreign exchange movements	-	67,082		(4,433,976)	(4,366,894)
Changes in fair value due to modifications	(214,605)	(16,850)		-	(231,455)
Interest expense	(1,735,496)	(589,377)		-	(2,324,873)
Net interest payments	1,700,000	589,377		(2,011,994)	277,383
Capital payments on leases	-	1,890,191		(1,890,191)	-
Settlement of deferred consideration	-	-		(525,785)	(525,785)
Net cash arising from issue of equity	-	-		661,180	661,180
Net cash/(borrowings) at 31 December 2022	(42,498,052)	(8,186,741)		60,585,277	9,900,484
Net cash used in operating activities	-	-		(22,886,414)	(22,886,414)
Net cash used in investing activities	-	-		(99,485,435)	(99,485,435)
Net proceeds from loans and borrowings	(81,060,421)	-		81,060,421	-
Lease additions	-	(1,581,470)		-	(1,581,470)
Foreign exchange movements	-	(87,647)		(356,108)	(443,755)
Changes in fair value	(4,419,547)	-		-	(4,419,547)
Interest expense	(14,717,544)	(1,103,318)		-	(15,820,862)
Net interest payments	1,895,000	844,592		(2,739,592)	-
Capital payments on leases	-	1,978,017		(1,978,017)	-
Net cash arising from issue of equity	-	-		30,656,083	30,656,083
Net cash/(borrowings) at 31 December 2023	(140,800,564)	(8,136,567)		44,856,215	(104,080,916)

25. Subsequent events

On 24 January 2024, the Company announced that the fourth and final Senior Secured Debt tranche of $30m had been drawn down under the Orion Senior Secured Debt Facility, and that the first quarterly debt repayment to Orion had been rescheduled from 30 June 2024 to 31 December 2024, with quarterly repayments thereafter.

On 27 February 2024, the Vareš Project in Bosnia and Herzegovina produced its first concentrate. The Vareš Processing Plant will continue ramping up with campaign processing, via the down blending of high-grade stockpiled ore with lower grade stockpiles. The campaign processing is intended to facilitate plant performance optimisation.  The Project will continue to ramp up to consistent production to nameplate processing capacity of approximately 65,000t per month by Q4 2024.

 

On 4 March 2024, the Company allotted 10,981,770 new ordinary shares of £0.013355 each in connection with the conversion by Queens Road Capital Investment Ltd of unsecured convertible bonds in the principal amount of $20m at a conversion price of A$2.7976 ($1.8212 or £1.4394) per share. The shares rank pari passu with the Company's existing ordinary shares.

 

 

Parent Company Statement of Financial Position

AT 31 DECEMBER 2023

(In USD)	Note	31 December 2023	31 December 2022
ASSETS
Current assets
Cash and cash equivalents		29,676,016	27,143,743
Receivables and prepayments	f	33,158,466	22,674,681
Total current assets		62,834,482	49,818,424
Non-current assets
Investment in subsidiaries	i	34,929,119	34,929,119
Receivables and prepayments	f	67,652,967	57,733,284
Property, plant and equipment	g	28,576	35,406
Right-of-use asset	m	215,963	249,697
Total non-current assets		102,826,625	92,947,506
Total assets		165,661,107	142,765,930
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities	h	1,676,757	1,171,031
Lease liabilities	n	49,239	48,889
Borrowings	o	16,108,967	-
Derivative liability	o	9,909,859
Total current liabilities		27,744,822	1,219,920
Non-current liabilities
Accounts payable and accrued liabilities	h	-	5,240
Lease liabilities	n	206,667	238,535
Borrowings	o	-	16,285,683
Derivative liability	o	-	6,369,219
Total non-current liabilities		206,667	22,898,677
Total liabilities		27,951,489	24,118,597
Equity
Share capital		5,712,782	5,376,349
Share premium		174,145,606	143,829,631
Merger reserve		23,497,730	23,497,730
Warrants reserve		2,743,303	2,743,303
Foreign currency translation reserve		2,513,538	2,513,538
Share-based payment reserve		3,591,220	4,943,436
Retained deficit		(74,494,561)	(64,256,654)
Total equity		137,709,618	118,647,333
Total liabilities and equity		165,661,107	142,765,930

The Company's loss after tax for the year ended 31 December 2023 was $12,575,142 (year ended 31 December 2022: $48,630,562).

The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 28 March 2024 and were signed on its behalf by:

Paul Cronin Managing Director and Chief Executive Officer

Mike Norris Chief Financial Officer

 

Parent Company Statement of Changes in Equity

FOR THE YEAR ENDED 31 DECEMBER 2023

 

(In USD)	Note	Share capital	Share premium	Merger reserve	Share-based payment reserve	Warrants Reserve	Foreign Currency Translation Reserve	(Restated*) Retained earnings	Total equity
31 December 2021		5,279,546	143,259,675	23,019,164	5,778,882	2,743,303	2,513,416	(17,756,831)	164,837,155
Comprehensive expense for the year
Loss for the year	e	-	-	-	-	-	122	(48,630,562)	(48,630,440)
Total comprehensive expense		-	-	-	-	-	122	(48,630,562)	(48,630,440)
Share issue costs	j	-	(86,199)	-	-	-	-	-	(86,199)
Exercise of options	j	91,224	656,155	-	(2,130,739)	-	-	2,130,739	747,379
Issue of options	j	-	-	-	873,155	-	-	-	873,155
2022 STIP awards	j	-	-	-	576,000	-	-	-	576,000
Expiry/cancellation of options/warrants	j	-	-	-	(153,862)	-	-	-	(153,862)
Acquisition of subsidiary		5,579	-	478,566	-	-	-	-	484,145
31 December 2022		5,376,349	143,829,631	23,497,730	4,943,436	2,743,303	2,513,538	(64,256,654)	118,647,333
Comprehensive expense for the year
Loss for the year	e	-	-	-	-	-	-	(12,575,142)	(12,575,142)
Total comprehensive expense		-	-	-	-	-	-	(12,575,142)	(12,575,142)
Issue of share capital	j	251,055	31,427,918	-			-	-	31,678,973
Share issue costs	j	-	(2,111,505)	-	-	-	-	-	(2,111,505)
Exercise of options	j	81,196	469,929	-	(2,337,235)	-	-	2,337,235	551,125
Issue of options	j	-	-	-	1,644,777	-	-	-	1,644,777
2022 STIP awards	j	4,182	529,633	-	(576,000)	-	-	-	(42,185)
Expiry/cancellation of options/warrants	j	-	-	-	(83,758)	-	-	-	(83,758)
31 December 2023		5,712,782	174,145,606	23,497,730	3,591,220	2,743,303	2,513,538	(74,494,561)	137,709,618

 

See note b to the Parent Company Financial Statements for details of the restatement of the prior year comparatives.

 

Notes to the Parent Company Financial Statements

a.  Corporate information

These Financial Statements represent the individual financial statements of Adriatic Metals PLC (the "Parent Company"), the parent company of the Adriatic Metals Group for the year ended 31 December 2023.

The Parent Company is a public company limited by shares and incorporated in England and Wales. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham, GL50 1HX.

b.  Basis of preparation

I)     Statement of compliance

 In preparing these financial statements, the Company applies Financial Reporting Standards 101, 'Reduced Disclosure Framework' (FRS 101 'Reduced Disclosure Framework'), and applicable law.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:

·      Cash Flow Statement and related notes;

·      Disclosures in respect of transactions with wholly owned Group companies;

·      Comparative year reconciliations for share capital, and intangible assets;

·      Disclosures in respect of capital management;

·      The effects of new but not yet effective IFRSs; a statement of compliance with FRS 101 is provided instead.

·      Disclosures in respect of the compensation of Key Management Personnel.

As the consolidated financial statements of the ultimate parent undertaking include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in respect of the following disclosures:

·      Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures

The Parent Company Financial Statements were authorised for issue by the Board of Directors on 28 March 2024.

II)    Basis of preparation

These Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value.

These Parent Company Financial Statements are presented in USD. Unless otherwise stated, all amounts indicated by "$" represent USD.

III)   Going concern

Refer to accounting policies in note 2C to the notes to the consolidated financial statements.

 

c.  Accounting policies

In addition to the accounting policies in note 3 of the Group consolidated financial statements, the following accounting policies are relevant only to the Parent Company Financial Statements.

I)    Investments in subsidiaries

Unlisted investments are carried at cost, being the purchase price, less provisions for impairment. Additional consideration paid when subscribing for new shares, is made via capital contributions and recorded as additions to investments in subsidiaries.

II)    Intercompany loans

All intercompany borrowings and loans are initially recognised at the fair value of consideration received or paid after deduction of issue costs and are subsequently measured at amortised cost.

III)   Impairment

The Company recognises an allowance for expected credit losses ("ECL") for all receivables held at amortised cost where there is objective evidence that the receivable is irrecoverable. ECL are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive.

d.  Critical accounting estimates and judgements

The preparation of the Parent Company's Financial Statements requires management to make certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from these estimates. In addition to the critical accounting estimates and judgements in note 4 to the consolidated financial statements, the following information about the material judgements, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses that are relevant only to the Parent Company Financial Statements are discussed below.

I)    Value of investments in subsidiaries

The Parent Company's investments in subsidiaries, which are made via capital contributions or arise upon acquisition, are reviewed for impairment if events or changes indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the net present value of expected future cash flows of the relevant generating unit or disposal value if higher.

As set out in note i, following a reorganisation of the entities holding exploration tenements in Serbia, as a result of which all four licences were transferred to Ras Metals d.o.o., Adriatic Metals Jersey Limited was no longer the owner of any tenements with licences at 31 December 2022. This was identified as an impairment indicator in relation to the Parent Company's investment in Adriatic Metals Jersey Limited, as it cast doubt on Adriatic Metals Jersey Limited's fair value. A judgement was made to recognise a full impairment of $3,973,286 against the investment balance.

As also set out in note i, impairment indicators were identified in the year ended 31 December 2022 in relation to the Raska Project and judgement was made to recognise an impairment of $22,177,477 against the carrying amount of the investment in Ras Metals d.o.o., holder of the Raska Project tenements, resulting in a carrying amount of $8,500,000 at 31 December 2022. The carrying amount has been determined by a benchmarking exercise using industry standard valuation measures. No further indicators of impairment have been noted at 31 December 2023.

II)    Intercompany loans

As set out in note f, judgement has been made to establish a provision of $11,932,591 (31 December 2022: $7,489,859) against foreign exchange adjusted receivables on the basis that the Raska Project impairment cast doubt on the subsidiaries' ability to repay the balances outstanding in the future.

e.  Loss for the year

The Parent Company has taken advantage of the exemption under section 408 (3) of the Companies Act 2006 and thus has not presented its statement of comprehensive income in these Parent Company Financial Statements. The Parent Company's loss after tax for the year ended 31 December 2023 is $12,575,142 (year ended 31 December 2022: $48,630,562).

 

 

f.  Receivables and prepayments

Receivables contain amounts receivable for VAT, prepaid expenses and deposits paid. All receivables are held at cost less any provision for impairment.

The Raska Project impairment set out in note d cast doubt over the ability of the subsidiaries to repay intercompany balances owed to the Parent Company and a provision of $11,932,591 at 31 December 2023 (prior year: $7,489,859) was recognised, representing 100% of the balance of the receivables relating to the Raska Project reducing the non current amounts receivable from subsidiaries from $79,585,558 to a net receivable $67,652,967  (31 December 2022: from $65,223,143 to net receivable $57,733,284).

All current receivables due within one year as follows:

 

(In USD)	31 December 2023	31 December 2022
Accrued interest income	59,321	57,114
Prepayments and deposits	215,179	202,118
Taxes recoverable	94,574	74,184
Amounts receivable from subsidiaries	32,789,392	22,309,041
Other receivables	-	32,224
	33,158,466	22,674,681

 

All non-current receivables due more than one year as follows:

(In GBP)	31 December 2023	31 December 2022
Amounts receivable from subsidiaries	67,652,967	57,733,284
	67,652,967	57,733,284

 

 

 

g.  Property, plant and equipment

 

(In USD)   Cost	Land and Buildings	Plant and Machinery	Total
31 December 2021	23,570	79,800	103,370
Additions	-	10,110	10,110
Foreign exchange difference	-	2,546	2,546
31 December 2022	23,570	92,456	116,026
Additions	-	1,612	1,612
31 December 2023	23,570	94,068	117,638
Depreciation
31 December 2021	4,857	52,011	56,868
Charge for the year	2,356	21,396	23,752
31 December 2022	7,213	73,407	80,620
Charge for the year	2,358	6,084	8,442
31 December 2023	9,571	79,491	89,062
Net Book Value
31 December 2022	16,357	19,049	35,406
31 December 2023	13,999	14,577	28,576

 

h.  Accounts payable and accrued liabilities

 

The breakdown of current accounts payable and accrued liabilities is as follows:

 

(In USD)	31 December 2023	31 December 2022
Trade payables	337,525	89,199
Accrued liabilities	1,284,135	918,861
Other payables	55,097	70,472
Amounts payable to subsidiaries	-	92,499
	1,676,757	1,171,031

 

The breakdown of non-current accounts payable and accrued liabilities is as follows:

 

(In USD)	31 December 2023	31 December 2022
Amounts payable to subsidiaries	-	5,240
	-	5,240

 

i.   Investments in subsidiaries

The breakdown of the investments in subsidiaries is as follows:

 

(In USD)	Eastern Mining d.o.o.	Adriatic Metals Holdings BIH Limited	Adriatik Metali d.o.o.	RAS Metals d.o.o.	Adriatic Metals Jersey Ltd	Total
31 December 2021	-	26,426,143	2,956	30,677,477	3,973,286	61,079,862
Impairment	-	-	-	(22,177,477)	(3,973,286)	(26,150,763)
Foreign currency revaluation	-	20	-	-	-	20
31 December 2022 and 31 December 2023	-	26,426,163	2,956	8,500,000	-	34,929,119

 

 

Following a reorganisation of the entities holding exploration tenements in Serbia, as a result of which all four licenses were transferred to Ras Metals d.o.o., Adriatic Metals Jersey Limited was no longer the owner of any tenements with licenses at 31 December 2022. This was identified as an impairment indicator in relation to the Parent Company's intercompany receivable from Adriatic Metals Jersey Limited, as it cast doubt on Adriatic Metals Jersey Limited's ability to repay the balance in the future. A judgement was made to recognise a full impairment of $3,973,286 against the receivable balance.

 

During the year ended 31 December 2022, impairment indicators were noted in relation to the Raska Project, see note 8 to the Consolidated Finance Statements for further information. This resulted in an impairment of $22,177,477 against the investment in Ras Metals d.o.o., down to a carrying amount of $8,500,000 on the basis that the recoverable amount of the investment value is equal to the fair value less cost of disposal of the exploration and evaluation asset in line with the requirements of IAS 36.

 

No further indicators of impairment or reversal of previous impairment have been identified in the year to 31 December 2023.

 

The list of subsidiaries of the Parent Company is presented in note 3A to the notes to the consolidated financial statements.

 

j.  Equity

The balances and movements in share capital, share premium, merger reserve, share-based payment reserve and warrants reserve are as detailed in note 13 to the Group consolidated financial statements.

 

k.  Related party disclosures

The Parent Company's related parties include key management personnel, companies which have directors in common and its subsidiaries.

 

Ownership of subsidiaries is disclosed in note 3A of the Group consolidated financial statements. Transactions with its Directors and key management personnel and transactions with companies which have directors in common during the year have been disclosed in notes 20 and 21 to the Group consolidated financial statements.

l.   Financial assets at fair value through profit and loss

The movements in financial assets at fair value through profit and loss are as detailed in note 11 to the Group consolidated financial statements. There are no differences compared with the Parent Company's transactions other than as stated in note o below.

m. Right-of-use asset

Under IFRS 16, the Parent Company's registered office has been recognised as a right-of-use asset and the carrying amounts of right-of-use assets and the movements during the year are set out below:

(In USD)	Land & buildings
31 December 2021	283,169
Depreciation	(33,472)
31 December 2022	249,697
Depreciation	(33,734)
31 December 2023	215,963

n.  Lease liabilities

Set out below are the carrying amounts of lease liabilities and the movements during the year:

(In USD)
31 December 2021	316,224
Interest expense	21,369
Payments	(50,169)
31 December 2022	287,424
Interest expense	19,187
Payments	(50,705)
31 December 2023	255,906

 

Of this amount, $49,239 is recognised as a current liability (31 December 2022: $48,889) and the remainder $206,667 is shown within non-current liabilities (31 December 2022: $238,535).

 

o.  Borrowings and derivative liability

The movements in the QRC convertible debt and its embedded derivative liability are as detailed in notes 6 a) to 6 c) to the Group consolidated financial statements.

The Orion Senior Secured Debt referred to in note 6b to the consolidated financial statements is held in Jersey based Group subsidiary, Adriatic Metals Trading and Finance Limited, and is therefore not included in the Parent Company Financial Statements.

p.  Commitments

Commitments relating to the Parent Company have been disclosed in note 23 to the Group consolidated financial statements.

The Parent Company has provided a Letter of Support to its subsidiaries Adriatic Metals (UK) Ltd and Adriatic Metals Holdings BIH Limited ("BIH"), confirming that it does not intend to recall intragroup payables should they not have the financial capability to settle them. The Parent Company will continue to support both in meeting its liabilities as they fall due, for a period of not less than 12 months from the date of signing of these financial statements.

q.  Subsequent events

Subsequent events relating to the Parent Company have been disclosed in note 25 to the Group consolidated financial statements.