ANNUAL
REPORT
FOR THE SIX MONTHS
ENDED 31 DECEMBER 2020
Adriatic Metals PLC
(ASX:ADT, LSE:ADT1)
Is a precious and base metals explorer
and developer that owns the world-
class Vares Silver Project in Bosnia &
Herzegovina and holds licences across the
Raska District in Serbia.
The Vares project’s captivating economics
and impressive resource inventory have
attracted Adriatic’s highly experienced
team, which is expediting exploration
efforts to expand the current JORC
resource. Results of a recent preliminary
feasibility study announced on 15
October 2020 indicate a post-tax NPV8
of US$1,040 million and IRR of 113%.
Leveraging its first-mover advantage,
Adriatic is rapidly advancing the project
into the development phase and through
to production with significant cornerstone
investment of US$28 million from
Queen’s Road Capital Investment and
European Bank for Reconstruction and
Development.
Adriatic Metals acquired TSX-V listed
Tethyan Resource Corp in 2020, to
advance the former Kizevak and Sastavci
polymetallic mines in the Raska District,
southern Serbia.
ANNUAL REPORT
FOR THE SIX MONTHS ENDED
31 DECEMBER 2020
STRATEGIC
REPORT
01
FINANCIAL
STATEMENTS
70
Highlights
Chairman’s Statement
Strategy
Business Model
Future Operations
Diversity
Social & Human Rights
COVID-19 Impact
Principal Risks and Uncertainties
Directors’ Section 172(1) Statement
Principal Decisions by the
Board During the Period
Our Assets
CEO Statement
Operational Review
Financial Review
1
3
5
6
7
7
8
8
9
15
21
23
29
31
33
Independent Auditor’s Report to the
Members of Adriatic Metals PLC
Consolidated Statement of
Financial Position
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Parent Company Statement of
Financial Position
Parent Company Statement of
Changes in Equity
Parent Company Statement of
Cash Flows
Notes to the Parent Company
Financial Statements
71
78
79
80
81
82
111
112
113
114
GOVERNANCE
37
ASX ADDITIONAL
INFORMATION
119
Governance
Audit and Risk Committee Report
ESG Committe Report
Remuneration Committee Report
Dialogue with Shareholders
Directors Report
Directors Statement of Responsibilities
37
43
45
47
63
64
69
HIGHLIGHTS OF THE 6 MONTHS
ENDED 31 DECEMBER 2020
Mineral Resource
Estimate (MRE)
Updated MRE completed in September
2020 for the Rupice Deposit which now
stands as 12.0Mt @ 149g/t Ag, 1.4g/t
Au, 4.1% Zn, 2.6% Pb, 0.5% Cu,
25% BaSO4 (reported above a cut-off
grade of 50g/t AgEq) containing 58Moz
Ag, 527koz Au, 489kt Zn & 312kt Pb
reflecting a 32% increase in tonnes
compared to the maiden 2019 Rupice
MRE.
Preliminary Feasibility
Study (PFS)
The Vares Silver Project PFS was
completed in October 2020 based on
significantly more robust inputs over the
2019 Scoping Study. PFS highlights
include as NPV8 of US$1,040 million,
IRR of 113%, low up front project
capital requirement of US$173 million
and average annual EBITDA of US$251
million in years 1-5.
US$28 million Financing
The Company closed financings
totalling US$ 28 million during Q4 2020
ensuring a strong cash position going
into 2021.
COVID-19 impact:
Restrictions in international travel have limited face-
to-face meetings and site visits by consultants and
advisors. However, the business fundamentals and
progress towards our primary objectives remain largely
unaffected by the current crisis.
1
ADRIATIC METALS PLC
STRATEGIC REPORT CONCESSION
RIGHTS AND
PERMITS
• 32km2 extension of the
existing Vares Silver
Project Concession
Agreement area approved
by the Government of the
Zenica-Doboj Canton.
• Received the urban
planning permit for the
Veovaca area of the Vares
Silver Project.
• Submitted the application
for the Veovaca
exploitation permit
which was subsequently
received in January 2021.
• Submitted the application
for environmental permit
for the Rupice area.
• Acquisition of highly
prospective land package
in southern Serbia,
containing two historic
Zinc-Silver mining
operations.
FINANCIAL
• Issued a US$20
CORPORATE
• Completed the
convertible bond to
Queens Road Capital
during Q4 2020.
acquisition of Tethyan
Resource Corp in
October 2020.
• £6.2m equity private
• Entered into a
placement to European
Bank of Construction
and Redevelopment
completed Q4 2020.
• Cash balance at 31
December 2020 of
£29.6 million, ensuring
the group is fully
financed through to
completion of the Vares
Silver Project Feasibility
Study.
Settlement deed with
Sandfire Resources
Limited in November
2020 raising A$8.5
million via a Settlement
Placement.
• Exercised an option to
acquire the remaining
90% of Ras Metals
d.o.o. in Serbia in
February 2021 not
previously held by the
Company.
GOVERNANCE
• Board stability and management
evolution continues to align
management skills with
operational objectives and
increase independence of the
Board.
• Board Evaluation exercise
completed.
• Corporate risk register updated.
• Established an Environmental,
Social & Governance (ESG)
Committee and implement a
number of policies including
establishing a reporting
framework for ESG matters,
whistleblower policy and
establishment of the Adriatic
Foundation.
• Remuneration policies updated
with short and long term
incentives to ensure alignment
of employees at all levels around
a clear set of common goals
and shareholder value creation.
2
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information PREPARING FOR
MINE DEVELOPMENT
CHAIRMAN’S STATEMENT
Key Milestones
The Company has achieved several
important milestones during the
period including the completion of the
Preliminary Feasibility Study, announced
on 15 October 2020, for the Vares
Silver Project. This indicated an
impressive project NPV8 of US$1,040
million net representing a 13% increase
over the scoping study outcome and a
US$ 5 million reduction in the estimated
project capital cost requirement to
US$173 million compared to the
scoping study. The PFS, which was
based on an updated mineral resource
estimate for the Rupice deposit which
was also completed in the period,
represents a further de-risking of
the project and reinforces the solid
economics of the Vares Silver Project
which is increasingly recognized as
a world class asset amongst the
investment community and peers.
The Environmental Permit was issued
for the Veovaca mine, processing
plant and tailing facility, and the Urban
Planning Permit was issued by the
Federal Ministry for Spatial Planning in
October 2020. This strong progress
on permitting has been made possible
through the enthusiastic, dedicated
and professional support shown by
our partners in the communities and
in government at local, cantonal and
federal levels.
Following completion of the PFS, the
team has immediately transitioned into
the various workstreams necessary
to complete the feasibility study. This
has also seen a number of additional
appointments to further build out our in-
house technical capability in anticipation
of commencing construction during the
second half of 2021.
We are also excited that Adriatic
Metals’ application for a significant land
extension to its current Concession
Agreement was approved on 2
September 2020. The new concession
area is highly prospective and adds
some 32.12km2 of land in close
proximity to the existing Rupice and
Veovaca deposits of the Vares Project.
We look forward to drilling in the new
areas of the concession during 2021.
Corporate Developments
On 8 October 2020, the Company
completed the acquisition of TSX-V
listed Tethyan Resource Corp. (Tethyan)
via a plan of arrangement in British
Columbia. Tethyan’s principal asset at
the time of acquisition was an option
agreement to acquire the entire share
capital of Ras Metals d.o.o., holder
of the exploration licenses for both
Kizevak and Sastavci which form the
Raska Project in Serbia. On 22 February
2021 we exercised our rights under the
option agreement acquiring Ras Metals
d.o.o. so that we now control 100% of
the project making clear our intentions
towards accelerating the advancement
of the Raska Project.
Impact of COVID-19
The global COVID-19 pandemic
required us, like many of our peers,
to continue to adapt our operational
plans and maintain the strict safety
protocols to protect our staff and our
local community during the period that
were implemented during the first half
of 2020. Our operational productivity
continues to be only moderately
affected and the Company has been
able to continue to deliver on its key
milestones. Whilst there are still certain
restrictions imposed on our activities
by the crisis, we are confident of our
ability to adapt to this dynamic situation
and continue to deliver the Vares Silver
Project on time.
As illustrated by the successful
completion of the £6.2 million private
placement to EBRD and US$ 20 million
convertible bond issue to Queens
Road Capital during Q4 2020, we
do not anticipate COVID-19 having a
Michael Rawlinson,
Chairman
“I am pleased to be able to
report that in the six months
since our previous annual report
we have continued to make
considerable progress towards
our main objective of exploring
mineral resource opportunities
that have the potential to deliver
growth for the benefit of Adriatic’s
shareholders.
The team have made great
progress on the Vares Project
with an updated mineral resource
estimate and a very positive
Preliminary Feasibility Study
and completed the acquisition
of Tethyan Resource Corp as
part of our long-term strategy to
become a multi-mine producer
notwithstanding the challenges
presented by the ongoing
COVID-19 pandemic.”
3
ADRIATIC METALS PLC STRATEGIC REPORT On behalf of the Board I would like to
thank the management and employees
for their ongoing determination and
hard work which has resulted in
a tremendous number of positive
achievements during the period
delivered safely and with probity and
good humour. I look forward to 2021
being another exciting year of progress.
Michael Rawlinson,
Chairman of the Board
Finally, Peter Bilbe stepped down as
Non-Executive Chairman on 3 August
2020 having done a tremendous job of
guiding the Company from before its
listing on the ASX in May 2018 through
a period of unprecedented growth and
its LSE listing in November 2019. We
are all very grateful for his leadership
and advice, and we continue to enjoy
working with him as he remains on
the Board as an independent Non-
Executive Director.
In addition, the Company continues to
build out the team in the UK, Bosnia
and Serbia with the appointment of
Thomas Horton as Head of Business
Development and Investor Relations,
Mark Richards as Logistics and
Procurement Manager for the Vares
Project and Jelena Aleksic as General
Manager in Serbia.
Governance Changes
We have strengthened our governance
committees during the period in
anticipation of a move towards
production, with the establishment
of a new ESG Committee led by our
newest Non-Executive Director and
Bosnian national Sanela Karic. This
committee is tasked with ensuring that
the policies, procedures and actions
that relate to key stakeholders are
handled transparently and to the highest
standards. We understand that the
Company’s license to operate stems
from its ability to negotiate ESG matters
successfully with its stakeholders -
be they employees, communities,
customers, suppliers or governmental
and non-governmental partners.
We have also decided to unify the
composition of the Remuneration
Committee and Nominations
Committees. The board felt that it
was important to consider succession
planning and the human resources
plan to production alongside the overall
remuneration strategy - something
which was updated in the period to
formalise short and long term incentives
for management and staff to ensure
alignment at all levels around our key
near term objectives and consistent
long term shareholder value creation.
detrimental effect on our ability to raise
finance for our future activities.
The cash balance at 31 December 2020
of £29.6 million ensures the group is
fully financed through to completion of
the feasibility study.
Board and Management
Changes
A substantial strengthening and
rounding out of the Board and the
executive management team, which
began earlier in the year, was completed
during the period. The Board now
consists of one executive director
and five independent Non-Executive
Directors with good diversity in gender,
skills and nationalities.
We have strengthened our executive
management team over the period
as we plan for the transition from
explorer to developer. The Board
remains committed to good corporate
governance, the Quoted Company
Alliance’s Corporate Governance Code
(QCA Code) and to aligning the skills
and experience of the Directors and
management with the needs of the
Vares Silver Project as it advances
toward production.
Mr. John Richards, a Non-Executive
Director appointed under the terms
of the Collaboration and Strategic
Partnership Deed between Adriatic and
Sandfire Resources Limited, stepped
down on 8 July 2020 following the
withdrawal of Sandfire’s nomination of
him. Sandfire have not nominated a
replacement for Mr. Richards, but are
entitled to do so as their shareholding
remains above 10%. We thank Mr.
Richards for his contribution whilst
serving our board.
Dominic Roberts joined the Company
as Head of Corporate Affairs in July
2020. Mr. Roberts has more than 25
years’ experience operating in the
Balkans and was previously company
Operations Director at Mineco, one of
the largest base metal miners in the
Balkans with five operating mines.
On 3 August 2020, Ms. Sanela Karic, a
Bosnian national, who brings with her
over 15 years’ experience as a lawyer
and a career spanning corporate affairs,
mergers & acquisitions and human
resources was also appointed as an
independent Non-Executive Director.
Annual Report for the year ended 31 December 2020
4
Strategic ReportGovernanceFinancial StatementsASX Additional Information THE COMPANY IS COMMITTED
TO SETTING HIGH STANDARDS
STRATEGY
Adriatic is a base and precious metals
developer and explorer focused on the
Balkan region. The Company’s strategy
is to build a European-focused mining
company.
In order to achieve long-term growth,
along with delivering shareholder
returns, the Company is focused on
creating value from its current asset
portfolio, through exploration and
development, as well as generating
a pipe-line of projects through
opportunistic, value-accretive
acquisitions. This was demonstrated
most recently by the acquisition
of Tethyan’s Serbian brownfield
development projects, Kizevak and
Sastavci, and its large prospective
landholding on the Tethyan mineral
belt adding to Adriatic’s asset portfolio
during the Period.
The Company will continue to build and
further strengthen a multi-disciplinary,
experienced team focused on delivering
this vision.
In addition, the Company is committed
to setting a high standard in responsible
extraction of its mineral resources.
Core to its strategy is setting a high
benchmark for ESG standards, not only
compared to its in-country peers but
also across the mining industry globally.
In the short to medium term, Adriatic’s
strategy will continue to leverage its
competitive advantages, of:
• its early mover advantage in Bosnia.
The Company is the only publicly
listed mining concession holder in
the country, where it also has the
largest granted mineral concession.
Bosnia has a rich mining history,
a pro-mining outlook, highly
prospective geology and a stable
fiscal and political system;
• a capable and multi-disciplinary
management team which includes
well regarded and experienced
mining professionals with a track
record of project delivery and
operating experience;
• well-funded financial position for
completing its planned activities;
• a strong commitment to contribute
to the sustainable development of
the communities associated with our
operations and to ethical conduct
and a focus on the professional
management of Environmental,
Social and Governance aspects of
the project; and
• World-class Project economics,
as determined by the 2019 Vares
Silver Project Scoping Study, and
subsequently confirmed by the 2020
PFS.
5
ADRIATIC METALS PLC
STRATEGIC REPORT BUSINESS MODEL
The primary focus of Adriatic is the
development of the Company’s flagship
asset, the Vares Silver Project in Bosnia,
followed by the exploration of the Zinc-
Silver Raska Project in Serbia.
The Vares Silver Project is located
approximately 50km north of the
Bosnian capital of Sarajevo, in the
district of Vares. The Vares Silver Project
comprises of two deposits, namely;
Veovaca – a brown-field open pit
mine – and Rupice - a silver dominant
underground deposit - which exhibits
exceptionally thick mineralisation
with high grades of precious and
base metals. Mineral Resources have
been estimated at the Veovaca and
Rupice deposits, and the Company is
confident that the underexplored region
surrounding the Vares Project offers
significantly more exploration potential.
The Company will continue its
exploration and development activities
across the region, and will look
to acquire surrounding, strategic
land holdings if deemed sufficiently
prospective. To date, exploration
activities have only been focused
around the Rupice and Veovaca
deposits. This includes geophysical
programmes, LIDAR survey, soil
geochemical programs, enhanced
ground penetrating radar and diamond
core drilling. Following evaluation of the
corridor between Rupice and Veovaca,
as well as South East of Veovaca,
32km2 of new concession areas were
granted in October 2020. This takes
the total concession area for the Vares
Project up to 41km2.
Adriatic, through its wholly owned
subsidiary company, Eastern Mining,
owns 100% of all the concessions.
Eastern Mining is the first company
to undertake any exploration in the
surrounding Vares District since the late
1980s.
A Scoping Study on the Vares Silver
Project was released in November
2019, outlining a robust, high-margin
project with a low up-front capital
expenditure. This was followed by a
Pre-Feasibility Study in October 2020,
which not only confirmed the robust
economics of the scoping study, but
also saw the economics improved.
The Company continues its exploration
at the Zinc-Silver Raska Project in
Serbia, since its acquisition of Tethyan
Resource Corp. – completed in
October 2020. To date, exploration
activities have been focused around
the Kizevak and Sastavci deposits. This
includes geophysical programs, LIDAR
survey, soil geochemical programmes
and diamond core drilling.
Further exploration programmes have
been prepared and budgeted across
both Projects; these include, but are
not limited to, drilling and assaying,
resource modelling, metallurgical testing
and potential mine engineering studies
as well as concession administration,
general administration and geological
services. The results of the exploration
programs determine the economic
viability and possible timing for the
commencement of further work
including engineering studies and
possible development of the Projects.
Adriatic’s development programmes,
both at Vares and Raska, rely on
leveraging the existing infrastructure,
built during prior mining operations.
This includes power, water, rail, sealed
roads, accommodation facilities, service
providers and international airports.
Since its IPO on the Australian
Securities Exchange (ASX) Adriatic has
been able to successfully access equity
markets. The company undertook a
US$28 million financing in October
2020, which was provided by EBRD
and Queens Road Capital. The Group
has used this funding primarily to
continue the advancement of the Vares
Silver Project toward the completion
of the DFS and construction, as well
as continue exploration at the Raska
Zinc-Silver Project. The Group is now
actively engaging with potential debt
and alternative finance providers for the
construction of the Vares Silver Project,
with the aim of minimising further equity
dilution for its shareholders.
6
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information SUBSTANTIAL INVESTMENT IN
INFRASTRUCTURE
FUTURE OPERATIONS
Adriatic completed the Preliminary
Feasibility Study for the Vares Silver
Project and is now progressing
the feasibility study with a view to
commencing construction during H2
2021. Based on the current studies,
once production commences, which is
targeted to take place during 2023, the
main operations will include:
Production and processing:
A c.800,000 tonne per year
underground mine will be developed
at Rupice, followed by a c.800,000
tonne per year open pit operation at
Veovaca. During the first 5 years of
operations average production rates will
be c.170,000 tonnes per year of silver/
lead concentrate, zinc concentrate
and pyrite concentrate and c.150,000
tonnes per year of barite for sale to
international smelters and end users.
The mine life, based on the current
mineral resource estimates, is 14 years
Infrastructure:
The mine will require a substantial
investment in infrastructure including:
• Ventilation, primary crusher and
other surface infrastructure at Rupice
to support underground mining.
• Haul road to transport ore from
Rupice to Veovaca.
• Process plant comprising milling,
sequential floatation, regrind,
thickening and filtration, tailing
storage facility and administration
buildings at Veovaca.
• Haul road to deliver product to the
railhead in Vares.
DIVERSITY
Employees:
Employment for approximately 350
people covering all aspects of the
operation including, mining, processing,
logistics and administration.
Environmental, occupational,
health and safety
• Dedicated departments responsible
for maintaining Adriatic’s absolute
commitment to safe operations and
the principle of ‘do no harm’.
• Monitoring of HSE obligations
and performance with appropriate
framework of policies and
management systems in place.
• Routine engagement and
consultation with local communities,
government and other civil society
partners.
Maintenance:
A substantial maintenance team will
be required to service both the mining
equipment, process plant equipment,
road haulage fleet and general vehicle
fleet.
Delivery and transportation:
• Approximately 21 trucks delivering
ore from Rupice to Veovaca.
• Approximately four trucks delivering
product containers to the railhead.
• Approximately two trains every day
delivering concentrates to port
Sales and marketing:
• A team marketing our products to
off-takers and end-users.
Suppliers and contractors:
• Current expectations are that mining
will be carried out by a contractor.
• We will have a range of local and
international suppliers of everything
from reagents and consumables to
spare parts.
Technical services and assay
laboratory:
• A laboratory on site for monitoring
and controlling process plant
operations.
• A metallurgical team constantly
looking at process methodology
improvements.
• On site mine geology team.
Adriatic is committed to workplace diversity which includes but
is not limited to gender, age, ethnicity and cultural background.
The Company’s Diversity Policy defines initiatives which assist
the Company in maintaining and improving the diversity of its
workforce. The Board has also set formal diversity objectives
from 2021 which are included as KPIs in the Company’s Short
Term Incentive Plan (STIP). The Company did not previous have
formal diversity objectives given its stage of development at that
time but has nevertheless achieved the following diversity in the
workplace:
7
Proportion of women:
Organisation as a whole
Executive Management Team
Board
26.6%
Nil
33.3%
Proportion with a registered disability:
Organisation as a whole
1.1%
ADRIATIC METALS PLC STRATEGIC REPORT SOCIAL & HUMAN RIGHTS
Following the establishment of the
ESG committee during the period
the Company has adopted important
policies committing to respect human
rights and its core project stakeholders;
the communities and environments in
which it operates.
Amongst others are a commitment
to support the Universal Declaration
of Human Rights and the United
Nations’ Guiding Principles on
Business and Human Rights and to
recognise and support the International
Labour Organization’s core labour
standards. At individual project level
the Company has continued to adopt
best international practice as well as
maintaining national compliance.
The entry of the European Bank for
Reconstruction & Development (EBRD)
on to the Company’s share register
via a private placement in November
2020 further reinforces the Company’s
adherence to operating in accordance
with EBRD’s ten Performance
Requirements. As a fundamental
part of the EBRD’s investment an
“Environmental and Social Action Plan”
was entered into, which details the
further development of the Company’s
already strong commitment to both
social and human rights.
As the Vares project moves towards
a construction decision and the
start of its procurement programme,
these rights are at the core of policy
development. Through responsible
sourcing initiatives or requiring suppliers
to adopt similar standards as the
Company (allocating resources to help
smaller, local suppliers to achieve these
where necessary) the commitment
to “do the right thing” is robust and
permeates from the Board down to the
most junior of its staff.
Looking forward to 2021 and the
requirement to start recruiting the future
workforce of an operating mine the
Company is committed to embedding
these values in both its corporate
culture and its practices.
COVID-19 IMPACT
The ongoing COVID-19 pandemic has
impacted both communities near the
project and the Company’s operations.
However, steps were quickly taken by
management to mitigate the impact.
COVID-19 prevention measures were
implemented, including a policy statement
issued to all staff. Distancing instructions
and personal protective equipment were
given to all staff, including contractors.
These measures were subsequently
augmented by mandatory temperature
checks at entry to the administrative site.
Through the community engagement
conducted during the Environmental and
Social Impact Assessment (ESIA) works,
the Company’s staff were able to provide
advice and support to the communities
near the project and expanded this by
providing free protective equipment to
Vares school and purchasing a disinfection
tunnel for the town’s health clinic.
Stakeholder engagement since the start
of the pandemic has been guided by the
advice issued by EBRD, including the
hosting of an open-air public consultation
meeting for the Rupice environmental
license.
Although there are ongoing restrictions
to international travel and sporadic
regional lockdowns in response to spikes
in COVID-19 cases our operations are
in general returning to pre-COVID times.
Our exploration activities are continuing
substantially unaffected, with supplies
being delivered on time.
All activities related to development
activities including metallurgical test work,
geochemical domaining and feasibility
study are ongoing and largely unaffected
by the current crisis. For the Environmental
and Social Impact Assessment, where
some foreign based consultants had
been expected to conduct site visits for
various streams of work, these have been
substituted by local resources under the
guidance of our international consultants,
with no resulting impact on the quality of
work.
The Company continues to work closely
with various government ministries in
Bosnia to ensure progress is made with
public hearings and other interactions
with local communities in connection with
permitting and other development activities
in a COVID-safe manner. We appreciated
the efforts of all stakeholders to progress
our various applications during a difficult
period for the Bosnian government which
has resulted most recently in the Company
receiving the Urban Planning Permit in
October 2020.
To date, Bosnia, & Herzegovina has
reported approximately 160,000 confirmed
cases of COVID-19 and approximately
6,000 deaths. Serbia has reported
approximately 500,000 confirmed cases
of COVID-19 and approximately 4,500
deaths. Whilst relatively small when
compared to other European countries,
recent increases in new cases may result
in further restrictions on the movement
of people. The Company has robust
measures and contingency plans if such
restrictions are imposed.
8
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information ESTABLISHED INTERNAL
CONTROLS FRAMEWORK
PRINCIPAL RISKS AND UNCERTAINTIES
The Board is responsible for putting in place a system to manage risk and implement internal controls. The Board has
considered mechanisms by which the business and financial risks facing the Group are managed and reported to the Board.
The principal business and financial risks have been identified and control procedures implemented. The Board acknowledges it
has responsibility for reviewing the effectiveness of the systems that are in place to manage risk.
The Board has delegated certain authorities of risk management to the Audit & Risk Committee, which has its own formal terms
of reference. The Audit & Risk Committee meets at least twice a year to consider presentations by the Auditors and drafts of the
Annual and Interim Financial Statements, and to assess the effectiveness of the Group’s system of internal controls. The Audit
& Risk Committee was chaired by Michael Rawlinson until his appointment as Chairman of the Board on 3 August 2020 and is
now chaired by Sandra Bates; both of whom have recent and relevant financial and business experience. All of the members of
the Committee are non-executive.
The Audit & Risk Committee is responsible, inter alia, for:
• Reviewing the Company’s risk
• Ensuring that the material business
• Overseeing the Company’s risk
management framework at least
annually in order to satisfy itself
that the framework continues to be
sound and to determine whether
there have been any changes in the
material business risks the Company
faces.
risks do not exceed the risk appetite
determined by the Board.
management systems, practices and
procedures to ensure effective risk
identification and management, and
compliance with internal guidelines
and external requirements.
a. Financial controls
The Company has an established
framework of internal financial controls,
the effectiveness of which is regularly
reviewed by the senior management
team, the Audit & Risk Committee
and the Board in light of an ongoing
assessment of significant risks facing
the Company.
The Board is responsible for reviewing
and approving overall Company
strategy, budgets and plans. Monthly
results and variances from plans and
forecasts are reported to the Board.
The Audit & Risk Committee
assists the Board in discharging
its duties regarding the financial
statements, accounting policies and
the maintenance of proper internal
business, and operational and financial
controls.
There are procedures for budgeting and
planning, for monitoring and reporting
to the Board business performance
against those budgets and plans, and
for forecasting expected performance
over the remainder of the financial
period. These cover cash flows, capital
expenditures and balance sheets.
The Audit & Risk Committee reviews
the adequacy of accounting and
financial controls together with the
implementation of any associated
recommendations of the external
auditor.
9
ADRIATIC METALS PLC STRATEGIC REPORT b. Internal controls
The Board is responsible for ensuring
that a sound system of internal
control exists in order to safeguard
shareholders’ interests and the
Company’s assets. In conjunction
with the Audit & Risk Committee it is
responsible for the regular review of the
effectiveness of the systems of internal
control. Internal controls are necessarily
designed to manage risk rather than
eliminate it. The key features of the
system that operated during the period
are:
• Regular Board meetings to consider
the schedule of matters reserved for
Directors’ consideration;
• A risk management process;
• An established organisation with
clearly defined lines of responsibility
and delegation of authority;
• Appointment of staff of the
necessary calibre to fulfil their
allotted responsibilities;
• Comprehensive budgets, forecasts
and business plans, approved by the
Board, reviewed on a regular basis,
with performance monitored against
them and explanations obtained for
material variances;
• An Audit & Risk Committee of the
Board considers significant financial
control matters as appropriate;
• Documented whistle-blowing
policies and procedures.
• formulating risk management
strategies to manage identified risks,
and designing and implementing
appropriate risk management
policies and internal controls; and
• monitoring the performance and
improving the effectiveness of
risk management systems and
internal compliance and controls,
including regular assessment of the
effectiveness of risk management
and internal compliance and control.
To this end, comprehensive practices
are in place that are directed towards
achieving the following objectives:
• compliance with applicable laws and
regulations:
• preparation of reliable published
financial information; and
• implementation of risk transfer
strategies where appropriate (e.g.
insurance).
The responsibility for undertaking and
assessing risk management and internal
control effectiveness is delegated
to management. Management is
required to assess risk management
and associated internal compliance
and control procedures and report
back to the Audit & Risk Committee
at least annually. The Board reviews
assessments of the effectiveness of risk
management and internal compliance
and control at least annually.
d. Principal Risks
The following risks are those that
the Group considers could have the
most serious adverse effect on its
performance and reputation.
c. Risk management policy
The Board determines the Company’s
“risk profile” and is responsible
for overseeing and approving risk
management strategy and policies,
internal compliance and internal control.
The Board has delegated to the Audit
and Risk Committee responsibility for
implementing the risk management
system.
The Audit and Risk Committee submits
particular matters to the Board for its
approval or review.
Among other things the Audit and Risk
Committee is responsible for:
• overseeing the Company’s risk
management systems, practices and
procedures to ensure effective risk
identification and management, and
compliance with internal guidelines
and external requirements;
• assisting management to determine
whether the Company has any
material exposure to economic,
environmental and/or social
sustainability risks and, if it does,
how it manages, or intends to
manage, those risks;
• assisting management to determine
the key risks to the business, and
prioritising work to manage those
risks; and
• reviewing reports from management
on the efficiency and effectiveness
of risk management and associated
internal compliance and control
procedures.
The Company’s process of risk
management and internal compliance
and control includes:
• identifying and measuring risks that
might impact upon the achievement
of the Company’s goals and
objectives, and monitoring the
environment for emerging factors
and trends that affect these risks;
Early stage status and funding requirements
The Company is currently an early stage mineral exploration business and
all of the Group’s activities will be likely directed towards exploration and,
if warranted, the subsequent development of its existing projects and the
search for new mineral deposits to maintain a pipeline of projects.
Significant capital investment will be required and losses are expected to
continue in the near future until the Company has successfully transitioned
into production. The Company has successfully raised funds in the equity
markets during the year and given the strong economics of the Vares Silver
Project and market support, we remain confident in our ability to raise
further finance for our ongoing activities as necessary. We do not anticipate
COVID-19 having a detrimental effect on this.
10
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information PRINCIPAL RISKS AND UNCERTAINTIES
- CONTINUED
Commodity pricing
The October 2020 Preliminary Feasibility Study indicated the contribution to income by element from concentrate sales, based
on pricing assumptions at that time, to be as summarised in the table below:
Contribution
Total
Zn Conc
Ag/Pb Conc
Ba Conc
Py Conc
Zinc
Lead
Copper
Barite
Gold
Silver
Antimony
Total
24%
14%
8%
8%
14%
31%
1%
100%
75%
0%
0%
0%
11%
14%
0%
36%
0%
25%
13%
0%
16%
45%
1%
57%
-
-
-
100%
-
-
-
8%
8%
0%
0%
0%
55%
37%
0%
3%
The Company seeks to mitigate
commodity pricing risks by
attracting long term investors,
routine monitoring of commodity
pricing trends, exploration project
results and development study
outcomes to ensure efficient use of
capital.
The price performance during the
year of relevant commodities for
the Vares Silver Project are shown
in the graph below. Following the
strengthening of precious metals
prices in Q2 2020 these are now
expected to contribute more than
50% of revenue at current prices.
Commodity price performance
Jan 20
Feb 20
Mar 20
Apr 20
May 20
Jun 20
Jul 20
Aug 20
Sep 20
Oct 20
Nov 20
Dec 20
Copper
Zinc
Gold
Silver
Lead
Antimony
11
80%
60%
40%
20%
0%
-20%
-40%
ADRIATIC METALS PLC STRATEGIC REPORT Au
Gold
196.967
Ag
Silver
107.868
Cu
Copper
63.546
Zn
Zinc
65.39
Pb
Lead
207.2
79
47
29
30
82
51
Sb
Antimony
121.760
Gold
The gold price has been volatile over the
past year but appreciated 25% over the 12
months from 1 January 2020. The precious
metal experienced a post-Covid rebound
of 28% from a low of US$1,474/oz to
US$1,888/oz as of end of December 2020.
Silver
Has seen a similar volatility to that of gold
but appreciated by a significantly larger
amount of 47% over the 12 months from
1 January 2020. Out of all the metals
considered here, silver was most impacted
by the Covid shock in mid-March with the
price dropping by nearly 30% to a low of
US$12.0/oz. Since this low point the price
has recovered strongly by over 120% to
US$26.5/oz as of end December 2020.
Copper
Since the 12 months from 1 January 2020
the copper price has pared losses at the
beginning of 2020 ending up 26% on
strong demand from China and optimism
on a broader post-pandemic rebound in
industrial activity. Copper prices fell by
c. 10% during the Covid shock in March
reaching a low of US$4,618/t. Since
then the price has recovered by 68% to
US$7,742/t as of end December 2020.
Zinc
Zinc has appreciated by 19% in the 12
months from 1 January 2020. The price
was on a steady decline even before the
Covid shock in March. However, after
hitting a low of US$1,774/t at the end of
March the metal has seen a strong and
steady recovery of over 53%, ending 2020
at a price of US$2,724/t.
Lead
Lead has been the worst performing of all
the base metals considered here with the
lead price appreciating just 2.5% in the 12
months from 1 January 2020. The price has
recovered 25% from its post-Covid low of
US$1,577/t. The price as at 31 December
2020 was US$1,972/t.
Antimony
(price delivered to Rotterdam
of 99.65% ingots)
The antimony price has increased by
14% over the 12 months from 1 January
2020. With the metal’s price following
a similar trend to that of zinc and lead.
The Antimony price was mildly affected
by the Covid shock decreasing by less
than 10%, however, unlike the other base
and precious metals, the price remained
stagnant and only started recovering at
the start of Q3 2020. Since September
2020 the price has appreciated by 26%
from US$5,300 to US$6,700/t as at 31
December 2020.
Risks associated with exploration and
development
There can be no assurance that exploration on
the Vares Silver Project, or any other exploration
properties that may be acquired in the future, will
result in the discovery of an economic mineral
resource. Even if an apparently viable mineral
resource is identified, there is no guarantee that it
can be economically exploited.
The Preliminary Feasibility Study on the Vares
Silver Project released by the Company on 15
October 2020 constitutes a conceptual study
based on certain technical and economic
assessments. As such, it is insufficient to provide
certainty that the conclusions of the Preliminary
Feasibility Study will be realised or that any
conceptual, projected or indicative net present
value or internal rate of return referred to in the
Preliminary Feasibility Study is assured by the
Vares Silver Project or certainty as to estimation
of ore reserves or any assurance of an economic
development case at this stage.
The Company is mitigating these risks with the
significant progress made during the year with
infill drilling, which has increased confidence in
the mineral resource estimate, technical studies
and permitting for the Vares Silver Project which
serve to de-risk the project and its commercial
viability.
The future exploration activities of the Company
may be affected by a range of factors including
geological conditions, limitations on activities
due to seasonal weather patterns, unanticipated
operational and technical difficulties, insufficient
or unreliable infrastructure (such as power,
water and transport), unanticipated metallurgical
problems which may affect extraction costs,
industrial and environmental accidents, changing
government regulations and many other factors
beyond the control of the Company.
The Company is working with internationally
recognised technical consultants to produce a
construction and operational plan that mitigates
these risks where possible through the use of
industry best practice and the recruitment of
capable, experienced staff and contractors.
Health & Safety
The Company has taken active steps throughout
the year to establish and maintain a strong
health & safety focussed work-place culture.
New joiners go through an induction programme
which covers OHS and there is a programme of
continuation training run by the Health & Safety
Manager. Notably training has been Working at
Height and Winter Driving training courses
12
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information PRINCIPAL RISKS AND UNCERTAINTIES
- CONTINUED
Risks associated with exploration and development - continued
Community/NGO Concerns
Affecting Exploration/Operational
Activity
The Company has taken a forward
stance on its engagement and
involvement of all its stakeholders
since operations began in 2017. To
date there have been no restrictions to
operations and the Company enjoys
a very successful relationship with
the near mine communities. An active
media campaign provides regular
updates to all the local communities
and the ESG team regularly meet and
listen carefully to the feedback given
by community leaders. Whilst the
Company enjoys both a cooperative
relationship with its stakeholders and,
to date no stakeholder groups or NGOs
have raised any material issues with the
Company about the development of
the mine, it is clear that it must not be
complacent and continue to put ESG at
the heart of its operational activities.
Land Acquisition
The development of the project will
require the acquisition or lease of
private land. The Company recognises
the importance of its approach to this
potentially problematic requirement and
is developing policies in accordance
with EBRD’s Performance Requirement
5 which provides guidance on best
practice.
Veovaca Historic Tailings Dam
There is the potential that the
community near the project will
consider the historic Veovaca tailings
dam to be the responsibility of
the Company. The Company has
cooperated closely with the Municipality
on this matter and whilst not required to
do so has commissioned independent
expert appraisal of the dam, its
structural integrity and any associated
environmental degradation. The water,
air and dust monitoring during the
ESIA process will establish the baseline
conditions around the tailings dam and
a Management Plan will be developed
to address any issues identified.
Bribery & Corruption
The Company’s code of corporate
governance specifies the measures
the Company takes to comply with all
applicable Anti Bribery & Corruption
legislation. The Board, through its
statutory oversight commitment,
enforces adherence and management
have implemented policy and provided
training to all staff, with refresher
training programmed as part of the HR
management plan.
In-country Risks in Bosnia and
Herzegovina and Serbia
The Company will be subject to the
risks associated with operating in
Bosnia and Herzegovina, including
various levels of political, sovereign,
economic and other risks and
uncertainties, which include, but are
not limited to, labour unrest, the risks
of war or civil unrest, expropriation
and nationalisation, renegotiation or
nullification of existing concessions,
licenses, permits and contracts, illegal
mining, changes in taxation policies,
restrictions on foreign exchange and
repatriation and changing political
conditions, currency controls and
governmental regulations that favour
or require the awarding of contracts
to local contractors or require foreign
contractors to employ citizens of, or
purchase supplies from, a particular
jurisdiction.
Operations and the Company’s
development and profitability may
be affected in varying degrees by
government regulations (and changes
to government regulations) with respect
to, but not limited to, restrictions on
production, price controls, export
controls, foreign currency remittance,
income taxes, expropriation of property,
foreign investment, maintenance of
claims, environmental legislation, land
use, land claims of local people, water
use and mine safety.
The Company seeks to mitigate these
risks through effective engagement with
relevant stakeholders including all levels
of government and local communities.
Political Instability
The Company acknowledges the
potential impact of political instability
on its ability to operate and deliver the
mine. To mitigate this risk the Company
closely monitors the national political
situation and carefully considers every
engagement with politicians (at all
levels, including internationally) with
each meeting minuted in detail.
A political framework and relationship
mapping exercise was completed in
June to better identify the relationships
and impact that party politics may have
on operations.
Risks associated with mining
concessions in Bosnia and
Herzegovina and Serbia
The laws and regulations on mining
in Bosnia and Herzegovina are still
developing and as a result some
areas of the law on mining are unclear.
Additionally, certain provisions of the
Vares Concession are unclear and may
require renegotiation or clarification,
the outcome of which the Company
cannot guarantee. If the Company
does not comply with the terms of the
agreement it may be in default and the
Concession may be terminated, which
would have adverse consequences for
the Company’s operational and financial
performance.
Outcomes in courts in Bosnia and
Herzegovina and Serbia may be less
predictable than in the United Kingdom,
which could affect the enforceability of
contracts entered into by the Company
or its subsidiaries in Bosnia and
Herzegovina and Serbia.
There is no guarantee that the
Company will be able to obtain all
required approvals, licenses and
permits relating to its exploration and
subsequent exploitation activities. To
the extent that required authorisations
are not obtained or are delayed, the
Company’s operational and financial
performance may be materially
adversely affected.
Notwithstanding these risks, the
Company has made good progress
during the period when it secured
a substantial extension to the area
covered by the Vares Silver Project
concession and was granted the
Urban Planning Permit for the Veovaca
area. The progress of ongoing permit
applications to facilitate exploration and
subsequent exploitation activities is
closely monitored by management and
the Board.
13
ADRIATIC METALS PLC STRATEGIC REPORT Permitting Delays
The Company must work very closely
with the government departments
responsible for permitting the project.
Open and regular dialogue to identify
and resolve any issues is critical.
The public consultation meeting,
required for the issuance of the Rupice
Environmental License, was delayed
whilst the Environmental ministry
was considering how to run such
a gathering under the restriction of
COVID-19. Through discussion with
the government and the suggestion
that EBRD’s guidance for stakeholder
engagement during the pandemic
be followed, this meeting was held
successfully, in the open air, during
August 2020.
Risks associated with
Commodity Prices and
Currency Exchange Rates
The value of the Company’s assets
and potential earnings as well as costs
and expenses may be affected by
fluctuations in commodity prices and
exchange rates, such as the US$ and
GBP denominated zinc, lead, gold,
silver, copper and barite prices, and
exchange rates affecting USD, GBP,
AUD and EUR.
The Company monitors these risks
by tracking commodity and exchange
rates in its internal financial modelling of
the Vares Silver Project.
Risks associated with resource
and reserve estimates
Resource and reserve estimates are
expressions of judgement based on
knowledge, experience and industry
practice. Such estimates may alter
significantly when new information
or techniques become available and
are, by their very nature, imprecise
and depend to some extent on
interpretation which may prove to be
inaccurate.
The Company follows industry standard
QAQC practices and has engaged CSA
Global, an internationally recognised
geological consultancy, to undertake
resource estimates and reduce the
inherent risks associated with resource
and reserves estimation.
Risks associated with
reliance on key personnel
The Group relies heavily on a small
number of key individuals, in particular
the Directors, its senior management
and consultants. The loss or diminution
in the services of any of the Directors or
any member of the management team
or an inability to recruit, train and/or
retain necessary personnel could have
a material and adverse effect on the
Group’s business, results of operations,
financial condition and prospects.
Key Performance Indicators
The near term and primary performance
indicators (KPIs) for Adriatic, which
relate primarily to its exploration and
development activities, are as follows:
• Growing Adriatic’s JORC resource
base at its projects in Serbia and
Bosnia
• Advancing permitting of the Vares
Silver Project status on a pathway
towards exploitation in line with
target milestone dates
• Delivering a robust NPV8 in the
feasibility study for the Vares Silver
Project in line with target milestone
dates
• Securing project finance for the
Vares Silver Project at a competitive
cost
• Commencing construction of the
Vares Silver Project in line with target
milestone dates
• Maintaining a strong culture of
occupational health and safety
best practices throughout the
construction phase of the Vares
Silver Project and into production
• Increasing staff satisfaction ratings
• Increasing gender diversity within the
workforce
These KPIs have been incorporated
into an annual, cash based short
term incentive plan with effect from
1 January 2021 as described in the
Remuneration Report.
Annual Report for the year ended 30 June 2020
14
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information WE ENGAGED
WITH INVESTORS
DIRECTORS’ SECTION 172(1) STATEMENT
This Statement addresses:
a ) Stakeholder engagement, with
information on stakeholders, issues
and methods of engagement
b ) Principal decisions made by the
Board, and how stakeholder
considerations influenced the
decision-making process
a. Stakeholder engagement
activities within the reporting
period
The Company continuously interacts
with a variety of stakeholders who are
important to its success, including
shareholders, debt providers, staff,
national, cantonal and municipal
government administrative and
environmental bodies, NGOs, the local
community, and suppliers.
In its engagement with shareholders,
Adriatic endeavours to strike a proper
balance between open communication
and the need to keep commercially
sensitive information confidential.
The Group recognises that its activities
and forthcoming development of
the Vares Silver Project creates
significant potential impacts on, as
well as opportunities for, local people.
The management of environmental
and social issues will be based on
an international standard ESIA. In
addition, the Group is committed to
regular consultation and engagement
with the community including through
a Community Information Centre and
Community Liaison Committee.
The Board acknowledges the
importance of forming and retaining
constructive relationships with
all stakeholder groups. Effective
engagement with stakeholders enables
the Board to ensure stakeholder
interests are considered when making
decisions and is crucial for achieving
the long term success of the Company.
The following disclosure describes
how the Directors have had regard to
the matters set out in section 172(1)(a)
of the Companies Act 2006 (the Act)
and forms the Directors’ statement
required under the Act. This reporting
requirement is made in accordance with
the corporate governance requirements
identified in The Companies
(Miscellaneous Reporting) Regulations
2018, which apply to company
reporting on financial years starting on
or after 1 January 2019.
The matters set out in section 172(1) (a)
to (f) of the Act are that a Director must
act in the way they consider, in good
faith, would be most likely to promote
the success of the Company for the
benefit of its members as a whole, and
in doing so have regard (amongst other
matters) to:
a ) the likely consequences of any
decision in the long term;
b ) the interests of the Company’s
employees;
c ) the need to foster the Company’s
business relationships with
suppliers, customers and others;
d ) the impact of the Company’s
operations on the community and
the environment;
e ) the desirability of the Company
maintaining a reputation for high
standards of business conduct; and
f ) the need to act fairly between
members of the Company.
In the above Strategic Report section of
this Annual Report, the Company has
set out its overall goal and its strategic
priorities for attaining it.
15
ADRIATIC METALS PLC STRATEGIC REPORT Key Stakeholder groups
Reason to engage
Engagement method
Engagement outcome
We engaged with investors
on topics of strategy,
governance, project updates
and performance. Please see
Dialogue with Shareholders
section of the Annual Report
on page 63. The CEO
presented at a number of
investor roadshows and one-
to-one meetings.
The process to select debt
providers to meet the upfront
capital requirements of
the Vares Silver Project is
ongoing.
The key mechanisms of
engagement included:
Substantial Shareholders:
• Sandfire Resources have the
right to appoint a Director
under the terms of its
Collaboration and Strategic
Partnership Deed.
• The other existing substantial
shareholders held periodic
meetings with the Chairman,
CEO and CFO.
Prospective and existing
investors:
• The AGM and Annual and
Interim Reports.
•
Investor roadshows and
presentations.
• One-on-one investor meetings
with the Chairman, CEO and
CFO.
• Access to the Company’s
brokers and advisers.
• Regular news and project
updates.
• Social media accounts.
• Site visits for potential
cornerstone investors.
Shareholders with queries are
encouraged to contact Thomas
Horton, the Company’s Head
of Corporate Development &
Investor Relations, at thomas.
horton@adriaticmetals.com
• One-to-one meetings with
the CEO and/or CFO and
undertaken on a regular basis
with a range of potential debt
providers to provide regular
updates on progress of the
Vares Silver Project.
• The Company has engaged
Tamesis Partners and
Terrafranca Advisory to
provide debt advisory
services, including the
preparation and distribution
of an information package to
potential financiers, solicitation
of financing offers and
evaluation of the same.
Equity Investors
All substantial shareholders
who own more than 3% of
the Company’s shares are
listed on page 65 within the
Governance Report.
On 2 November 2020 the
Company completed a £6.2
million private placement
with the European Bank
of Reconstruction and
Development.
As at 31 December 2020,
Sandfire Resources holds
16.1% of the shares of the
Company, and until 8 July
2020 had a representative on
the Board of the Company.
At 31 December 2020,
shares held in public hands
(defined as shares not held by
persons associated with the
Company or holding over 5%)
constituted 31.8% of the total
shares in issue.
Existing and potential
future debt providers
On 1 December 2020,
Adriatic announced it had
completed the issue of US$20
million of convertible bonds to
Queens Road Capital Limited.
Potential future debt providers
include commercial banks,
credit funds, development
financial institutions, streaming
and royalty companies and
off-take financiers.
Access to capital is of vital
importance to the long term
success of our business
and achieving value for
shareholders.
Engagement activities are
designed to inform shareholders
of Adriatic’s progress towards
achieving its strategic objectives
and develop an investor base
that will support the Company in
achieving those objectives.
Particularly during its pre-
production, exploration and
development phase, Adriatic
may incur substantial debt from
time to time to finance working
capital, capital expenditures,
investments or acquisitions or
for other purposes.
To achieve the outcomes
indicated in the Vares Silver
Project preliminary feasibility
study, external funding will
be necessary to finance up-
front capital requirements to
construct the mine, processing
plant and general project
infrastructure. It is expected that
the finance will be derived from
a combination of equity and
debt instruments from existing
shareholders, new equity
investment, and debt providers.
The Group is committed to
international best practices and
to working to the standards set
out in the Equator Principles,
the IFC Performance Standards
and EBRD Performance
Requirements.
16
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information DIRECTORS’ SECTION 172(1) STATEMENT
- CONTINUED
Key Stakeholder groups
Reason to engage
Engagement method
Engagement outcome
Workforce
The Company has seven
UK employees. Two of the
Directors are UK resident
and four are overseas
resident. The Chairman
is UK-based, the CEO
is based in Bosnia-
Herzegovina and the CFO
is based in Jersey, Channel
Islands.
The Company has 53
employees based in
Bosnia-Herzegovina, 21
based in Serbia.
The Company’s long term
success depends to a large
degree on the expertise,
loyalty and commitment
to Adriatic’s values of its
workforce.
The Board recognises that
reliance on key personnel is a
known risk (see page 14).
The Board recognises the
importance of company
culture and of establishing
employee alignment on
issues like safety and health,
business integrity and
sustainable development.
The Company has an
absolute commitment to safe
operations and the principle
of ‘do no harm’.
General Workforce:
The company maintained
an excellent safety record
during the year.
UK Employees:
The number of employees
in the UK increased by one
during the year.
Bosnian employees:
The Company has attracted
a further 26 employees to
the workforce during the
year with excellent staff
retention.
Serbian employees:
The Company acquired
16 employees in Serbia
as a result of the Tethyan
transaction which has since
increased to 21.
General Workforce:
• Adriatic maintains an open
line of communication
between its employees, senior
management and Board.
• The Company monitors
HSE obligations and reports
performance against these.
• The Company intends to
undertake a group-wide
employee survey in 2021
UK employees:
• The CEO and CFO report
regularly to the Board,
including the provision of board
information. Key members of
the finance team are invited to
some of the audit committee
meetings.
• There is a formalised employee
induction into the Company’s
corporate governance policies
and procedures.
Bosnian employees:
• There is a Bosnian HR
Function.
• Senior management regularly
visit the operations in Bosnia-
and Herzegovina and engage
with its employees through
one-on-one and staff meetings,
employee events, project
updates, etc.
• The Company is looking to
establish a formal consultation
mechanism during 2021.
Serbian employees:
• There is not a dedicated
Serbian HR Function.
• Senior management regularly
visit the operations in Serbia
and engage with its employees
through one-on-one and staff
meetings, employee events,
project updates, etc.
17
ADRIATIC METALS PLC STRATEGIC REPORT Key Stakeholder groups
Reason to engage
Engagement method
Engagement outcome
The Company will only
be able to commence
production once it receives
the relevant licenses and
permits from all levels of
government to mine and
process ore.
Governmental
bodies
The Company engages with
local (Municipal), regional
(Canton)and national
(Federal) government in
Bosnia- Herzegovina.
In Serbia the Company
engages with local
(Municipal) and national
government.
The Company engages with
the relevant departments
of the Bosnian & Serbian
governments to obtain
the operational licences
it will require. In addition
to statutory reporting the
Company regularly updates
the government departments
and that open, continuous
engagement is key to
developing a successful
permitting regime.
The Country Managers
report regularly to the Board
on progress with obtaining
licences and permits.
The Group is committed
to being a long term actor
in both Bosnia & Serbia
with a firm commitment to
each country’s sustainable
development. We are
committed to conducting our
relationships on the basis of
transparency, partnership and
integrity
Bosnia:
The Company announced on 29
January 2020 that it had entered
into Annexure 4 to its Concession
Agreement with the Ministry
of Economy for Zenica-Doboj
Canton. This Annex granted the
Company rights to the gold, silver
and copper in addition to the lead,
zinc and barite at Veovaca and
Rupice.
In July 2020 the Company was
issued its Environmental Permit
for the Veovaca mine, processing
plant and tailings facility.
On 28 August 2020 the Canton
awarded a further precious and
base metals concession covering
32km2 of highly prospective land
between the two deposits and
further following the geological
trend from Veovaca to the South
East.
The Public Consultation prior to
the issuance of the Environmental
Permit for Rupice was held on
31 August 2020 and a positive
Record of Decision for the
Rupice Environmental Permit was
subsequently received in February
2021.
The Urban Planning Permit,
a further pre-cursor event to
the issuance of an exploitation
permit for Veovaca was received
in November 2020 and the
Veovaca exploitation permit was
consequently issued in January
2021.
Serbia:
Since the acquisition of Tethyan, in
October 2020, there has been no
requirement to amend the issued
exploration licences. However the
Company’s senior management
have introduced themselves
to both local and national
government bodies.
18
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information DIRECTORS’ SECTION 172(1) STATEMENT
- CONTINUED
Key Stakeholder groups
Reason to engage
Engagement method
Engagement outcome
Bosnia:
Effective media
penetration both locally
and regionally, increasing
social media presence
which will be further
propagated and used for
local recruitment.
The Public Liaison
Committee has held three
meetings and is proving
an excellent forum for
community feedback.
Community
Bosnia:
The near-mine communities
in Vares and Kakanj and
the wider population of the
municipalities and Canton
of Zenica-Doboj.
Serbia:
The near-mine communities
in the Municipality of
Raska, the national
park of Kapaonik (which
borders the north eastern
extremities of the licence
area) and the wider
population of both south
west Serbia and northern
Kosovo.
Establishing and maintaining
good relations with the local
community throughout the
development, operation and
ultimately closure of the mine
is vital for the Company’s
social licence to operate.
Principally the Company
needs to engage with
its affected communities
in order to build trust.
Developing this will increase
the likelihood that any fears
raised can be assuaged and
the Company’s plans and
strategies are more likely to
be accepted. Community
engagement will inform
better decision making,
particularly during the project
planning stage.
The Company will in due
course have a significant
social and economic impact
on the local community and
surrounding area.
Dissemination of project
developments, the
advertisement of the public
consultations and the
function of the Information
Centre is a cornerstone of
the Company’s ESG policy.
Bosnia:
The municipality of Vares
and the surrounding area
supply the majority of the
Company’s employees now
and in the future.
Serbia:
The municipality of Raska
provides over 50% of the
Company’s local staff.
The Company, assisted by its
contracted Environmental, Social &
Governance consultant and advised
by Critical Resource (ESG experts)
is following a carefully constructed
programme of engagement.
The Company established a Board
ESG Committee which will, inter alia,
monitor Adriatic’s engagement with
its stakeholders. The ESG charter
and policy commits the Group to
ensuring sustainable growth, with
minimal adverse impacts.
Bosnia:
From the development of a
Stakeholder Engagement Plan in
Vares (listing all project stakeholders
and the engagement with each),
the establishment of an Information
Centre and appointment of
community officer to the initiation of
a 28 member strong Public Liaison
Committee the Company is adhering
to best international practice as
proscribed by both the EBRD’s
Performance Requirements and the
IFC’s Performance Standards.
The Group employs the majority
of its current (and future) staff from
the municipality of Vares and as
the Company approaches the
build phase of the project a Local
Business Development Officer has
been appointed to encourage/
support local procurement and
contracting.
Social, print, radio and television
media platforms have all been
utilised. A bi-weekly interview with
members of staff is broadcast on
“Radio Bobovac”, which is listened
to by approximately 80% of the
residents of Vares. Most recently a
media coordinator has been bought
onto the team in Vares, particularly
to focus on the increasing social
media flow associated with the
project.
Serbia:
The blueprint of Community
Engagement developed in Bosnia
is being rolled out in Serbia. A
Stakeholder Engagement Plan, initial
public consultation and the opening
of an information centre in the town
of Raska are programmed for 2021
in line with increased operational
activity.
19
ADRIATIC METALS PLC STRATEGIC REPORT
Key Stakeholder groups
Reason to engage
Engagement method
Engagement outcome
Suppliers
During the construction
phase of the Vares Silver
Project, Adriatic will use
key suppliers under
commercial engineering
contracts to deliver the
mine and plant, all of
whom are expected to be
large international vendors.
At a local level, we also
partner with a variety of
smaller companies, some
of whom are independent
or family run businesses.
Partners
In May 2018 Adriatic
entered into a
Collaboration and Strategic
Partnership Deed (Deed)
with the Australian
copper producer Sandfire
Resources Limited
(Sandfire) which had been
a substantial investor in
Adriatic’s ASX IPO in April
2018 and at 31 December
2020 held 16.1% of
Adriatic’s shares.
Our suppliers are fundamental
to ensuring that the Company
can construct the project on
time and on budget. Using
quality suppliers ensures
that as a business we
meet the high standards of
performance that we expect
of ourselves and our vendor
partners.
• The Management
team has commenced
preliminary discussions
with a number of potential
EPCM providers and
mining contractors.
• One on one meetings
between management and
suppliers.
• Contact with procurement
department and accounts
payable.
Smaller local vendors were
engaged at a broad level to
better align with the Company’s
objective of increase local and
regional project content.
The procurement policies and
processes are currently in
development and are expected
to be completed during H1
2021.
This partnership was intended
to allow the Company to
benefit from Sandfire’s
significant technical expertise
to develop its Veovaca and
Rupice Projects, as well as
further strategic support as
Adriatic moves to unlock
the potential from its first
mover status and regional
exploration portfolio.
• Adriatic and Sandfire
formed a Technical
Committee to oversee
the strategy and
implementation of
the exploration and
development of these
Projects.
• The Technical Committee
met in April 2019 but has
not had any subsequent
meetings.
• Under the partnership
agreement Sandfire
Resources is entitled
to nominate one Non-
Executive Director to the
Board of the Company for
as long as Sandfire holds
10 percent or more of
Adriatic’s issued ordinary
shares. John Richards
served in this capacity
from November 2019 until
July 2020 and has not
been replaced by another
nominee thus far.
Following a dispute Sandfire
brought proceedings against
Adriatic in the Supreme
Court of Western Australia,
as announced on 31 July
2020, Adriatic announced
on 3 November 2020 that it
had entered into a Deed of
Settlement and Release with
Sandfire where both parties
had agreed to settle the
dispute.
Pursuant to Sandfire’s anti-
dilution right under the
Deed, Sandfire paid Adriatic
A$8,649,360.35 in cash for
4,830,156 Adriatic shares as
a Settlement Placement and
such shares were allotted on
24 December 2020.
Sandfire has chosen to exercise
its ongoing anti-dilution right in
respect of subsequent issues
of equity by the Company since
the settlement.
20
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information REPUTATION FOR HIGH
STANDARDS OF
BUSINESS CONDUCT
PRINCIPAL DECISIONS BY THE BOARD DURING THE PERIOD
We define principal decisions as those
which potentially have a long term
strategic impact and are material
to the Group, and/or are significant
to our key stakeholder groups.
In making the following principal
decisions, the Board considered how
they would affect its stakeholders,
the need to maintain a reputation for
high standards of business conduct,
the impact on the environment and
the need to act fairly between the
members of the Company:
a. Equity capital raising and
convertible debt financing:
In September 2020, the Board
decided to seek to raise additional
funding for the Company to advance
the Vares Silver Project and general
working capital requirements. The
Company subsequently announced
on 2 November 2020 that it had
completed a £6.2 million equity
private placement to EBRD at a price
of £1.175 per share and in December
2020 completed the issue of US$20
million in convertible debentures to
Queens Road Capital with an 8.5%
coupon.
b. Approval of technical
information prior to
announcement:
Following careful consideration,
including internal review procedures
as necessary, the Board approved for
release the updated mineral resource
estimate for the Rupice deposit of the
Vares Silver Project on 1 September
2020 and the results of the Vares
Silver Project Preliminary Feasibility
Study on 15 October 2020.
c. Settlement of Litigation with
Sandfire:
As announced on 3 November 2020,
the Board approved the Company
entering into a Deed of Settlement
and Release with Sandfire as a result
of both parties having agreed to
settle the dispute brought by Sandfire
against Adriatic in the Supreme Court
of Western Australia, as announced
on 31 July 2020
In connection with the settlement, and
pursuant to Sandfire’s anti-dilution
right under the Deed, the Board
approved the allotment of 4,830,156
Adriatic shares for which Sandfire
paid Adriatic A$8,649,360.35 in cash.
The shares were allotted on 24
December 2020.
21
ADRIATIC METALS PLC
STRATEGIC REPORT d. Tethyan Resource Corp
acquisition:
In June 2020 the Company announced
that Adriatic and Tethyan Resource
Corp. had entered into a Definitive
Arrangement Agreement whereby
Adriatic would acquire 100% of
the outstanding common shares
of Tethyan, in consideration for the
issuance of 0.166 of an ordinary share
of Adriatic for each common share of
Tethyan.
The Board subsequently authorized
the execution of all necessary
documentation to complete the
transaction including the allotment
of 13,278,937 new ordinary shares in
Adriatic and the issue of 4,128,633
warrants and 469,779 options to
former Tethyan warrant holders and
former Tethyan option holders.
The acquisition, which has resulted
in the addition of Tethyan’s Serbian
brownfield development projects,
Kizevak and Sastavci, and its large
prospective landholding on the
Tethyan mineral belt to Adriatic’s
asset portfolio, positions the enlarged
Group as the leading Balkan base and
precious metals developer.
The acquisition also represents the
first phase of implementing a strategy
to identify and acquire substantially
accretive assets to Adriatic’s portfolio
of high value, high margin assets. It is
expected to leverage Adriatic’s core
strengths so as to realise value growth
and further Adriatic’s aim of becoming
a European focused, multi-asset
mining company.
e. Change of accounting
reference date:
On 23 November 2020, the Company
changed its accounting reference date
from 30 June to 31 December to align
it with that of its subsidiary companies
to streamline financial reporting
processes and reduce administrative
costs.
Accordingly, Adriatic has published
audited accounts for the year ended
30 June 2020 and will subsequently
publish audited accounts for the six
months ending 31 December 2020.
Thereafter, interim and annual reports
will be published each year for the 6
months to 30 June and 12 months to
31 December respectively.
Annual Report for the year ended 31 December 2020
22
Strategic ReportGovernanceFinancial StatementsASX Additional Information IDENTIFY AND ACQUIRE
SUBSTANTIALLY ACCRETIVE
ASSETS
OUR ASSETS
The Company asset portfolio consists of two polymetallic projects in the Balkan region, which are both situated on the Tethyan
Metalogenic Belt. The company’s flagship asset is the Vares Silver Project in Bosnia and Herzegovina, which is currently in
development phase. The other is the Raska Zinc-Silver Project in Serbia, which is an exploration project.
23
ADRIATIC METALS PLC STRATEGIC REPORT THE VARES SILVER
PROJECT, BOSNIA
AND HERZEGOVINA
The Company’s flagship Vares Silver Project is located
approximately 50 km north of Sarajevo, in the district of Vares.
Adriatic, through its wholly owned subsidiary Eastern Mining d.o.o., owns 100% of the Vares Silver Project concession. In September
2020, the Group successfully secured a 32 km2 extension to its concession area and the Vares Silver Project concession area covers
a total of 41 km2 as at 31 December 2020. The significantly expanded concession area includes an area between Veovaca and
Rupice (Semizova Ponikva & Brezik), as well as an area to the south-east of Veovaca (Vares East) as shown in the diagram below.
The concession area expires in 2038, but can be extended for a further 10 years upon written request. Additionally on 28 January
2021, the Group received the Veovaca exploitation permit from the Federal Ministry for Energy, Mining and Industry. The receipt of
this permit initiates the formal exploitation period for the project, which under the terms of the concession agreement is up to 30
years, thus further adding to our security of tenure.
RUPICE
B O S N I A
Area of
Interest
SARAJEVO
Rupice
Jurasevac - Brestic
Pogari
Borovica
SEMIZOVA PONIKVA
BREZIK
Vares
Orti
Railhead
Veovaca
Veovaca West
Resource Development & Scoping Study
Advanced Stage Exploration Targets
Historical Brownfield Targets
Granted Licence
New Concession Boundaries
Prospect
Road
Rail
2.5 Kilometres
Mekuse
Seliste
VARES EAST
B O S N I A
R u p i c e a n d V e o v a c a
L o c a t i o n M a p
N
Eastern Mining is the first company to
conduct exploration in the surrounding
Vares District since the late 1980s,
when the last mining operation in the
area was shut down. Informed by data
from historical exploration activities
within the Vares District, the Company
has been conducting exploration
activities since 2017 and successfully
delineated a maiden Mineral Resource
at Rupice in July 2019 which was
subsequently increased in an updated
mineral resource estimate announced in
September 2020. To date, exploration
by Adriatic has been focused around
the Rupice and Veovaca deposits. The
Company expects to expand its future
exploration activities, following the grant
of a 32 km2 extension to its existing
concession area in September 2020
covering a number of areas of interest
including Semizova-Ponikva, Brezik and
Vares East.
In October 2020, a Preliminary
Feasibility Study (PFS) on the Vares
Silver Project was released. The results
from the PFS improved on the robust,
high-margin project economics and low
up-front capital expenditure, which were
in the 2019 Scoping Study.
High-grade mineral resources with
strong potential for exploration
upside
Mineral Resources have been delineated
at both the Veovaca and Rupice
deposits, which make up the Vares
Silver Project. The polymetallic Mineral
To Breza
Tisovci
VEOVACA
Brgule
Smajlova Suma
Resource consists of high grades of
silver, gold, zinc, lead, copper and
barite, offering a high potential for mine
development, which was confirmed
in the 2019 Scoping Study, and more
recently in the October 2020 PFS. These
mineralisation systems have a potential
to repeat along strike, as well as extend
at depth. This suggests a potential
for further discoveries across the
concession area. The Mineral Resource
estimates for Rupice and Veovaca are
shown below.
Excellent metallurgical recoveries
and concentrate grades
The Vares Project will produce zinc,
silver/lead, barite and precious metal
pyrite concentrates. Over the 14 year
life of mine, the zinc concentrates will
on average grade 57.1%, the silver/
lead concentrates will on average grade
41.4% lead and 1,880 g/t of silver. The
barite concentrate will on average grade
74.2% and the pyrite concentrate will
on average grade 4.43 g/t gold and 287
g/t silver. t The Project will potentially
produce annually, on average, 46,800
tonnes of zinc concentrate, 43,470
tonnes of silver/lead concentrate,
164,270 tonnes of barite concentrate
and 17,800 tonnes of precious metals
pyrite. All concentrates are expected to
be marketable.
Existing infrastructure in a historical
mining district
The nearby town of Vares, which sits
between the Veovaca and Rupice
deposits, has a long history of mining.
State-owned iron ore mining operations,
along with associated steelworks
operated there from the 1890s until
the late 1980s. It is as a result of this
that there remains existing road, rail,
water and power infrastructure. Within
the licence area is also an abandoned
processing facility, along with a
previously permitted tailings storage
facility. Adriatic is proposing to take
advantage of much of this infrastructure
for the Vares Silver Project.
The abandoned processing facility,
which operated until the late 1980’s,
is located ~2 km southeast of the
proposed Veovaca open pit. While all
previous equipment and supporting
services have been removed, a large
administrative building remains, along
with the concrete foundations of the old
processing plant. The administrative
building has already been renovated and
repurposed as the Company’s country
office for the Vares Project.
The Rupice deposit is largely a
greenfield site located 10km from
Veovaca. Current infrastructure at
Rupice includes two stream based
pump-stations and water reservoirs
which are currently used for the ongoing
exploration drilling.
Annual Report for the year ended 31 December 2020
24
Strategic ReportGovernanceFinancial StatementsASX Additional Information STRATEGIC REPORT
OUR ASSETS - CONTINUED
THE VARES SILVER PROJECT, BOSNIA AND HERZEGOVINA - continued
Mineral Resources
The Vares Silver Project comprises the Rupice and Veovaca deposits.
On 1 September 2020, the Company announced an updated Indicated and Inferred Mineral Resource estimate for the
Rupice deposit representing a 32% increase in tonnes compared to the Rupice maiden Mineral Resource estimate using a
50g/t AgEq cut-off.
Rupice Mineral Resources (Note 1)
At 31 December 2020
Grades
Contained metal
JORC Classification
Indicated
Inferred
Total
Note 1:
Tonnes
(mt)
9.5
2.5
Ag
Zn
g/t %
176
4.9
49
0.9
12.0
149
4.1
Pb
%
3.1
0.7
2.6
Au Cu
Sb
BaSO4
g/t %
%
1.6
0.5
0.2
0.3
0.2
0.1
1.4
0.5
0.2
%
29
9
25
Au
Cu
Sb
BaSO4
Ag
Moz
Zn
Kt
Pb
Kt
Koz
54
466
294
500
4
23
18
27
Kt
52
4
58
488
312
526
56
kt
22
3
24
Kt
2,732
218
2,949
• Prepared by CSA Global Pty Ltd in Perth in September 2020
• Mineral Resources are based on JORC Code definitions.
• A cut-off grade of 50g/t silver equivalent has been applied.
• AgEq – Silver equivalent was calculated using conversion factors of 31.1 for Zn, 24.88 for Pb, 80.0 for Au, 1.87 for BaSO4,
80.87 for Cu and 80.87 for Sb, and recoveries of 90% for all elements. Metal prices used were US$2,500/t for Zn,
US$2,000/t for Pb, $150/t for BaSO4, $2,000/oz for Au, $25/oz for Ag, $6500/t for Sb and $6,500 for Cu.
• The applied formula was: AgEq = Ag(g/t) * 90% + 31.1 * Zn(%) * 90% + 24.88 * Pb(%) * 90% + 1.87 * BaSO4% *
90% + 80 * Au(g/t) * 90% + 80.87 * Sb(%) * 90% + 80.87 * Cu(%)* 90%
•
It is the opinion of Adriatic Metals and the Competent Persons that all elements and products included in the
metal equivalent formula have a reasonable potential to be recovered and sold.
• Metallurgical recoveries of 90% have been applied in the metal equivalent formula based on recent and ongoing
test work results.
• A bulk density was calculated for each model cell using regression formula
BD = 2.745 + BaSO4 * 0.01793 + Pb * 0.06728 - Zn * 0.01317 + Cu * 0.1105 for the halo domain,
BD = 2.7341 + BaSO4 * 0.01823 + Pb * 0.04801 + Zn * 0.03941 - Cu * 0.01051 for the fault zones and
BD = 2.7949 + BaSO4 * 0.01599 + Pb * 0.05419 + Zn * 0.01169 + Cu * 0.06303 for the low grade domain.
Bulk density values were interpolated to the combined high-grade domain from 631 BD measurements.
• Rows and columns may not add up exactly due to rounding.
Rupice Mineral Resources (Note 2)
At 30 June 2020
Tonnes
(mt)
7.5
1.9
9.4
Zn
%
5.7
2.4
5.1
Pb
%
3.7
1.6
3.3
Grades
BaSO4
%
34
18
31
Au
g/t
2.0
0.9
1.8
Ag
g/t
207
86
183
Cu
%
0.6
0.3
0.6
JORC Classification
Indicated
Inferred
Total
Note 2:
• Prepared by CSA Global Pty Ltd in Perth in July 2019
• Mineral Resources are based on JORC Code definitions.
• A cut-off grade of 0.6% zinc equivalent has been applied.
Zn
Kt
Pb
Kt
Contained metal
BaSO4
Au
Ag
Cu
Kt
Koz Moz
430
280
2,590
470
50
30
330
60
480
310
2,920
530
50
5
55
Kt
46
6
52
• ZnEq – Zinc equivalent was calculated using conversion factors of 0.80 for lead, 0.08 for BaSO4, 1.80 for Au, 0.019 for Ag and 2.40 for
Cu, and recoveries of 90% for all elements. Metal prices used were US$2,500/t for Zn, US$2,000/t for Pb, $200/t for BaSO4, $1,400/oz
for Au, $15/oz for Ag and $6,000 for Cu.
• The applied formula was: ZnEq = Zn% * 90% + 0.8 * Pb% * 90% + 0.08 * BaSO4% * 90% + 1.8 * Au(g/t) * 90% + 0.019 * Ag(g/t) * 90%
+ Cu% * 2.4 * 90%.
25
ADRIATIC METALS PLC
•
It is the opinion of Adriatic Metals and the Competent Persons that all elements and products included in the metal equivalent formula
have a reasonable potential to be recovered and sold.
• Metallurgical recoveries of 90% have been applied in the metal equivalent formula based on recent test work results.
• A bulk density was calculated for each model cell using regression formula BD = 2.88143 + BaSO4 * 0.01555 + Pb * 0.02856 + Zn *
0.02012 + Cu * 0.07874 for the barite high-grade domain and BD = 2.76782 + BaSO4 * 0.01779 + Pb * 0.03705 + Zn * 0.02167 + Cu *
0.07119 for the barite low-grade domain (the barite domains were interpreted using 30% BaSO4).
• Rows and columns may not add up exactly due to rounding.
The Veovaca Indicated and Inferred Mineral Resource estimate was unchanged during the period and stands at:
Veovaca Mineral Resources (Note 3)
At 30 June 2020 and 31 December 2020
JORC Classification
Indicated
Inferred
Total
Note 3:
Tonnes
(mt)
5.3
2.1
7.4
Zn
%
1.6
1.1
1.4
Pb
%
1.0
0.5
0.9
Grades
BaSO4
%
16.1
5.9
13.2
Contained metal
Au
g/t
0.1
0.1
0.1
Ag
g/t
50
17
41
Zn
Kt
83
23
106
Pb
Kt
50
10
70
BaSO4
Kt
860
120
980
Au
Koz
14
4
18
Ag
Moz
9
1
10
• Prepared by CSA Global Pty Ltd in Perth in June 2019
• Mineral Resources are based on JORC Code definitions.
• A cut-off grade of 0.6% ZnEq has been applied.
• ZnEq was calculated using conversion factors of 0.80 for lead, 0.08 for BaSO4, 1.80 for gold and 0.019 for silver, and
recoveries of 90% for all elements. Metal prices used were US$2,500/t for zinc, US$2,000/t for lead, US$200/t for BaSO4,
US$1,400/oz for gold and US$15/oz for silver.
• The applied formula was: ZnEq = Zn% * 90% + 0.8 * Pb% * 90% + 0.08 * BaSO4% * 90% + 1.8 * Au(g/t) * 90% + 0.019 *
Ag(g/t) * 90%.
• It is the opinion of Adriatic Metals and the Competent Persons that all elements and products included in the metal
equivalent formula have a reasonable potential to be recovered and sold.
• A bulk density was calculated for each model cell using regression formula BD = 2.70855 + BaSO4 * 0.01487 + Pb *
0.03311 + Zn * 0.03493.
• Rows and columns may not add up exactly due to rounding.
There have been no material
adverse changes in the assumptions
underpinning the forecast financial
information or material assumptions
and technical parameters
underpinning the mineral resource
estimate since the original relevant
market announcements which
continue to apply.
In addition to the Company’s internal
resources, the Company also utilises
the services of independent specialist
consultants including CSA Global,
Ausenco and others as part of the
governance and internal controls in
relation to mineral resource estimates
and the reporting thereof.
Competent Persons’ Report
The information relating to the Mineral
Resources estimates in this Annual
Report are based on and fairly
represents information and supporting
information compiled by Dmitry Pertel.
Dmitry Pertel is a full-time employee
of CSA Global and is a Member of the
Australian Institute of Geoscientists.
Dmitry Pertel has sufficient
experience relevant to the style of
mineralisation and type of deposit
under consideration and to the activity
which he is undertaking to qualify as
a Competent Person as defined in
the 2012 Edition of the Australasian
Code for the Reporting of Exploration
Results, Mineral Resources, and
Ore Reserves (JORC Code). Dmitry
Pertel consents to the disclosure of
information in this report in the form
and context in which it appears.
The information in this report which
relates to Exploration Results is based
on, and fairly represents, information
compiled by Mr. Philip Fox, who is
a member of the Australian Institute
of Geoscientists (AIG). Mr. Fox is a
consultant to Adriatic Metals PLC,
and has sufficient experience relevant
to the style of mineralisation and type
of deposit under consideration and to
the activity he is undertaking to qualify
as a Competent Person as defined in
the 2012 Edition of the “Australasian
Code for Reporting of Exploration
Results, Mineral Resources and Ore
Reserves”. Mr. Fox consents to the
inclusion in this report of the matters
based on that information in the form
and context in which it appears.
The information in this report which
relates to Metallurgical Results is
based on, and fairly represents,
information compiled by Mr. Philip
King of Wardell Armstrong. Mr.
King and Wardell Armstrong are
consultants to Adriatic Metals PLC
and Mr. King has sufficient experience
in metallurgical processing of the
type of deposits under consideration
and to the activity he is undertaking
to qualify as a Competent Person
as defined in the 2012 Edition of the
“Australasian Code for Reporting
of Exploration Results, Mineral
Resources and Ore Reserves”. Mr.
King is a Fellow of the Institute
of Materials, Minerals & Mining
(which is a Recognised Professional
Organisation (RPO) included in a list
that is posted on the ASX website
from time to time), and consents
to the inclusion in this report of the
matters based on that information
in the form and context in which it
appears.
Annual Report for the year ended 31 December 2020
26
Strategic ReportGovernanceFinancial StatementsASX Additional Information
STRATEGIC REPORT
OUR ASSETS - CONTINUED
The Raska Zinc-Silver Project in Serbia was attained though the acquisition of
Tethyan, which was completed in October 2020. Tethyan Resource Corp had
been exploring a highly prospective 99 km2 land package in southern Serbia,
which contains two historic Zinc-Silver mining operations called Sastavci &
Kizevak. The Sastavci & Kizevak deposits, like those in the Vares Silver Project
sit on the Polymetallic Tethyan Metallogenic Belt. Therefore like the Vares Project,
they have Zinc, Silver and Lead mineralisation.
Sastavci has a non-JORC compliant historic resource of 1.4Mt at 4.0% zinc,
1.9% lead and 30g/t silver and Kizevak has a non-JORC compliant historic
resource of 6.2Mt at 5.3% zinc, 3.2% lead and 48g/t silver. Both deposits are
within 3km of one another and are close to surface, and therefore they have
open-pit potential.
THE RASKA
PROJECT,
SERBIA
Kremice West
Porphyry
S E R B I A
R a s k a D i s t r i c t
S i m p l i fi e d G e o l o g y
& E x p l o r a t i o n T a r g e t s
480,000 mE
Kremice East Veins
4,800,000 mN
BELGRADE
S E R B I A
Area of
Interest
Sastavci EL (2346)
Sastavci Mine
Kremice EL (2176)
Raska
Kizevak EL
(2345)
Kizevak Mine
Raska EL (2150)
Karadak Veins
Kaznovice EL (2177)
Renewal Pending
Rudnica Porphyry
Plavkovo Veins
Bukovik Lithocap
Lipovica Veins
470,000 mE
N
Tethyan EL/JV
EFPP Els
Renewal Pending
4,790,000 mN
2.5 Kilometres
Simplified Geology
Alluvium
Andesitic Volcanic
and Volcaniclastic
Latite
Granodiorite
Serpentinised Basement
Undifferentiated
Sedimentary Rocks
Prospects
Copper-Gold Porphyry
Gold-Silver-Lead-Zinc
Silver-Zinc-Lead
27
ADRIATIC METALS PLC Since the acquisition of the Raska
Zinc-Silver Project, the Company
has been conducting exploration
drilling, with a diamond core drill rig
operating at each deposit. Drilling to
date at Kizevak has intercepted thick
mineralisation that has demonstrated
continuity of the historic resources.
Recent drilling has also confirmed
near-surface polymetallic
mineralisation as well as an
anomalous broad gold structure
at depth. Further mineralised sub-
parallel structures have also been
discovered within 100m of the main
mineralising trend, which demonstrate
potential for scale.
There are a number of other targets
across the Raska Project, such as
Rudnica and Karadak in the South
West of the Raska licence area, which
the company plans to follow up in due
course.
Category
Tonnes (Mt)
Ag (g/t)
Zn (%)
Pb (%)
A+B+C1
C2
Total
A+B+C1
C2
Total
4.4
1.8
6.2
0.4
1.0
1.4
54
36
48
45
25
30
5.4
5.0
5.3
5.6
3.5
4.0
3.6
2.2
3.2
2.1
1.9
1.9
Non-JORC Compliant
Classification for Kizevak
Non-JORC Compliant
Classification for
Sastavci
Notes:
• The mineral resource estimate for the Kizevak-Sastavci project is a foreign estimate and is not reported in accordance
with the JORC Code. A competent person has not done sufficient work to classify the foreign estimate as a mineral
resource in accordance with the JORC Code. It is uncertain that following evaluation and/or further exploration work
that the foreign estimates will be able to be reported as mineral resources in accordance with the JORC Code.
• The foreign mineral resource estimate for the Kizevak-Sastavci project was first disclosed in accordance with listing rule
5.12 in Adriatic’s announcement of 11 May 2020. The supporting information provided in the previous announcement
continues to apply and has not materially changed. Historical drillholes are subject to confirmation drilling.
28
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information ANOTHER TRANSFORMATIVE
PERIOD AS WE CONTINUE TO
MOVE FORWARD
CEO STATEMENT
The second half of 2020 was another
transformational chapter for the
Company. The team has worked
tirelessly to deliver major milestones,
most notably the completion of
the Vares Silver Project Preliminary
Feasibility Study, but also the closing of
the Tethyan acquisition and the updated
Mineral Resource Estimate at Rupice. I
would like to express our appreciation
too of the professionalism with which
the Bosnian regulatory authorities have
processed the regulatory approvals
required by the Vares project. We
welcome too the strong support lent by
our local communities.
The Vares Silver Project Pre-Feasibility
Study showed improved economics
compared with the 2019 Scoping
Study. I am confident that as we
continue our engineering, there is
additional value which can be realised
from Vares as we work towards the
completion of the Definitive Feasibility
Study (DFS) in mid-2021.
We go into 2021 with a strong cash
position, having raised US$28 million
of funding from EBRD and Queens
Road Capital in Q4. This fully funds our
DFS and ESIA workstreams, as well
as an aggressive exploration programs
planned at both the Vares and Raska
Projects.
I am excited about our 2021 exploration
programme, which is the largest in the
history of Adriatic. At Vares we will be
looking for repeats of the Rupice-style
mineralisation, across our existing and
newly granted concession areas. At
Raska we will be building on the historic
resources with the aim of producing
a maiden resource in the latter half of
2021, and in addition conducting step-
out exploration across a number of new
drill ready targets elsewhere in across
the large land package. We inherited a
strong geological team with the Tethyan
acquisition and they have integrated
well with our existing team at Vares,
comparing their experiences of the
Tethyan Belt.
Paul Cronin,
Chief Executive Officer
We go into 2021
with a strong cash
position
29
ADRIATIC METALS PLC
STRATEGIC REPORT Junior mining companies often have
good intentions but fall sometimes
short in their environmental, social &
governance performance through lack
of resources and expertise. This can
create resentment on the part of local
stakeholders denying the required
social license to operate, and ultimately
eroding value for shareholders. We
warmly welcome the increasing
investor emphasis on ESG factors.
We strongly believe in the importance
of good stewardship from the start.
Hence we are basing our social and
environmental work on the EBRD
Performance Requirements and are
undertaking an international standard
ESIA. Looking ahead, the Vares project
should add more than 1.5% of GDP to
the Bosnian economy in its first full year
of operation. Similarly we want to create
sustainable socio-economic benefits
for the communities around the project
both through adopting a pro-active
approach to local procurement and
development of local human resources.
In addition, we are already engaged in
establishing a community foundation
capable of being a long-term engine for
development, guided by the priorities of
local people and capable of attracting
investment from a variety of government
and non-government agencies. We
hope too that the development of our
work can also facilitate the development
of complementary livelihoods such
as tourism. This, of course, depends
on our adopting a careful approach
to environmental stewardship. As an
employer, and in selecting suppliers,
we want to create a safe working
environment which promotes diversity,
opportunity and mutual benefit for all.
2021 will be another transformative year
as we move towards the completion
of the DFS and the project financing,
and then the commencement
of construction at Vares. In the
background, we continue to build out a
highly skilled and capable staff base that
can deliver our strategy.
I would like to thank our shareholders
for their continued support, as well as
our staff who individually and collectively
make Adriatic, not only a great place to
work, but a company primed for growth
and success.
Paul Cronin
Chief Executive Officer
Annual Report for the year ended 31 December 2020
30
Strategic ReportGovernanceFinancial StatementsASX Additional Information MOVING FROM POTENTIAL
TOWARDS PRODUCTION
OPERATIONAL REVIEW
Corporate structure
The corporate structure of the Group at 30 March 2021 is as follows:
Adriatic Metals PLC
England & Wales
Tethyan Resource Corp.
Canada
Ras Metals d.o.o.
Serbia
Kizevak Permit
Sastavci Permit
Eastern Mining d.o.o.
Bosnia & Herzegonvina
Vares Concession
Tethyan Resources Limited
England & Wales
Suva Ruda Option Agmt
Tethyan Resources Jersey Ltd
Jersey
Taor d.o.o.
Serbia
Kremice Permit
Kaznovici Permit (pending)
Tethyan Resources d.o.o.
Serbia
Bucje Permit (cancel)
Zukovac Permit (cancel)
Kriva Freja Permit (pending)
95%
Tethyan Resources
Bulgaria EOOD
Bulgaria
Kosovo Resource Company
Kosovo
Cernac Permit
Bistrice Permit
KEY
All shareholdings 100% unless otherwise stated
Global Mineral Resources
d.o.o.
Serbia
Holding Company
Operating Company
Adriatic Metals PLC is a public limited
company incorporated in England and
Wales on 3 February 2017. In addition
to operating as a holding company of
Eastern Mining, Adriatic is involved in
the supervision of the exploration and
development of the Vares Silver Project
and commission of associated studies.
The Company’s principal assets are the
investment in its wholly owned subsidiary
Eastern Mining, intangible exploration
and evaluation assets relating to work
undertaken on the Vares Silver Project
and cash generated from fundraising
activities and the exercise of options.
Eastern Mining was registered in Bosnia
and Herzegovina on 19 May 2008.
Eastern Mining is the main operating
entity of the Group and holds the
Vares Silver Project concession which
comprises the Rupice and Veovaca
deposits.
Tethyan Resource Corp. and its wholly
owned subsidiaries were acquired on 8
October 2020.
The corporate structure chart reflects the
Company’s post-period end acquisition
of the entire share capital of Ras Metals
d.o.o. and the disposal of a 10% interest
in EFPP d.o.o. on 22 February 2021.
Vares Silver Project
Developments
The Company completed the Vares
Silver Project Preliminary Feasibility
Study on 15 October 2020. Highlights
include:
• Post-tax net present value of US$
1,040 million (8% discount rate)
• Internal Rate of Return of 113%
• Low upfront capital of US$ 173
million
• 1.2 years payback
• Average annual EBITDA of US$ 251
million in years 1-5
31
• 11.1 Mt of Probable Ore Reserves
mined over a 14-year mine life,
annual throughput of 800 kt
• 88.5% conversion of Indicated
Resources to Ore Reserves at
Rupice
• 45.3% of revenues from silver and
gold
• Study relies on significantly more
robust inputs over 2019 Scoping
Study
• 2020 Mineral Resource estimate with
improved geological interpretation
• Metallurgical domaining of the
orebody
• Low environmental impact with
underground mining and partial
tailings backfill at Rupice, and use
of brownfield Veovaca mine site for
majority of plant infrastructure
Based on the positive outcome of
the Preliminary Feasibility Study, work
is immediately commencing on the
Definitive Feasibility Study
ADRIATIC METALS PLC STRATEGIC REPORT KEY METRIC
Mined tonnes to plant
Life of operation
Total life of mine AqEq* production
UNIT
Mt
Years
koz
Average annual AqEq production years 1-5
koz/year
Cash Cost **
All-in Sustaining Cost (AISC) ***
Revenue
Pre-production capital
Post tax NPV (8%)
Post tax Internal Rate of Return
Project payback from first production
$USD/t Milled
$USD/t Milled
$USD/t Milled
US$ Million
US$ Million
%
years
Average annual EBITDA years 1-5
US$ Million
Profitability Index
(Post-Tax NPV8/CAPEX)
2020 PRE-FEASIBIITY STUDY
11.1
14.0
137,269
15,302
117.1
120.0
296.3
173.0
1,040
113%
1.2
251
6
Veovaca
Exploitation permit for Veovaca
was issued on 25 January 2021.
Development of Main Mining Project
commenced in Q1 2021.
Rupice
Environmental permit received in
February 2021. Urban planning permit
submitted in March 2021.
Raska Project Developments
Since acquisition, exploration has continued at Raska with 2 diamond
core drilling rigs, one each at the Kizevak and Sastavci deposits. In total
over 11,000m of diamond core drilling has been completed. Adriatic has
a further 25,000m of step-out diamond core drilling planned across the
Raska Project during 2021.
To date, drilling at Kizevak has confirmed the down dip continuity of a high
grade lens in the central-northwest part of the deposit, beneath the limit of
the historic drilling. Kizevak continues to yield thick zones of polymetallic
mineralisation, which remains open.
To date, drilling from the base of the historic open
pit at Sastavci has delivered wide intercepts of
high-grade mineralisation from surface. The results
have demonstrated excellent polymetallic grades
from surface in a much wider zone of mineralisation
than historically reported. Confirmation drilling at
Sastavci has been complemented by the discovery
of a separate, large gold bearing structure. This first
phase of confirmation drilling at Sastavci has provided
confidence to continue exploring the full extent of the
mineralised system.
On 23 February, the Company completed the
acquisition of Ras Metals, which included the
exploration licenses for both Kizevak and Sastavci.
This included a consideration paid for the remaining
90% of the shares in Ras Metals that the Company
did not already hold for EUR 1,365,000, plus the
allotment of 166,000 Ordinary shares of 0.013355p
each in the Company. Additionally, there is deferred
consideration of EUR 500,000, payable on 14 May
2022, and 498,000 Ordinary shares in the Company
that will be allotted in three equal tranches on or around
22 August 2021, 22 February 2022 & 22 August 2022.
The Shares rank pari passu with the existing Ordinary
shares and application has been made to the Financial
Conduct Authority and the London Stock Exchange
for the Shares to be admitted to the standard segment
of the Official List of the London Stock Exchange.
Admission of the Shares is expected on 2 March 2021.
32
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information RAMPING UP CAPABILITY
AND CAPACITY
FINANCIAL REVIEW
The Group made an operating loss of
£5,176,158 for the six months ended
31 December 2020 (Period) compared
with an operating loss of £6,752,862
in the prior year ended 30 June 2020.
The increase in the operating loss in the
Period on a pro-rata basis compared
to the prior year reflects our expansion
into Serbia following the acquisition
of Tethyan Resource Corp and the
ongoing ramp up in operating capability
and capacity as the Group moves
closer towards the start of construction
of the Vares Silver Project in Bosnia.
Income Statement Review
General and administrative
expenses
General and administrative costs
incurred in the Period were £2,115,707
(year ended 30 June 2020: £3,315,634)
and share-based payment expenses of
£2,267,239 (year ended 30 June 2020:
£3,443,359).
Professional fees of £313,760 (year
ended 30 June 2020: £1,051,354) and
stock exchange fees of £136,166 (year
ended 30 June 2020: £358,663) were
both lower in the Period compared
to the prior year during which the
Company completed an initial listing of
the Company’s shares on the London
Stock Exchange.
Exploration costs
The Group incurred £798,028 of
exploration costs in the Period relating
to pre-JORC resource stage exploration
activities in Serbia (year ended 30 June
2020: £nil).
Finance income
Finance income in the Period was nil
compared to £203,131 in the prior year
which had comprised interest income
of £50,366 primarily on Australian dollar
deposits and a foreign exchange gain
of £152,765 attributable primarily to the
appreciation of Australian dollars held
by the Company.
Finance costs
The finance expense in the Period
was £197,039 (year ended 30
June 2020: £11,580) as a result of
foreign exchange losses on foreign
denominated currency of £103,772,
interest expense on borrowings
£82,744 and an interest expense on
lease liabilities £10,523.
Revaluation of fair value asset
Following completion of the acquisition
of Tethyan in October 2020, the
convertible loan facility that had
previously been provided by the
Company to Tethyan was amended to
remove the conversion option resulting
in a revaluation of fair value asset gain
in the Period of £322,987 reversing
the revaluation of fair value asset loss
of £322,987 in the prior year. The
loan balance has been eliminated on
consolidation in the Group financial
statements at 31 December 2020 (30
June 2020: £876,201).
Geoff Eyre,
Chief Financial Officer
and Joint Company Secretary
33
ADRIATIC METALS PLC
STRATEGIC REPORT Cash Flow and Balance Sheet Review
Cash Flow
(In GBP)
Net cash used in
operating activities
Net cash used in
investing activities
Net cash inflows
from financing
activities
Net increase in
cash and cash
equivalents
Six months ended
31 December 2020
Year ended
30 June 2020
(2,307,208)
(2,807,191)
(3,552,249)
(6,016,265)
25,817,089
13,284,686
19,957,632
4,461,230
Net cash used in operating activities during the Period was
£2,307,208 compared to £2,807,191 in the prior year.
Investing activities included cash outflows for the purchase
of exploration and evaluation assets during the Period of
£3,052,019 (year ended 30 June 2020: £4,942,689) reflecting
the significant ramp up in activities related to completion
of the updated mineral resource estimate for Rupice and
completion of the Preliminary Feasibility Study for the Vares
Silver Project in the Period.
Net cash inflows from financing activities increased
substantially in the Period with £12,317,964 of proceeds
from the issue of shares following the completion of an equity
private placement with the European Bank for Reconstruction
and Development at a price of £1.175 per share generating
gross proceeds of £6.2 million and the receipt of
A$8,649,360 from Sandfire Resources (ASX:SFR) as part of
the settlement agreement reached between Sandfire and the
Company which has been announced on 3 November 2020.
Proceeds from the exercise of options and performance
rights in the Period also increased to £1,261,913 compared
£743,544 in the prior year.
Financing activity cashflows also include the issue of US$20
million in convertible debentures to Queens Road Capital in
with an 8.5% coupon in December 2020.
The financings in the Period ensure the Company has
sufficient financial resources to complete the feasibility study
for the Vares Silver Project and undertake an extensive plan of
exploration activities in Bosnia and Serbia during 2021.
34
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information
FINANCIAL REVIEW - CONTINUED
Cash flow and balance sheet review continued
Working Capital
(In GBP)
Other receivables and
prepayments
Accounts payable and
accrued liabilities
At 31
December
2020
At 30
June 2020
654,514
451,546
(1,900,436)
(682,402)
Capital Expenditure
Working capital
(1,245,922)
(230,856)
The Groups working capital position at 31 December 2020
was (£1,245,922), a decrease of £1,015,067 compared to
30 June 2020, primarily as a result of the acquisition of
Tethyan which contributed (£1,101,642) net working capital
to the group position at 31 December 2020.
Net cash position
At 31
December
2020
At 30
June 2020
Change
29,580,538
9,942,729
19,637,809
(105,515)
-
(105,515)
(14,635,385)
-
(14,635,385)
(In GBP)
Cash
and cash
equivalents
Short-term
borrowings
Long-term
borrowings
(including
imbedded
derivative
liability)
Net cash
position
The cash balance at 31 December 2020 was £29,580,538,
an increase of £19,637,809 compared to 30 June 2020.
Combined short term and long term borrowings totalled
£14,740,900 at 31 December 2020 (30 June 2020: £nil) as a
result of the issue of US$20 million in convertible debentures
to Queens Road Capital in December 2020.
The net cash position (cash and equivalents minus long
and short term borrowings) at 31 December 2020 was
£14,839,638, an increase of £4,896,909 compared to 30
June 2020, primarily as a result of cash inflows from financing
activities as noted in the cash flow commentary.
35
At 31
December
2020
At 30 June
2020
Change
36,479,724
9,045,169
27,434,555
969,464
910,920
58,544
(In GBP)
Exploration
and
evaluation
assets
Property,
plant and
equipment
Exploration and evaluation assets increased to £36,479,724
at 31 December 2020 (30 June 2020: £9,045,169) primarily
due to acquisition consideration capitalised of £22,678,884
following the acquisition of the entire issued share capital of
TSX-V listed Tethyan Resource Corp. (Tethyan) in October
2020 and subsequent exercise of the Ras Metals d.o.o.
option agreement in February 2021 that Tethyan had
held. The components of the acquisition consideration are
summarised below:
(In GBP)
Shares issued
Share options issued
Total equity consideration
Consideration payable under
Ras Metals d.o.o. option
agreement
Value
17,129,828
236,571
2,797,086
20,163,485
2,515,399
Total consideration
22,678,884
Vares Silver Project Funding Developments
The Company also engaged Tamesis Partners and
Terrafranca Advisory during the Period to provide debt
advisory services to assist with the evaluation of the various
funding options available to the Company for the Vares
Silver Project and to select and secure the most appropriate
financing package with a view to commencing construction
during 2021.
Geoff Eyre
Chief Financial Officer and Joint Company Secretary
14,839,638
9,942,729
4,896,909
Warrants issued
ADRIATIC METALS PLC STRATEGIC REPORT
The strategic report of Adriatic Metals PLC on the preceding pages was approved and authorised for
publication by the Board of Directors on 30 March 2021 and was signed on its behalf by:
Michael Rawlinson
Chairman of the Board
36
Annual Report for the Six Months Ended 31 December 2020Strategic ReportGovernanceFinancial StatementsASX Additional Information APPROPRIATE RESOURCES ARE
AVAILABLE TO MEET OBJECTIVES
CORPORATE GOVERNANCE REPORT
We believe that transparency and
fair dealing, particularly in relation
to environmental and community
issues, are essential to the
Company’s ultimate success. At all
times Adriatic will aim to:
• Minimise its environmental
impact,
• Meet legal and other
requirements applicable to it,
• Foster positive relationships in
the local community,
• Protect the health and wellbeing
of employees and encourage
positive relationships in the
workplace, and
• Ensure the sustainability of the
business for shareholders and
other stakeholders.
The Board firmly believes that
a corporate culture based on
sustainability and ethical values
and behaviour is in the best
interests of the shareholders.
The Company maintains a Code
of Conduct which underpins its
commitment to integrity and fair
dealing in its business affairs and
to a duty of care to all employees,
clients and stakeholders. The
document sets out the principles
covering appropriate conduct in a
variety of contexts and outlines the
minimum standard of behaviour
expected from employees.
The Code of Conduct is included in
the Corporate Governance Manual
on the Company’s website.
a. Board Composition
As at 31 December 2020, the Board
comprised a Non-executive Chairman,
a Chief Executive, and four other Non-
Executive Directors (“NEDs”). As part
of its annual performance evaluation
process the Board, in conjunction with
the Remuneration and Nominations
Committee, keeps its structure
under review in order to maintain an
appropriate balance of executive and
non-executive experience and skills.
The Board considers the following
NEDs who served during the Period
to have been independent: Peter
Bilbe, Julian Barnes, Sandra Bates,
Michael Rawlinson and Sanela Karic.
None of these Directors is or has
been an employee, had a significant
business relationship or close family
ties with related parties, or represented
significant shareholders, although
they all hold non-performance related
options to acquire ordinary shares in
the Company.
The QCA Code recommends that,
in the interests of maintaining their
independence, NEDs should not
normally participate in performance-
related remuneration schemes or have
a significant interest in a company share
option scheme; any performance-
related remuneration for NEDs should
be proportionate, and shareholders
must be consulted and their support
obtained. However, in Adriatic’s case
the options granted to the NEDs have
no performance conditions and vested
fully on the date of grant, and it is not
considered that they compromise the
NEDs’ independence.
The Board has not yet considered
it appropriate to nominate a Senior
Independent Director but will keep this
under review.
Corporate Governance Code
– QCA disclosure statement
The Board believes in the value
of good corporate governance
in improving performance and
mitigating risk and acknowledges
its duty to take account in its
decision-making of all of the
stakeholders in Adriatic, and not
just the shareholders.
As a company with a standard
listing on the London Stock
Exchange, Adriatic is able to
choose which governance code
to follow. The Board has decided
to apply the Quoted Company
Alliance’s (QCA) Corporate
Governance Code (QCA Code)
(revised in April 2018).
The Code is based on 10
principles and a set of supporting
disclosures. It sets out what the
QCA considers to be appropriate
arrangements for growing
companies and asks companies,
by means of the prescribed
disclosures, to explain how they
are meeting those principles
through the prescribed disclosures.
We have considered how we
apply each principle to the extent
that the Board judges these to be
appropriate in the circumstances,
and in the QCA statement to be
placed on our website we will
provide an explanation of the
approach taken in relation to each.
The Chairman has overall
responsibility for implementing an
appropriate corporate governance
regime at the Company.
The Board is committed to
ensuring the sustainability of its
development strategy and to
delivering on its commitments to
shareholders, clients, employees,
partners and other stakeholders
with sustainability in mind.
37
ADRIATIC METALS PLC GOVERNANCE b. Board Performance Effectiveness Review
Board discussion on evaluation
and design
Skills matrix and discussion
sheet distributed
One on one interviews
Findings documented by Chairman
and Company Secretaries
Findings discussed with Independent
Non-Executive Directors
Findings discussed with CEO
Board discussion of findings and
action plan for implementation
0
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S
The most recent board performance effectiveness review
was undertaken internally during August and September
2020 through one-to-one interviews conducted by
Michael Rawlinson following his appointment as
Chairman and supported by the Company Secretaries.
The interviews were structured to seek the Directors’ views on
a number of subject areas including those outlined below.
The Committees
Composition and overall workings of the main Board
Committees was evaluated. In respect of the Audit & Risk
Committee consideration was given to the adequacy of the
level of rigor applied and sufficiency of resources dedicated
this area.
Adequacy of timely engagement of the Remuneration and
Nominations Committee together with sufficiency of alignment
of reward with the Company’s strategy was considered.
Regarding the newly established Environmental, Social &
Governance Committee consideration was given to the focus
for 2021 and the potential benefits of additional support from
external advisors.
The Board
The overall composition of the board was considered, taking
into account the balance of skills represented by board
members relative to the current and future requirements of the
Company together with gender diversity.
The workings of the board, leadership & culture, clarity of
strategy, governance and risk management were also covered
as part of the structured interviews.
2020 Board Performance
Effectiveness Review Findings
The findings of the Chairman’s Board
performance effectiveness review were
collated and considered between the
Non-Executive Directors before being
relayed to the CEO. The resulting
recommendations were discussed and,
where appropriate, approved by the
Board.
Outcome
The principal recommendations arising
from the 2020 Board Performance
Effectiveness review process are as
follows:
• A step change in resourcing
necessary to support the internal
finance and legal functions reflecting
the rate of growth, complexity
and compliance obligations of the
Company.
• More visibility to be given to the
existing Whistleblower policy and
compliance requirements during the
new staff induction process.
• Upgrading and updating of the risk
register
• Remuneration and Nomination
Committee members to receive
more timely updates on potential
senior staff hiring requirements and
be more active in response to key
staff risks and the HR build out to
operations.
• A review of renumeration for
Directors and Senior management
and update of policies to be
undertaken with a focus on getting
the right balance between short and
long term incentives, personal and
corporate goals and the introduction
of tiering staff by management level.
c. Board Terms of Reference and
Powers (see Board Charter
in Schedule 1 to Corporate
Governance Manual on the
Company web site)
The Board derives its authority
from the shareholders under the
Company’s Articles of Association.
Its main duty is to drive the strategic
direction of the Company while
ensuring that appropriate resources
are available to meet objectives and
monitor management’s performance.
Members of the Board have collective
responsibility for the performance of
the Company and must ensure that all
decisions are taken in the interests of
the Company as a whole, taking into
account the interests of the various
stakeholder groups.
Whilst the Board has delegated the
normal operational management of the
Company to the Managing Director &
CEO and other senior management, it
has reserved to itself specific matters
including approving the Company’s
remuneration framework; reviewing
and ratifying systems of audit, risk
management and internal compliance
and control, codes of conduct and
legal compliance; approving and
monitoring the progress of major capital
expenditure; approving and monitoring
the budget; and approving the annual
and interim accounts.
The Board Charter requires that,
where practical, the majority of Board
members should be independent non-
executives. An independent Director is
a director who in the Board’s opinion is
free of any interest, position, association
or relationship that might (or might be
perceived to) influence materially his or
her capacity to bring an independent
judgement to bear on issues before the
Board and to act in the best interests
of the Company and its shareholders
generally.
38
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
CORPORATE GOVERNANCE REPORT - CONTINUED
d. Director Commitments
(also see Remuneration
Committee Report)
The services of the Managing Director
& Chief Executive Officer, Paul Cronin,
are supplied under a contract with
Adriatic. He is not required to provide
these services on an exclusive basis,
although any services provided to third
parties must avoid conflicts of interest
or any interference with his obligation to
provide services to the Company.
Mr. Cronin has a separate agreement
with Eastern Mining d.o.o. (an operating
subsidiary of Adriatic) in respect of his
role as Director of that company.
All Non-Executive Directors
acknowledge in their letter of
appointment that the nature of the role
makes it impossible to be specific on
maximum time commitment and that
at certain times of increased activity,
the preparation for and attendance at
meetings will increase. All Directors are
expected to attend all Board meetings
(either in person or by telephone),
the AGM, one annual Board strategy
meeting a year, committee meetings
where appropriate, meetings with the
Non-Executive Directors, meetings with
shareholders, any meetings forming
part of the Board evaluation process,
and training meetings.
e. Board Meetings
The Board meets formally at least once
a quarter, with additional meetings held
as required to review the corporate and
operational performance of the Group
and address any other issues that
need to be dealt with before the next
scheduled meeting.
In order to save time and travel
expenses as the Directors are based all
over the world, most meetings are held
by conference call. Due to the ongoing
COVID restrictions, the Board did not
meet physically during the period.
The agendas of the Board and its
Committees ensure that all areas for
which the Board has responsibility are
addressed and reviewed during the
course of the period.
The Chairman is responsible, with the
help of the Company Secretaries, for
ensuring that the Directors receive
Board briefing that is accurate,
comprehensive and timely enough
to allow them to make proper use of
it in the fulfilment of their duties. The
Company Secretaries assemble the
Board and Committee papers and
circulate them to the Directors well in
advance of the relevant meeting. The
Company Secretaries also take minutes
of each meeting.
A summary of attendance at Board
meetings in the 6 months ended 31
December 2020 is set out below.
Director
Michael Rawlinson
Peter Bilbe
Paul Cronin
Julian Barnes
Sandra Bates
Sanela Karic
John Richards
f. Board Committees
The Board has delegated specific
responsibilities to the Audit & Risk,
Environmental, Social & Governance
and Remuneration & Nominations
Committees, details of which are set
out below. Each Committee has written
terms of reference setting out its duties,
authority and reporting responsibilities.
It is intended that these will be kept
under continuous review to ensure
they remain appropriate and reflect any
changes in legislation, regulation or best
practice.
Towards the end of the year the Board
established an Environmental, Social
& Governance (ESG) Committee,
comprised of Sanela Karic (Chair),
Peter Bilbe and Michael Rawlinson
which held its first meeting in October
2020 following a programme of training
provided by the Company’s ESG
consultants Critical Resource.
39
Independent
Maximum possible
attendance
Actual
attendance
Yes
Yes
No
Yes
Yes
Yes
No
6
6
6
6
6
5
-
There is currently no internal audit
function, given Adriatic’s modest size,
although the Audit Committee keeps
this under annual review.
The Board considers that, at this
stage in Adriatic’s development, it
is appropriate for the members of
the Remuneration Committee to be
also the members of the Nomination
Committee, and for the meetings of
the two bodies to be held together.
However, the separate terms of
reference of the two Committees will be
respected. This decision will be kept
under review by the Board.
6
6
6
6
6
5
-
g. Audit & Risk Committee
The Audit & Risk Committee’s overall
goal is to ensure that the Company
adopts and follows a policy of proper
and timely disclosure of material
financial information and reviews all
material matters affecting the risks
and financial position of the Company.
The Committee meets the Company’s
external auditor and its senior financial
management to review the annual and
interim Financial Statements of the
Company, oversees the Company’s
accounting and financial reporting
processes, the Company’s internal
accounting controls and the resolution
of issues identified by the Company’s
auditors. It also advises the Board on
the appointment of the Auditor, reviews
its fees and discusses the nature,
scope and results of the audit with the
Auditor.
ADRIATIC METALS PLC GOVERNANCE The Audit Committee was chaired
during the year by Michael Rawlinson,
who was succeeded as Chair by
Sandra Bates upon his appointment
as Chairman of the Board on 3 August
2020 but remains a member of the
Committee. The other members of the
Committee were Julian Barnes, and
John Richards (until his resignation in
July 2020). At the date of the Annual
Report the composition of the Audit
& Risk Committee was Sandra Bates
(Chair), Michael Rawlinson and Julian
Barnes. In accordance with the
Committee Charter, all of its members
have been non-executive and a majority
of them independent throughout the
period.
The Committee has unrestricted access
to the Group’s Auditor. The CFO and
other executives are invited to attend
Committee meetings, as necessary.
The Committee meets at least twice a
year and met twice during the Period
with all committee members attending
each meeting.
The Audit Committee Report contains
more detailed information on the
Committee’s deliberations during the
Period.
h. Environmental, Social &
Governance (ESG) Committee
The role of the Environmental, Social
& Governance Committee is to assist
the Board in fulfilling its oversight
responsibilities, by reviewing and
monitoring any matters relating
to the management of workforce,
community or environmental impacts
(in accordance with the policy set
out in Annexure A), the management
of stakeholder relationships, and the
oversight of permitting and relevant
regulatory risks. The Committee also
seeks to identify opportunities to
strengthen the Company’s license
to operate and to strengthen the
sustainability and resilience of the
communities and regions where Adriatic
companies operate. It will also provide
scrutiny of and guidance to executive
management on these issues.
Since its formation during the Period
and at the date of the Annual Report
the composition of the Environmental,
Social & Governance Committee was
Sanela Karic (Chair), Michael Rawlinson
and Peter Bilbe. In accordance with the
Committee Charter, all of its members
have been non-executive and a majority
of them independent throughout the
Period. The Committee met twice
during the Period with all committee
members attending each meeting.
Dominic Roberts, Head of Corporate
Affairs and executive lead for ESG
compliance acts as the Committee’s
secretary. Critical Resources, the
Company’s ESG consultants are
contracted to provide direct support to
the Committee members during its first
12 months of operation.
The ESG Committee Report contains
more detailed information on the
Committee’s deliberations during the
period.
i. Remuneration & Nominations
Committee
The Remuneration & Nominations
Committee assumes general
responsibility for assisting the Board
in respect of remuneration policies
for the Company and to review and
recommend remuneration strategies for
the Company and proposals relating
to compensation for the Company’s
Directors and employees. The
Committee reviews the performance
of the Executive Directors and makes
recommendations to the Board on
matters relating to their remuneration
and terms of employment. It has the
responsibility for, inter alia, administering
share and cash incentive plans and
programmes for Directors and other
senior management for approving (or
making recommendations to the Board
on) share and cash awards for Directors
and other senior management.
The Remuneration & Nominations
Committee is chaired by Peter Bilbe,
and its other members during the
year were Michael Rawlinson, Milos
Bosnjakovic and Julian Barnes. At
the date of the Annual Report the
composition of the Remuneration and
Nominations Committee was Peter
Bilbe (Chairman), Sandra Bates and
Julian Barnes.
The Committee normally meets at least
once a year and met once during the
period with all committee members
attending each meeting.
The Remuneration Report contains
more detailed information on the
Committee’s role and the Directors’
remuneration and fees.
j. Nomination Committee
The role of the Nomination Committee,
which comprises three independent
directors, is to assist the Board in
monitoring and reviewing any matters of
significance affecting the composition of
the Board and the Executive Team.
The primary purpose of the Committee
is to support and advise the Board in:
• maintaining a Board that has
an appropriate mix of skills and
experience to be an effective
decision-making body; and
• ensuring that the Board is composed
of Directors who contribute to the
successful management of the
Company and discharge their duties
having regard to the law and the
highest standards of corporate
governance.
The Nomination Committee normally
meets at least once a year but was
combined with the Remuneration
Committee with effect from 3 August
2020 and therefore did not meet during
the period.
k. The Board as a Whole
The skills and experience of the
members of the Board are set out in
their biographical details below. The
experience and knowledge of each
of the Directors enables them to
challenge management and scrutinise
performance in a constructive way.
The Board believes it has achieved
a good balance of experience in
financial and operational matters.
Board members have diverse national,
cultural and career backgrounds, and
gender diversity was increased by the
appointment of Sanela Karic to the
Board in August 2020 respectively.
The Board does not consider that
any of the Directors is in danger of
“over-boarding” by holding too many
directorships at other listed companies
to be able to devote sufficient time to
Adriatic’s business, and Directors are
required to consult the Board before
accepting any new appointment that
might cause a conflict of interests or
prevent them from discharging their
responsibilities to Adriatic effectively.
New Directors receive a formal
induction to the Company including
a briefing discussion with existing
Directors and a site visit to the project
as soon as practicable. Directors
are also provided with a memo
on the continuing obligations of a
company admitted to the London
Stock Exchange (Standard Segment),
a copy of the QCA Code and the
ASX Governance, Principles and
Recommendations Guide from the
Company Secretaries. Directors also
have full access to the Company’s
management and advisors.
40
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 CORPORATE GOVERNANCE REPORT - CONTINUED
l. List of Directors
Michael Rawlinson, Non-Executive Director (Chairman since 3 August 2020)
Mr. Rawlinson was the Global Co-Head of Mining and Metals at Barclays investment bank between 2013
and 2017 having joined from the boutique investment bank, Liberum Capital, a business he helped found in
2007.
He is currently the Senior Independent Non-Executive Director at Hochschild Mining, Independent Non-
Executive Director at Capital Limited and Non-Executive Director of African Gold Acquisition Corporation.
Peter Bilbe, Non-Executive Director (Chairman until 3 August 2020)
Mr. Bilbe is a mining engineer with 40 years’ Australian and international mining experience in gold, base
metals and iron ore at the operational, CEO and board levels. He is currently Non-executive Chairman of IGO
Limited, an ASX100 company, and is also a Non-Executive Director of Horizon Minerals Limited, an emerging
gold producer.
Paul Cronin, Chief Executive Officer and Managing Director
Mr. Cronin is a co-founder and Director of Adriatic Metals and is Executive Director of ASX listed Black
Dragon Gold Corp, Non-Executive Director of ASX listed Taruga Minerals and a Non-Executive of TSX listed
Global Atomic Corporation. Mr. Cronin has over 20 years of experience in corporate finance, investment
banking, funds management, and commodity trading, with a strong European mining focus. Notwithstanding
Mr. Cronin’s additional commitments, the Board is of the opinion that Mr. Cronin is not “over-boarded” and is
able to adequately perform his role with the Company.
Julian Barnes, Non-Executive Director
Mr. Barnes is a geologist with extensive experience in major exploration and development projects.
Previously, he was Executive Vice President Dundee Precious Metals with a strong focus on Balkan mining &
development. Mr. Barnes founded and led Resource Service Group for nearly two decades, which ultimately
became RSG Global and has since been sold to Coffey Mining. His is also Non-Executive Director of Zinc Of
Ireland N.L. and Thor Explorations Limited.
Sandra Bates, Non-Executive Director
Ms. Bates is a commercial and strategic international lawyer with over 20 years’ experience advising
management teams and boards of both listed and private companies in the UK and internationally. Ms Bates
is also a Non-Executive Director of Pensana PLC and Aldeia International Limited.
Sanela Karic, Non-Executive Director (appointed 3 August 2020)
Ms. Karic, a Bosnian national, has over 15 years’ experience as a lawyer and a career spanning corporate
affairs, mergers & acquisitions and human resources. She is a graduate of the University of Sarajevo and
is currently the Executive Director for Legal Affairs and Human Resources at the Prevent Group, Bosnia’s
largest diversified industrial corporation. She also holds the position of Chief Executive Officer at Sanitex, a
subsidiary company of the Prevent Group, specialising in the manufacturing of medical and hygiene products
for export across the European Union.
John Richards, Non-Executive Director (resigned 8 July 2020)
Mr. Richards is an internationally experienced mining executive with an extensive track record in the initiation
and execution of growth strategies and transactions. He currently serves a Non-Executive Director of ASX-
listed Saracen Mineral Holdings Ltd and Sheffield Resources Ltd..
41
ADRIATIC METALS PLC GOVERNANCE m. Board Advice During the
Period
The Remuneration and Nominations
Committee engaged h2glenfern to
undertake a review of the Company’s
remuneration policies. The board has
implemented a number of changes to
the remuneration policies, including
the implementation of STIP and LTIP
programmes for the forthcoming years,
further details of which are provided in
the Remuneration Committee Report.
Critical Resource were also engaged
during the period to support the work of
the recently formed ESG Committee.
n. Internal Advisory Roles
i ) Company Secretary
The joint Company Secretaries during
the period were Gabriel Chiappini
(Australia) and Geoff Eyre (UK), the
latter of whom combined the role with
that of CFO. The Company Secretaries
are responsible for advising the Board
on the Company’s legal and regulatory
compliance, including (for the UK)
the Market Abuse Regulation, and
play a central role in ensuring good
governance. They assist the Chairman
in preparing for and running effective
Board and shareholder meetings and
act as the first point of contact for the
NEDs on the workings of the Company,
providing information and advice, and
also general guidance on their duties
as Directors. The Company Secretaries
report directly to the Chairman on
governance matters.
ii ) Annual Board Appraisal
In accordance with current best
practice and the Code, the Board
undertakes an annual formal evaluation
of its performance and effectiveness
and that of each Director and the
Committees. In line with the QCA
Code Principles, the evaluation will be
based on clear and relevant objectives,
seeking continuous improvement. The
first evaluation was undertaken in late
Q3 2020 and a summary of the findings
are set out in section b above.
o. Ongoing Board Development
The Company Secretaries ensure
that all Directors are kept informed of
developments in relevant legislation,
regulations and best practice, with the
assistance of the Company’s advisers
where appropriate.
Non-Executive Directors are
encouraged to raise any personal
development or training needs with
the Chairman or through the Board
evaluation process.
i ) Succession Planning
The Board does not have a formal
emergency succession plan for the
Senior Management team. However,
succession planning is considered
as part of the Remuneration and
Nominations Committee’s remit and
Board members maintain a watching
brief to identify relevant internal and
external candidates who may be
suitable additions to or backup for
current Board members.
42
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 AUDIT & RISK COMMITTEE REPORT
I am pleased to present this report on the activities of the Audit & Risk Committee (the
Committee) for the Six months ended 31 December 2020.
This report is prepared in accordance with the Quoted Companies Alliance (QCA)
corporate governance code for small and mid-sized quoted companies, revised in
April 2018. A summary of the Committee’s role and membership can be found in the
Governance section of this Annual Report.
Committee meetings are held at least twice a year, and the CFO is invited to attend
together with the external auditor. During the period, two meetings of the Committee were
held, and the following significant issues were considered:
Sandra Bates,
Chair of the Audit &
Risk Committee
Significant
issue
Summary of Significant Issue
Actions and Conclusion
Notwithstanding the Group having issued USD 20
million of convertible bonds in December 2020 to
Queens Road Capital and completed an equity
private placement of £6.2m to European Bank of
Reconstruction and Development in November 2020,
the audit committee has considered a number of
additional factors in respect of going concern including:
• at present the Group is in exploration and
development phase, and accordingly is not yet
revenue generating, but has certain committed
operating costs;
• The impact of COVID 19 on operations and access
to future funding.
Management prepared two going concern
assessments. The first based on the forecast
expenditure for the next 12 months inclusive of
discretionary expenditure, based on planned levels of
future activity including commencement of construction
of the Vares Silver Project.
The Second scenario was based on including only
committed expenditure and eliminating all discretionary
spend including deferral of construction related
activities.
Based on the second scenario, there is no material
uncertainty pertaining to going concern as managing
the cash flows is within management’s control. The
Directors therefore considered the going concern
assessment to be appropriate.
Management prepared an assessment of impairment
indicators and considered whether there are any of
the indicators of impairment in line with criteria set out
under IFRS 6. The impairment assessment did not
highlight any impairment indicators and as such an IAS
36 impairment assessment was not required.
Going Concern
Assessment of the Groups’ ability to continue as
a going concern as part of the preparation of the
financial statements. This includes considering
whether the Group has adequate resources to
continue in operation for the foreseeable future
from the date of anticipated signing of the financial
statements.
The assessment of going concern covers a period
of at least 12 months from the date of signing the
financial statements.
Exploration
and evaluation
assets carrying
value
The Group’s total exploration and evaluation
assets of £12,023,219 (30 June 2020:
£9,045,169 and the £22,678,884 exploration and
mining asset recognised on acquisition of Tethyan
Resource Corp) (30 June 2020 – £nil) are material
to the Group’s balance sheet.
Management are required to assess whether
there are any indicators that an asset may be
impaired in accordance with IFRS 6 at the end
of each reporting period. If any such indicators
are identified a full impairment test in line with the
requirements of IAS 36 is necessary.
43
ADRIATIC METALS PLC GOVERNANCE Significant
issue
QRC
Convertible
loan
Summary of Significant Issue
Actions and Conclusion
The accounting and disclosure of the convertible
loan note payable of £11,590,172 (30 June 2020:
£nil) and its imbedded derivative liability value
£3,045,213 (30 June 2020: £nil) is a complex
area because the loan should be accounted for at
fair value per IFRS 9.
Management engaged the services of independent
valuation experts to assist in determining the
appropriate fair value of the loan from QRC including the
fair value of derivative liability.
Tethyan
Acquisition
& treatment
of Options
Agreements
The accounting and disclosure of the equity
transaction to acquire the Tethyan Resources
Corp Group completed on 8th October 2020
is a complex area which requires assessment
of whether the equity transaction represents a
business acquisition or an asset acquisition under
IFRS 3.
Consideration needs to be made as to what
entities the group controls and at what point did
this control pass to the group.
Consideration paid as part of the acquisition
needs to be apportioned based on the fair value
of assets acquired.
Management prepared an assessment of the equity
transaction.
Assessment in line with criteria set out in IFRS 3 led
management to conclude that transaction was an asset
acquisition rather than a business acquisition.
Assessment in line with criteria set out in IFRS 10 led
management to conclude that substantive control
of Tethyan Resources Corp and its wholly owned
subsidiaries was obtained as part of the second close
of the acquisition on 8th October 2020.
Assessment of the Option agreements in line with
criteria set out in IFRS 10 obtained as part of the
Tethyan Resource Corp acquisition led management
to conclude that Ras Metals d.o.o. (which the group
owned 10% of its equity) was also substantively
controlled from 8 October 2020 due to the option
agreement allowing it to acquire the remaining share
capital of this company (though the group does not
have present access to returns due to variable price of
consideration still to be paid). This option agreement
was enacted subsequent to year end on 22 February
2021. See Section 4 of Financial Statements ‘Critical
accounting estimates and judgements’ for further
details.
In line with IFRS 10, the excess value of the transaction
over the historical value of assets acquired was
recognised as an exploration/mining asset. Non-
controlling interest in respect of 10% ownership of
Ras Metals d.o.o. and other equity balance was also
recognised.
External Auditor’s Fees
There was no significant non-audit
work carried out by BDO subsequent
to their appointment. Full details of fees
paid during the period may be found in
note 18 to the Consolidated Financial
Statements.
Objectivity and Independence
The Committee continues to
monitor the auditor’s objectivity and
independence and is satisfied that BDO
and the Company have appropriate
policies and procedures in place to
ensure that these requirements are not
compromised.
Re-appointment of External Auditor
The Committee recommends to the
Board the re-appointment of BDO as
auditor at the forthcoming 2021 annual
general meeting (AGM), and BDO has
expressed its willingness to continue in
office.
Internal Auditor
The requirement for the appointment
of an internal auditor is continually
assessed by the Committee; the level
of spending and complexity of the
operations being taken into account
when considering this decision. To
date, the Committee has decided that
an internal audit function is not required
but will continue to assess the situation
on a regular basis.
Going Concern
The Directors considered it appropriate
to continue to adopt the going concern
basis of accounting in preparing the
financial statements. The going concern
statement is detailed in full in note 2c of
the Consolidated Financial Statements.
Conclusion
The Committee is satisfied with the
quality, independence and objectivity
of the external audit and believes that
on the basis of the audit it can make
a proper assessment of the quality of
financial and other systems of reporting
and control within the Company.
In respect of its own performance, the
Committee considers that it has given
appropriate challenge and direction to
the finance department, concentrating
on the areas that are relevant to the
risks facing the Company.
Sandra Bates
Chair of the Audit
& Risk Committee
44
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 PROTECTING VALUE FOR OUR
SHAREHOLDERS
ENVIRONMENTAL, SOCIAL & GOVERNANCE COMMITTEE REPORT
Concurrent with the Company’s
achievement of various milestones on
project and corporate development,
Adriatic has taken significant steps to
further advance our environmental,
social & governance (ESG) approach.
We recognise that a critical aspect of
delivering and protecting value for our
shareholders and other stakeholders
is to be a responsible operator that
adheres to and promotes good mining
practice. At a time when the Covid-19
pandemic has continued to threaten
lives and livelihoods globally – including
in the communities where we operate
– acting on our commitments to our
stakeholders has been critical.
Activities of the ESG Committee
A major step in our governance
approach was the establishment of the
Environmental, Social & Governance
Committee, which I am delighted to
have been asked to Chair. I, my fellow
Committee members, and our other
Board and management colleagues
have identified ESG issues as among
the most prominent to be managed
at this stage of the Company’s
development. We are building
foundations for the long term, both for
the Company and our stakeholders.
As a reflection of our commitment
to best practice, the Committee has
undertaken training to build further on
the wealth of ESG expertise among the
Committee members and to ensure this
is applied as effectively as possible.
Since its establishment, the ESG
Committee has held regular meetings
and ongoing engagement. Areas of
focus have included: the development
of a dashboard of ESG KPIs against
which to monitor the Company’s
ESG performance; oversight of
progress on project permitting; input
into governance arrangements for
the Adriatic Foundation; examination
of the key issues arising from the
ESIA process and how these will
be managed; and a review of the
Company’s approach on areas such as
environmental and tailings management
and stakeholder engagement. We
expect that the Committee’s work
programme in 2021 will continue
to focus on these areas, as well
as reviewing ESG issues at Raska,
ensuring a proactive approach to
local hiring and procurement, and
supporting robust and transparent ESG
communications and public reporting.
Sanela Karic
Chair of the Environmental,
Social & Governance Committee
45
ADRIATIC METALS PLC GOVERNANCE Highlights from the Company’s ESG
activities over the reporting period
The Company’s governance of ESG
issues has been further strengthened
by the development of a framework of
ESG policies to guide our activities. The
framework includes policies on Anti-
Bribery and Corruption, Environment,
Climate Change, Health and Safety,
Human Rights, Human Resources,
Social Performance and Community,
Procurement, and a Modern Slavery
statement.
Our relationships with the communities
where we work have continued to be
strong and positive. We have taken
various measures to ensure that the
Company’s engagement with our host
communities can continue in a safe
way during the Covid-19 pandemic.
For example, our Public Liaison
Committee in Vares, which consists of
28 community members, has continued
to convene regularly, including via virtual
and telephone sessions. We have also
continued to share updates and collect
feedback through other engagements,
such as through the distribution of
community newsletters and project
information leaflets, and through public
consultation sessions as part of our
ESIA process.
As our Vares projects advance, we
are shifting our approach to social
investment to support and promote
the region’s long-term sustainable
development. Over the past six
months, we have laid the groundwork
for the creation of the Adriatic
Foundation, which is expected to be
formally established in Q2 2021. The
Foundation will be governed by a
Board of Trustees with independent
members from our local community and
will support projects that aim to bring
about positive, lasting socio-economic
impacts in the local community, with
a focus on education, environmental
protection and healthcare.
With a view to the commencement
of construction activities in 2021, we
continued to prepare for local hiring
and sourcing of goods and services,
including through the establishment of
training plans and engagement with
local employment centres. We have
also been working with a high school in
Vares to reinstate and update a mining
training course, which will support the
development of young local talent.
Our environmental work has continued
at pace during the second half of 2020,
with most of our activities centred on
the international-standard ESIA for our
Vares projects. We have completed an
interim baseline report and collected
almost all of the necessary baseline
data. We expect to complete our data
collection and field research by summer
2021, and then subsequently complete
the project impact modelling and
assessment.
We expect 2021 to be an even more
significant year for the Company,
with ESG being a core pillar of our
approach. We seek to continue our
close engagements and partnerships
with all of our stakeholders, to ensure
a healthy and safe working
environment, and to have positive
and lasting impacts in the areas
where we operate.
Sanela Karic
Chair of the Environmental,
Social & Governance
Committee
Annual Report for the Six Months Ended 31 December 2020
46
Strategic ReportGovernanceFinancial StatementsASX Additional Information STRONG ALIGNMENT OF
REMUNERATION POLICY WITH
SHAREHOLDER INTERESTS
REMUNERATION COMMITTEE REPORT
PART 1 – SUMMARY STATEMENT FROM THE CHAIRMAN
of the Remuneration Committee’s role
and membership can be found in the
Governance section of this Annual
Report.
After this introductory letter, this report is
split into two parts:
1. Our Remuneration Policy,
which became effective for a
period of three years when it was
passed by a binding shareholder
resolution at the 6 November 2020
AGM, and
2.
the Annual Statement on
Remuneration covering the six
months ended 31 December 2020,
reflecting the arrangements in place
during that Period.
An important point to note is that, as
required by ASX rules, all share incentive
awards to Directors during the period
were also approved by shareholders at a
general meeting. Share awards are a key
part of Adriatic’s director remuneration
policy and the central element of director
incentivisation.
Remuneration policy
The Remuneration Policy is intended
to fit the current size and profile of the
Group, to support the achievement
of the Group’s operational, business,
financial and strategic objectives and
align the interests of the directors with
shareholders over the short and longer
term. To achieve our goals, the Group
seeks to provide competitive overall pay,
split between fixed and performance-
related elements.
To date and during the Period, the
approach to executive remuneration
has been to limit the cash cost through
modest salaries (or consulting fees), no
pension or benefit arrangements, limited
and focused key performance indicator
(KPI) bonuses and to make significant
share incentive awards either as options
or performance rights, normally with
operational or share price performance
targets to be met by specified dates
which do not correspond to specific
one or three year financial periods.
Paul Cronin our CEO receives base
remuneration split between Director’s
fees and consultancy fees paid to
a service company, no pension or
benefits, a KPI bonus at modest levels
for achieving specific targets which
was not operated on an annual bonus
and has received significant share
awards reflecting his contribution to
the development of the Company
when his cash remuneration was
substantially below commercial levels.
The Chairman’s and non-executive
directors’ remuneration has been
pitched at modest levels with one-off
option awards. As an Australian listed
company, all share awards to directors
have been approved by shareholders.
As the company develops including
bringing its lead asset into production
and building its asset portfolio, it will
develop its executive, senior team and
non-executive director remuneration
arrangements to reflect its changing
profile and priorities. The Company
proposed a new directors’ remuneration
policy as laid out in our 2019/20 Annual
Report and approved at our AGM on
6th November 2020 with the support
of 97.0% of votes cast. This policy
was designed to provide scope and
flexibility for the company to develop its
remuneration arrangements over time
towards arrangements which are more
conventional for mid cap international
quoted resources business.
The Company will develop its
remuneration arrangements over time
in accordance with this policy. It intends
to review and change the Executive
Director’s base remuneration from July
2021 and increase the fee levels of the
Chairman and Non-Executive Directors
from January 2022 as reflected later in
this document. No further option awards
will be granted to the Chairman or non-
executive directors.
Peter Bilbe,
Chairman of the Nominations
and Remuneration Committee
Dear Shareholder
On behalf of the Board, I am pleased to
present the Remuneration Committee
Report, which sets out the remuneration
policy and the directors’ remuneration
for the six months ended 31 December
2020 (Period). It has been prepared
in accordance with the requirements
of The Large and Medium-sized
Companies and Groups (Accounts and
reports) (Amendment) Regulations 2013
(the Regulations).
The Regulations apply to the Company
because it is a UK incorporated
company and was admitted to the
Standard Segment of the Official List
of the Financial Conduct Authority
and to trading on the London Stock
Exchange’s Main Market (Standard
Segment) on 12 December 2019. The
Company has resolved to comply with
the provisions of the Quoted Companies
Alliance Corporate Governance Code
(QCA Code) so far as is practicable
given the Company’s size, nature
and stage of development and has
prepared this report with regard to
the QCA Remuneration Committee
Guide for small and mid-sized quoted
companies, revised in 2018. A summary
47
ADRIATIC METALS PLC GOVERNANCE between Swellcap Limited and the
Company dated 1 July 2019 was
terminated. The Company entered into
a new agreement on substantially the
same terms directly with Mr. Cronin with
a commencement date of 1 January
2021. No compensation was paid or
will be paid to either Swellcap Limited
or Mr. Cronin in connection with these
changes.
AGM
At our AGM on 6 November 2020, the
annual advisory resolution to approve
the Directors’ Remuneration Report
and the binding resolution on our
Remuneration Policy contained in our
30 June 2020 Annual Report (which
is required to be put to shareholders
every three years) were approved with
the support of 98.1% and 97.0% of
votes cast, respectively. The Directors
are not aware of the reason for the
modest vote against. As required under
the rules of the ASX, all share incentive
awards granted to Directors during the
Period including the share option award
to our new Non-Executive Director
Sanela Karic and to amend the Articles
to increase the cap on Non-Executive
Director fees, were approved by
shareholders at general meeting.
I hope that you find this report helpful
and informative and I look forward to
receiving further feedback from our
investors on the information presented.
Peter Bilbe
Chairman of Remuneration Committee
The Company has implemented a
structured short-term cash based
incentive plan to operate on an annual
basis starting from 1 January 2021.
The Company also intends to operate a
structured long-term incentive strategy
entailing awards of performance
rights granted annually subject to total
shareholder return and corporate targets
with the first awards being granted in
January 2022. Further detail on forward
remuneration is set out at the end of this
remuneration report.
The Remuneration and Nominations
Committee is abreast of developments
in corporate governance and good
practice. The Company has resolved
to comply with the QCA Code so far is
as is practicable given the Company’s
size, nature and stage of development
and the remuneration arrangements in
the future are intended to comply with
good practice reflecting the company’s
size and profile, and with the QCA Code,
not the UK Corporate Governance Code
(published by the FRC) which Premium
List companies are required to comply
with.
Annual statement
The following section, the Annual
Statement on Remuneration covering
the six months ended 31 December
2020, reflects the arrangements in
place over that Period. Given that the
Company was admitted to the ASX
in April 2018 and to the Standard
Segment of the London Stock Exchange
in December 2019, some of the
disclosures required by the Regulations
have limited applicability and where this
is the case, we have stated this in the
relevant sections of this report.
At the end of this section, we set out
details of how we intend to operate
Executive Remuneration during 2021.
Remuneration Committee
Remuneration Committee meetings are
normally held at least once a year and
met once during the six months ended
31 December 2020. Additionally, matters
for its consideration were discussed at
Board meetings on several occasions.
On each occasion, no Director was
present while matters concerning him
or her were discussed, and all decisions
were taken by Non-Executive Directors,
in accordance with the Remuneration
Committee’s Charter.
Context within which
Remuneration managed
As detailed elsewhere in this annual
report, during the Period the Company
achieved considerable progress towards
our main objective of developing the
Vares Silver Project including completion
of associated equity and debt financing
that have the potential to deliver growth
for the benefit of Adriatic’s shareholders.
The company also completed the
acquisition of Tethyan Resource Corp
with a view to developing a pipeline of
projects and becoming a multi-mine
producer.
Principal actions and decisions
during the Period
As reflected earlier in this annual report,
the Board was pleased with progress
achieved during the Period. The principal
decisions in respect of remuneration
taken during the Period were:
• Approving the employment terms of
our new Head of Corporate Affairs
who is not a director
• Awards of performance rights to the
Head of Corporate Affairs and Head
of Exploration, neither of whom are
directors, in August 2020
• Approving the vesting of performance
rights held by the CFO and Head
of Exploration, neither of whom are
directors, in December 2020
• Increasing the fee of our new
Chairman, Michael Rawlinson to
£50,000 per annum and reducing
the fee of Peter Bilbe to £30,000
following his move from Chairman to
Non-Executive Director
• Appointed h2glenfern Remuneration
Advisory in August 2020 to provide
advice and assistance on executive,
Non-Executive Director and Senior
Management remuneration policy.
Principal actions and decisions
after the period end
Following consideration of the
remuneration policy review report
produced by h2glenfern the Company
has made a number changes to the
Remuneration policy for 2021 including
changes to base remuneration as
referred to above and set out in greater
detail later in this report. Details of these
changes are provided on page 60 of
the Remuneration Committee Report.
Following Mr. Cronin’s decision to
permanently relocate to Bosnia &
Herzegovina from 1 January 2021,
the Company, Swellcap Limited and
Mr. Cronin entered into an agreement
pursuant to which the service contract
48
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 REMUNERATION COMMITTEE REPORT
PART 2 – REMUNERATION POLICY
The Company’s remuneration policy seeks to provide a strong and clear link between business strategy and incentive
arrangements. No payments may be made that are inconsistent with the policy that was approved at our 6 November 2020 AGM,
and it must be approved by the shareholders once every three years, or whenever there is a proposal to amend it.
Executives and management
The Board is responsible for determining
and reviewing compensation
arrangements for the Directors and
senior executives reporting to the Chief
Executive Officer. The broad policy is
to ensure that remuneration properly
reflects the individuals’ duties and
responsibilities and that remuneration
is fair and competitive in attracting,
retaining and motivating quality people
with appropriate skills and experience.
At the time of determining remuneration,
consideration is given by the Board to
the Group’s financial circumstances and
performance.
To date and at present, the approach
to remuneration is to limit the cash cost
through modest salaries and fees, no
pension or benefit arrangements, limited
and focused key performance indicator
bonuses and to make significant share
incentive awards either as options
or performance rights, typically with
operational or share price performance
targets to be met by specified dates
which do not correspond to specific one
or three year financial periods.
As part of its suite of corporate
governance policies and procedures, the
Board has adopted formal Remuneration
and Nomination Committee Charters
and this Remuneration Policy, which was
approved by shareholders for the first
time under English company law at the
Company’s 6 November 2020 AGM.
The table below summarises the main
elements of the remuneration package
for Directors.
Maximum
opportunity
Applicable performance
measures
There is no maximum value. None.
Element
Base
salary
Purpose and link to
remuneration policy
Supports the
recruitment and
retention of Executive
Directors of the calibre
required to fulfil the
role without paying
more than necessary.
Reflects skills,
experience, role.
Key features and operation
Base salaries are set by the
Remuneration Committee
(Remcom) and reviewed
annually, and increases are
effective from 1 January,
although increases may be
awarded at other times if
the Remcom considers it
appropriate. In determining
base salaries, the Remcom
considers: pay levels at
companies of a similar size and
complexity, external market
conditions; pay and conditions
elsewhere in the Group; role
of individual and personal
performance. Directors may be
paid consultancy fees through
service companies.
Benefits
To help recruit, retain
and motivate high
performing Executives.
None are provided or
anticipated at present.
Pension
To help recruit, retain
and motivate high
performing Executives.
None are provided or
anticipated at present
Bonus
Rewards and
incentivise the
achievement of
annual objectives
which are aligned
with key strategic
goals and supports
the enhancement of
shareholder value.
Operational, financial and/
or other targets are set to be
achieved by specified dates
triggering the payment of
specified amounts. Awards
subject to targets may be set
at any time and are not set on
an annual basis. Paid in cash
following meeting of target.
Bonuses are non- pensionable.
May be paid in shares at the
Committee’s discretion.
No maximum value.
The Group may provide
additional market
competitive benefits such as
private healthcare and car
allowance.
If introduced, the maximum
amount would be 10% of
base salary plus consultancy
fees.
Maximum potential values
will not exceed 100% of
base salary and consultancy
fees in any year.
Existing arrangements are
set out in the annual report
section below.
The Company does not
anticipate putting further
bonus arrangements in
place for the Executive
Director before 1 July 2021.
None.
None.
Specific targets and
weightings may vary
according to strategic
priorities and may include:
financial performance,
operational performance,
attainment of personal and
strategic objectives.
Weighting will focus on
operational targets.
49
ADRIATIC METALS PLC GOVERNANCE Element
Purpose and link to
remuneration policy
Key features and
operation
Maximum
opportunity
Applicable performance
measures
Long term
incentive
plan
Incentivises executives
to achieve the
Company’s long term
strategy and create
sustainable shareholder
value. Aligns with
shareholder interests
through the potential
delivery of shares.
Non-
executive
fees
Fees for Non-Executive
Directors are set at
an appropriate level
to recruit and retain
directors of a sufficient
calibre without paying
more than is necessary
to do so. Fees are set
taking into account
the following factors:
the time commitment
required to fulfil the role,
typical practice at other
companies of a similar
size, and salary levels of
employees throughout
the Group.
Non-
Executive
share
awards
To help recruit,
retain and motivate
appropriately skilled
non-executive directors
and align them with
shareholders.
Specific targets and
weightings may vary
according to strategic
priorities and may include
operational, share price
or financial performance,
attainment of personal and
strategic objectives
Weighting is likely to focus
on operational and share
price targets.
Market value of award will
not normally exceed 100%
of the individual’s salary
and consultancy fees. In
exceptional circumstances,
such as initial awards,
awards to facilitate hiring,
new strategic periods,
market value at award may
be up to 300% of salary.
The Company does not
anticipate making further
long term incentive awards
to the Executive Director
before 1 July 2021.
Existing arrangements are
set out in the annual report
section below.
There is no maximum value.
Awards of performance
rights or options under
either of 2019 share award
plans which vest subject to
operational, financial and/
or share price targets to be
achieved by specified dates
triggering the payment of
specified amounts. Awards
subject to targets may be
set at any time and are not
set on an annual basis.
Vesting schedule is at the
Committee’s
Discretion and may be
different for each award. A
summary of the key terms
of the plans is set out later
in this policy section.
Fees are reviewed at
appropriate intervals
(normally once every year)
by the Board with reference
to individual experience,
the external market and the
expected time commitment
required of the director.
In the past the Company
has made one-off awards
of options with exercise
prices above the prevailing
share price at the time of
the award. No performance
conditions are attached and
the options vest immediately
and lapse three years after
grant.
Awards have been made
before the date of this
annual report, one further
award was made to a
Non-Executive Director,
Sanela Karic, as detailed in
the letter above approved
by resolution at the AGM.
Beyond this, only modest
awards, with a market value
up to £50,000 may be
made to the Chairperson or
Non-Executive Directors.
50
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
REMUNERATION COMMITTEE REPORT
PART 2 – REMUNERATION POLICY CONTINUED
Shareholder approval
This Policy set out above was approved
by shareholders at the 6 November
2020 AGM and became effective from
that date for a period of three years.
Equity incentive schemes
A summary of the key terms of the
ESOP 2019 and the Option Plan 2019
was set out in our 2019/2020 annual
report.
No further approvals are required under
UK law in relation to the operation of
the existing or future share options
plans. However, shareholder approvals
may be required in future under
applicable ASX rules.
Malus and Clawback
Historically, neither the bonus nor
the long term incentive plans have
contained malus or clawback
provisions, reflecting the size and profile
of the Company when these plans
were approved by the Board. However,
future bonus and long term incentive
awards will have malus and clawback
provisions attached in line with UK
governance best practice.
POLICY PROVISIONS RELATING TO EXECUTIVE DIRECTOR’S REMUNERATION
Illustration of application of remuneration policy
To date the Company’s remuneration policy has been differentiated from how UK-listed companies normally operate
remuneration. Whilst a significant proportion of the potential remuneration of the Executive Director is variable and is therefore
performance related, performance related pay has not been awarded or operated according to a fixed annual or longer period
or with fixed parameters applied. This is anticipated to change with the introduction of a new annual bonus plan (STIP) for the
year ending 31 December 2021 onwards and long term performance rights awards (LTIP) on an annual basis commencing
from 1 January 2022.
An illustration of the application of the policy for 2021 is set out below. The charts below give an indication of the level of
remuneration that would be received by the Executive Director in accordance with the Directors’ remuneration policy.
MINIMUM
ON TARGET
MAXIMUM
0
0
5
,
4
3
2
£
100%
0
0
5
,
4
3
2
£
0
0
0
,
0
7
£
18%
6%
0
0
5
,
4
3
2
£
0
0
0
,
0
7
£
18%
5%
4
8
9
,
9
8
8
£
69%
4
8
9
,
9
8
8
£
68%
8
3
9
,
7
8
£
7%
0
5
2
,
7
1
1
£
9%
Base Salary
Previously agreed cash bonus targets
Previously awarded performance rights (unvested)
2021 Annual STIP
The charts provide estimates of the potential future reward opportunities for the Executive Director for the year ending 31
December 2021, and the potential split between the different elements of remuneration under three different performance
scenarios: “Minimum”; “On target”; and “Maximum”. The “On target” scenario will be calculated based achievement of the
previously agreed cash bonus and performance rights vesting targets and achieving 75% of the maximum potential award
under the STIP. The “Maximum” scenario has been calculated assuming that the Director achieves the maximum allowed STIP
bonus which for 2021 will be capped at 50% of Mr. Cronin’s base salary.
There are presently no other executive directors.
51
ADRIATIC METALS PLC GOVERNANCE
How employee pay is taken
into consideration
When determining remuneration
policy and arrangements for Executive
Directors, the Remuneration
Committee considers the wider pay
and employment conditions elsewhere
in the Group to ensure pay structures
from Executive Director to senior
executives are aligned and appropriate.
The Remuneration Committee did
not consult with its employees in
formulating this policy.
Shareholder views on
remuneration
The Chair of the Remuneration
Committee will be available to contact
shareholders concerning the Company’s
approach to remuneration. The
Company welcomes a dialogue with its
shareholders and will seek the views of
its major shareholders if and when any
major changes are being proposed to
the policy.
Alignment of executive
remuneration and the market
The Remuneration Committee sets
Director remuneration policy in the
light of its knowledge of remuneration
at comparable companies and will
undertake benchmarking exercises
periodically so that it can do this. This
is done to ensure Executive Director
remuneration is appropriate, competitive
and not excessive.
Approach to remuneration on
recruitment
In the event that the Company recruits
a new Executive Director (either from
within the organisation or externally)
when determining appropriate
remuneration arrangements, the
Remuneration Committee will take
into consideration all relevant factors
(including but not limited to quantum,
the type of remuneration being offered
and the jurisdiction the candidate was
recruited from and in which he/she
will primarily be located) to ensure that
arrangements are in the best interests of
both the Company and its shareholders
without paying more than is necessary
to recruit an Executive Director of the
required calibre.
The Remuneration Committee would
generally seek to align the remuneration
package offered with the Company’s
remuneration policy outlined in the table
above. However, the Remuneration
Committee retains the discretion
to make proposals on hiring a new
Executive Director which are outside the
standard policy:
• In the first year of appointment, the
Committee may offer additional
remuneration arrangements that it
considers appropriate and necessary
to recruit and retain the individual
which shall not be offered in
successive years; and
• It may also offer awards on
appointing an Executive Director
to “buy-out” remuneration
arrangements forfeited on leaving a
previous employer.
Executive Director’s service
contracts
During the Period, the services of the
CEO and Managing Director were
provided under a service contract with
Swellcap Limited with commencement
date 1 July 2019. These are not of a
fixed duration and are terminable by
either party giving six months’ written
notice. Contracts entered into with
Executive Directors will have a notice
period not exceeding 12 months.
As noted preciously, following Mr.
Cronin’s permanent relocation to Bosnia
& Herzegovina on 1 January 2021,
the Company, Swellcap Limited and
Mr. Cronin entered into an agreement
pursuant to which the service contract
between Swellcap Limited and the
Company date 1 July 2019 was
terminated. The Company entered into
a new agreement on substantially the
same terms directly with Mr. Cronin with
a commencement date of 1 January
2021. No compensation was paid or
will be paid to either Swellcap Limited
or Mr. Cronin in connection with these
changes.
52
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 Committee at times where changes to
business requirements demand it has
the ability to assess and amend pay
and short term or other incentives as
appropriate in order to motivate, drive
appropriate behaviours and incentivise
performance to promote the long term
success of the Company. Judgement
and flexibility may also be needed in
downgrading, as well as upgrading
certain remuneration elements, or
in determining a suitable balance
between fixed and performance-
related, immediate and deferred
remuneration, thereby permitting the
Remuneration Committee to adapt to
changing or challenging situations in
the overall business environment for
the benefit of the Company, including
considerations of political and social
pressures to which the Company may
be subject. Although the Remuneration
Committee will seek to maintain a strict
adherence to the three year policy
whenever possible, the requirement
to engage with shareholders each
and every time a measure is identified
as being required can be onerous in
time and expense. The Remuneration
Committee remains wholly committed
to maintaining engagement with
shareholders throughout the three year
life of the policy and, where appropriate,
shall formally engage them in placing a
revised policy to a General Meeting for
approval before the three year period
expires. The Remuneration Committee
however requests the ability (and
flexibility) to exercise their discretion
and judgement to ensure that the
determination and implementation of
this policy is fair to both the Executive
Directors and the shareholders,
whilst taking into account the overall
performance of the Company and any
relevant internal and external factors.
REMUNERATION COMMITTEE REPORT
PART 2 – REMUNERATION POLICY CONTINUED
Policy for payments for loss of
office
Notice periods set in the Executive
Directors’ service contracts are driven
by the need to protect shareholder
value and interests. As noted above,
the service contract of the Executive
Director has a notice period of six
months. A bonus is not usually paid to
a “good leaver” or any leaver should
they leave before the payment date of
said bonus.
The principles governing determination
of payments for loss of office are:
• service contracts legally oblige the
Company either to continue to pay
salary and pension allowances
and other contractual benefits for
any unworked notice period or,
at the option of the Company, to
make payment in lieu of notice
unless where an Executive
Director’s employment is summarily
terminated. The Remuneration
Committee reserves the right to
make discretionary payments in lieu
of notice which may be paid in a
lump sum, quarterly or monthly;
• the payment of a performance
bonus and/or other short term
incentives may be offered to the
departing Executive Director during
his/her notice period, based on
an assessment of personal and
corporate performance up to the
date of departure. Bonuses will not
be paid for any unworked period of
notice;
• where a role fulfilled by an Executive
Director is declared redundant
then the individual may have
the legal right to either statutory
redundancy pay or to a payment
under the Group’s normal severance
arrangements applicable to
employees generally; and
• in case of poor performance,
contractual termination payments
may generate undue and potentially
excessive reward; in such
circumstances, the Remuneration
Committee will consider terminating
a service contract on a fair basis,
whilst protecting the rights of the
Company.
The Company’s various incentive
schemes are governed by formal rules,
approved by shareholders. Executive
Directors have no contractual rights to
the value inherent in any awards held
under these plans and these plans
provide for vesting in different leaver
scenarios. Unless otherwise agreed by
the Board, unvested awards will lapse
when an Executive Director ceases
to be employed by the Company.
However, in cases of death, ill-health,
injury, redundancy, retirement or the
transfer of employment from one
company to another company in
the Group, awards will lapse unless
the Board, in its absolute discretion,
determines otherwise.
If employment or service is terminated
by the Company, the departing
Executive Director or senior executive
may have a legal entitlement (under
statute or otherwise) to additional
amounts, which would need to be
met. The Remuneration Committee
retains discretion to settle any other
amounts reasonably due to the
Executive Director or senior executive
where the Company wishes to enter
into a settlement agreement. In certain
circumstances, the Remuneration
Committee may approve new
contractual arrangements with the
departing Executive Director or
senior executive, potentially including
settlement, confidentiality, restrictive
covenants and/or consultancy
arrangements. These will only be used
where the Remuneration Committee
believes it is in the best interests of the
Company.
The Remuneration Committee generally
seeks to apply practical mitigation
in respect of termination payments
where appropriate. Any ex-gratia
payments made at the discretion of the
Remuneration Committee in excess of
statutory or contractual obligations will
be limited to an amount not exceeding
one year’s bonus plus legal fees, so
long as such fees do not exceed
£10,000.
Flexibility, discretion and
judgement
Attempt has been made to ensure
that the majority of situations and
scenarios that may arise in relation
to Executive Directors’ remuneration
have been covered in this policy. There
may be times when the Remuneration
Committee may need to exercise
appropriate discretion, judgement
or flexibility to achieve a fair result;
as no remuneration policy, however
comprehensive and carefully designed
and implemented can pre-empt every
possible scenario. Discretion must
be available to the Remuneration
53
ADRIATIC METALS PLC GOVERNANCE Non-Executive Directors
The Non-Executive Directors
signed letters of appointment
with the Company upon
appointment for the provision
of Non-Executive Directors’
services, terminable by three
months’ written notice given by
either party.
The Non-Executive Directors’
remuneration (including that of the
Chairperson) reflects the anticipated
time commitment to fulfil their
duties. Non-Executive Directors
do not receive benefits, a pension
or compensation on termination of
their appointments or bonus. In the
future, they will not receive further
major long term incentive awards
(see policy table for details). When
recruiting a new Non-Executive
Director, the Remuneration
Committee will follow the policy set
out in the table above. The letters
of appointment do not include any
provisions for the payment of pre-
determined compensation upon
termination of appointment and
notice may be served by either party.
All appointments are subject to the
Non-Executive Director
Appointment date
Michael Rawlinson
4 March 2019
Peter Bilbe
Julian Barnes
Sandra Bates
Sanela Karic
16 February 2018
16 February 2018
11 November 2019
3 August 2020
The Articles provide that each
Director is entitled to such
remuneration from the Company
as the Directors decide, but the
total amount of fees provided to
all Non-Executive Directors must
not currently exceed £400,000
(A$725,000) per annum.
The Director’s service agreements
and letters of appointment are held at
the registered office and are available
for shareholders to view on request
from the Company Secretaries.
Company’s Articles of Association
(Articles) and re-election by
shareholders in accordance with the
provisions contained in the Articles.
If the Board is contemplating a
transaction that requires more work
than would normally be expected of
Non-Executive Directors, their fees
may be increased by up to 100%,
to a level to be determined by the
Board at that time.
The Directors have responsibility
to review, monitor and make
recommendations to the Board
regarding the orientation and
education of directors which includes
an annual review of the directors’
compensation programme.
54
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 REMUNERATION COMMITTEE REPORT
PART 3 – REMUNERATION REPORT (AUDITED)
The Group paid the following remuneration to each Director:
(In GBP)
Six months ended 31 December 2020
Total Salaries
and fees (A)
Cash
bonus (C)
Share awards
vesting in
year (C)
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
Executive Directors
Paul Cronin
106,859
Non-Executive Directors
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates(1)
John Richards(2)
Sanela Karic(3)
Total Directors’
Remuneration
23,333
16,642
15,000
15,000
642
78,533
256,009
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
106,859
106,859
23,333
16,642
15,000
15,000
642
78,533
23,333
16,642
15,000
15,000
642
78,533
256,009
256,009
-
-
-
-
-
-
-
(In GBP)
Year ended 30 June 2020
Total Salaries
and fees (A)
Cash
bonus (C)
Share awards
vesting in
year (C)
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
Executive Directors
Paul Cronin
Milos Bosnjakovic(5)
Non-Executive Directors
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates(1)
John Richards(2)
Eric de Mori(5)
Total Directors’
Remuneration
Notes:
208,158
238,897
195,107
47,642
30,000
53,356
52,282
7,480
30,000
620,731
-
-
-
-
-
858,889
238,897
208,158
238,897
195,107
195,107
47,642
30,000
53,356
52,282
7,480
47,642
30,000
53,356
52,282
7,480
650,731
-
-
-
-
-
-
-
832,922
30,000
620,731
1,483,653
832,922
650,731
A ) Total amount of salaries and fees includes money or other assets received or receivable for the relevant financial year, including share awards without
performance measures or targets vested in the relevant year. The monetary value of share awards is calculated as the number of awards vested multiplied
by the share price on the vesting date less options exercise price or performance rights nominal value payable.
B ) There were no taxable benefits in either the current or prior year
C ) Money or other assets received or receivable for the relevant financial year as a result of the achievement of performance measures and targets relating to
a period ending in that financial year. The monetary value of share awards is calculated as the number of awards vested multiplied by the share price on the
vesting date less options exercise price or performance rights nominal value payable.
D ) There were no pension related benefits in either the current or prior year
1: Appointed 11 November 2019 2: Appointed 11 November 2019, resigned 8 July 2020
3: Appointed 3 August 2020 4: Until 11 June 2020 5: Resigned 8 October 2019
55
ADRIATIC METALS PLC GOVERNANCE
The monetary value of vested share awards granted to each Non-Executive Director without performance measures or targets
included in total salaries and fees was as follows:
(In GBP)
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates
Eric de Mori
John Richards
Sanela Karic
6 months ended
31 December 2020
-
-
-
-
-
-
66,244
66,244
Year ended
30 June 2020
165,107
-
-
34,070
-
34,070
-
233,247
Paul Cronin was appointed CEO and Managing Director on 18 September 2019. His total remuneration during the six months
ended 31 December 2020 was £106,859 (year ended 30 June 2020: £858,889).
No payments for loss of office were made in the current Period or in the prior year.
Directors’ fees are paid monthly in arrears.
Gains on the exercise of share options by Directors during the six month period ending 31 December 2020 were as follows:
Date of
Grant
Date of
exercise
Exercise
price
Number of
performance
rights exercised
Share price on
date of exercise
Gain on
exercise
Peter Bilbe
27 April 2018
20 November 2020
A$0.30
600,000
A$2.23
£641,782
The exercise price is calculated based on the share price at date of the agreement being entered into between the Company
and the Director and may not be the same as the share price on the date of grant due to timing differences arising as a result of
the ASX requirement for shareholders to approve all options and share awards to Directors.
There were no gains on the exercise of share options by Directors during the previous year.
There were no gains on the exercise of performance rights by Directors during the six month period ended 31 December 2020.
Date of
exercise
Nominal consideration
payable on exercise
of each performance
right
Number of
performance
rights exercised
Share price on
date of exercise
Gain on
exercise
Paul Cronin
8 January 2020
£0.013355
750,000
A$1.675
£647,187
The 750,000 Performance Rights exercised by Mr. Cronin during the prior year were granted on 29 November 2019 following
shareholder approval and vested on the test date of 31 December 2019 because the performance criteria of (a) completing
the scoping study for the Vares Silver Project; and (b) the Volume Weighted Average Market Price per CDI (as quoted on ASX)
exceeded A$1.25 for the 5 consecutive trading days immediately prior to 31 December 2019 had been met.
KPI bonus
During the prior year ended 30 June 2020, the Board set the following KPIs, and accompanying bonus amounts, for Mr. Cronin
as follows:
KPI Target
Bonus Amount
Status
Admission of the Company to the London
Stock Exchange
£30,000
Paid during the year ended 30 June 2020.
Issue of an exploitation permit for Veovaca
£35,000
Paid in February 2021
Issue of an exploitation permit for Rupice.
£35,000
Not yet met
No KPI’s were paid during the six months ended 31 December 2020 and no new KPIs were set for Mr. Cronin during the period.
However, as part of a structured annual, cash based short term incentive plan the Company has implemented with effect from
1 January 2021, new KPIs that have been set for Mr. Cronin for the year ending 31 December 2021 as outlined later in the
Remuneration Policy in 2021 section of this report.
56
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
REMUNERATION COMMITTEE REPORT
PART 3 – REMUNERATION REPORT (AUDITED)
- CONTINUED
Equity incentives
The following options were granted to Directors of the Company during the year. The options granted to Non-Executive
Directors do not have performance conditions, vest immediately on the date of grant and lapse three years from the date of
grant:
Sanela Karic
6 November 2020
2.20
1,000,000
1,000,000
Date of grant
Exercise price (A$) Number of options
The exercise prices of these options were agreed at the time the awards were proposed to the individual. The options award
was subsequently approved by shareholders, as is required by the ASX, at the Annual General Meeting of the Company on 6
November 2020.
There was no grant of performance rights to Directors of the Company during the period.
The interests in the Company’s shares and other securities held by Directors at 31 December 2020 that served during the
period is set out below:
Paul Cronin
Peter Bilbe
Michael Rawlinson
Julian Barnes
Sandra Bates
Sanela Karic
John Richards
Number of
Ordinary Shares
Percentage
of Issued
Share Capital
17,601,132
760,000
40,000
8.48%
0.37%
>0.01%
-
-
-
-
Number
of Options
5,000,000
900,000
1,000,000
1,000,000
1,000,000
1,000,000
-
Number of
Performance
Rights
750,000
-
-
-
-
-
-
18,401,132
9,900,000
750,000
In issue at 31 December 2020
207,576,675
17,369,827
3,735,000
Percentage held by directors that
served during the year
8.86%
57.00%
20.08%
As at 31 December 2020, all options in the table above had vested and none of the performance rights had vested.
Advice on remuneration
During the period, h2glenfern Remuneration Advisory provided advice to the Company with respect to the Executive Directors’
remuneration. Fees were charged pursuant to a cost incurred basis in relation to advice and support on the proposed new
remuneration policy and totalled £23,000 excluding VAT in the period to 31 December 2020. h2glenfern Remuneration
Advisory has no other connection with the Company. h2glenfern Remuneration Advisory has confirmed that it has operated in
accordance with the Code of Conduct of the Remuneration Consultants’ Group in relation to Executive remuneration consulting
in the United Kingdom. The Remuneration Committee has therefore satisfied itself that all advice provided by h2glenfern was
objective and independent.
Other disclosures on remuneration for the 6 months ended 31 December 2020
Other than option awards detailed above, no other remuneration was paid or payable during the year. As such, there are no
further disclosures to be made in respect of salaries or fees, pension, benefits, annual bonus or long term incentive awards.
No payments were made for loss of office during the year. There were no payments during the year to past directors.
57
ADRIATIC METALS PLC GOVERNANCE UK performance graph against CEO remuneration
The Directors have considered the requirement for a UK performance graph comparing the Company’s Total Shareholder
Return with that of a comparable indicator. The comparable indicators chosen are indexes in similar industry classification on
exchanges in which the Group are listed, being the FTSE 350 Mining Index and S&P ASX 300 Metals & Mining. The chart below
illustrates the Company’s share price performance during the year compared to relevant market indices:
FTSE 350 Mining Index
S&P ASX 300 Metals & Mining
ASX : ADT
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
The total monetary value of remuneration for the person undertaking the role of Chief Executive Officer was as follows:
(In GBP)
Cash remuneration
Value of share awards vested
CEO Remuneration
Cash remuneration for the Chief Executive Officer
role decreased by 52% compared to the prior
year and total monetary value of all remuneration
decreased by 87% compared to the prior year.
VALUE OF SHARES AWARDS VESTED
CASH REMUNERATION
1,000,000
)
P
B
G
n
I
(
800,000
600,000
400,000
200,000
6 months ended
31 December 2020
Year ended
30 June 2020
106,859
-
106,859
238,158
620,731
858,889
£858,889
£106,859
Period ended 31 Dec 2020 Year ended 30 June 2020
58
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
REMUNERATION COMMITTEE REPORT
PART 3 – REMUNERATION REPORT (AUDITED)
- CONTINUED
Relative importance of spend on pay
The Directors have considered the requirement to present information on the relative importance of spend on pay compared to
other financial metrics.
The total monetary value of Group remuneration was as follows:
(In GBP)
Cash remuneration
Value of share awards vested
Average number of employees
6 months ended
31 December 2020
Year ended
30 June 2020
1,418,362
748,834
2,167,196
73
1,299,362
973,351
2,272,713
39
All employees, including all other Directors, key management personnel and those engaged via personal service contracts were
chosen as the most appropriate comparator group as this includes senior executives and international employees. Average
remuneration of the comparator group compared to that of the CEO in the current and previous year, was as follows:
Period ended
31 Dec 2020
CEO
Comparator Group
Year ended
30 June 2020
CEO
Comparator Group
0
200,000
400,000
600,000
800,000
1,000,000
(In GBP)
CASH REMUNERATION
MONETARY VALUE OF NON-CASH REMUNERATION
The table below sets out the details of total group general and administration expenses and capex:
(In GBP)
G&A expenses
Exploration Expenses
Property, plant and equipment additions
Exploration & evaluation additions
6 months ended
31 December 2020
Year ended
30 June 2020
2,115,707
798,028
91,022
3,052,019
6,056,776
3,315,634
-
237,543
5,048,523
8,601,700
59
ADRIATIC METALS PLC GOVERNANCE
Relative Spend
Cash remuneration represented
24.9% of the total exploration activities
expenses, general and admin, Capex
and exploration and evaluation spend
during the year (30 June 2020: 15.1%).
24.9%
15.1%
42.4%
Relative Spend
by type for the
Period Ended
31 DEC 2020
Relative Spend
by type for the Year Ended
30 JUNE 2020
26.6%
13.2%
55.5%
18%
1.5%
2.8%
CASH REMUNERATION
EXPLORATION ACTIVITIES EXPENSES
G&A EXPENSES
PROPERTY, PLANT AND EQUIPMENT ADDITIONS
EXPLORATION & EVALUATION ADDITIONS
Remuneration policy in 2021and 2022
Following consideration of the remuneration policy review report produced by h2glenfern Remuneration Advisory, the Company
is making a number of changes to remuneration for 2021 and 2022 within the Policy approved in November 2020 which are set
out below.
Executive Director and Management
The fixed remuneration of the Executive Director Paul Cronin will remain at £209,500 p.a. until 30 June 2021. The Remuneration
Committee anticipates changing this salary level effective 1 July 2021 to £259,500 p.a.
Short Term Incentive Plan (STIP) and 2021 KPIs
The Company has implemented a structured annual, cash based short term incentive plan with effect from 1 January 2021
for the Executive Director, Executive Management, Senior Managers and other eligible staff within the Group.
In recognition of the Executive Director’s existing 750,000 unvested performance rights and outstanding cash bonus targets
previously agreed, as disclosed earlier in this report, the performance and vesting conditions of which are expected to be
achieved during 2021 if the company achieves its stated objectives, Mr. Cronin’s maximum potential award under the
STIP will be 50% of base salary in 2021, increasing to 100% of base salary in subsequent years. The reduced maximum
potential STIP award to Mr. Cronin in 2021 is also consistent with the Company’s stated remuneration policy that
additional bonus arrangements were not anticipated to be put in place for the Executive Director before 1 July 2021.
Under the STIP, corporate and personal objectives (KPIs) will be set each year and actual performance
measured against those KPIs. Each KPI has been given a weighting and the specific performance criteria
further split into Low, Expected & High targets, with differing levels of bonus being payable
depending on the outcome.
The targets are designed to ensure they are difficult to achieve, and as such STIP should not be
viewed as an extension of base salary and aligned to key value adding milestones. The target areas
and their weightings within the bonus are:
Target Area
Weighting
Global Resource Growth
Feasibility Study NPV
Exploitation Permit
OH&S
Construction Start
Project Finance
Staff Satisfaction
Diversity
15.0%
17.5%
15.0%
12.5%
10.0%
15.0%
10.0%
5.0%
Further details of the target thresholds are commercially sensitive.
Further detail and information on performance in each area will be
disclosed in our 2021 remuneration report.
Annual Report for the Six Months Ended 31 December 2020
60
Strategic ReportGovernanceFinancial StatementsASX Additional Information REMUNERATION COMMITTEE REPORT
PART 3 – REMUNERATION REPORT (AUDITED)
- CONTINUED
The potential percentage of base salary achievable as a bonus under the STIP for each staff grade and the split of corporate
versus personal objectives as is as follows:
Level
CEO
Executive Management
Percentage of Base
salary achievable 2021
Percentage of Base
salary achieveable
2022 onwards
Corporate
Objectives
Personal
Ojectives
50%
70%*
100%
70%
100%
70%
-
30%
* Percentage may differ for certain individuals as part of transition arrangement taking into consideration existing performance
objectives agreed prior to the implementation of the structured annual STIP.
The actual amount of the 2021 STIP bonus earned will be determined in January 2022 and 50% of that amount paid during
that month with the remaining 50% being paid in January 2023 to serve as a retention mechanism. STIP bonuses earned in
respect of the year ending 31 December 2022 onwards are expected to be paid without any deferral.
Long Term Incentive Plan (LTIP)
The Company intends to implement a structured equity based long term incentive plan with effect from 1 January 2022 for the
Executive Director, Executive Management, Senior Managers and Managers of the Group. The first grant of performance rights
under the LTIP will occur on 1 January 2022, subject to the provisions of the Company’s share dealing policy, and grants will be
annual thereafter.
It is anticipated that performance rights awards to the CEO will have a value of 100% of salary and performance rights awards
to Executive Management will normally be at or around 70% of salary. It is anticipated that 50% of the award will be subject to a
total shareholder return performance target and 50% subject to meeting corporate objectives.
The performance rights granted to the Executive Director under the LTIP will vest after three years, subject to the performance
targets having been met.
Performance rights granted to Executive Management, Senior Managers and Managers under the LTIP will vest over three
years in equal tranches on each anniversary of the grant, subject to the performance targets having been met.
All LTIP awards will be made under either the Company’s ESOP 2019 or Option Plan 2019.
Chairperson and Non-Executive Directors
Effective 1 January 2022, the annual base fees payable to each non-Executive Director will increase from £30,000 p.a. to
£50,000 p.a. to reflect the growing size, complexity and risks associated with the Group. The role of Chairperson of the Board
will attract an additional fee of £50,000 p.a. Directors serving as the chairperson of a board committee will receive an additional
fee of £5,000 for each committee that they chair.
Additionally, Ms. Karic has voluntarily chosen to waive all future emoluments from 1 March 2021 that would otherwise be paid
to her by the Company until such time as the Company has received the Rupice exploitation permit. Ms. Karic has requested
that the Company instead donates the equivalent amount to the Adriatic Foundation that was established during the Period as
noted in the ESG Committee Report.
Peter Bilbe
Chairman of Remuneration Committee
61
ADRIATIC METALS PLC GOVERNANCE 62
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 DIALOGUE WITH SHAREHOLDERS
a ) All Investors
b ) Institutional Investors
The Board is committed to providing
shareholders with clear and timely
information on Adriatic’s activities,
strategy and financial position. General
communication with shareholders is
coordinated by the Chairman and Chief
Executive Officer together with the
Investor Relations Manager.
The Company publishes on its website
a range of information which helps
current and potential shareholders to
make an assessment of the Group’s
position and prospects:
• Investor presentations
• Technical reports on the project
• Resources estimates
• Annual and Interim Financial
Statements
• Quarterly Activities Reports
• Business Strategy
• Governance material including the
Corporate Governance Manual and
Anti-Bribery policy
• All regulatory and other
announcements relating to equity
issues, Board changes, etc.
• Shareholder information (AGM etc.)
• Contact details for the Company
The Company’s AGM will be held in
London following the publication of
its annual results and all shareholders
are (subject to any COVID-19 related
restrictions) invited to attend.
The Board maintains a regular
dialogue with the Company’s major
institutional investors, providing
them with such information on the
Company’s progress as commercial
confidentiality, market abuse rules and
other legal requirements permit. The
Company typically holds meetings with
institutional investors and other large
shareholders following the release of
interim and financial results.
c ) Private Investors
The Company acknowledges that the
majority of its private investors hold
their shares via nominee shareholders
and may not be able to fully exploit
their shareholder rights effectively.
Accordingly, the Company is committed
to engaging with all shareholders and
not just institutional shareholders.
The Company has an Investor Relations
Manager based at the registered
office in Cheltenham, who deals with
shareholder enquiries and works in
conjunction with the Company’s PR
advisers to facilitate engagement with
its private investors.
d ) Board review
The Board is kept informed of the views
and concerns of major shareholders
by briefings from the CEO and
the Chairman and the Company’s
Brokers. Analyses of the share
register commissioned from external
consultants are also periodically
circulated to the Board, together with
significant investment reports from
analysts.
63
ADRIATIC METALS PLC GOVERNANCE DIRECTORS’ REPORT
Introduction
In accordance with Section 415 of the Companies Act 2006,
the Directors of Adriatic Metals PLC present their report
to shareholders for the six month financial period ended
31 December 2020. The Directors’ Report comprises the
Directors’ Report section of this report, together with the
sections of the Annual Report incorporated by reference.
As permitted by legislation, some of the matters normally
included in the Directors’ Report have instead been included
in other sections of the Annual Report, as indicated below.
Directors
The names of the Directors who held office during the period
and to the date of this report were:
Michael Rawlinson*
(Chairman from 3 August 2020)
Peter Bilbe*
(Non-Executive Director. Chairman until 3 August 2020)
Paul Cronin
(Managing Director and CEO)
Julian Barnes*
(Non-Executive Director)
Sandra Bates*
(Non-Executive Director)
Sanela Karic*
(Non-Executive Director) (from 3 August 2020)
John Richards
(Non-Executive Director) (resigned 8 July 2020)
* Determined by the board to be independent in accordance
with the UK Corporate Governance Code
The company secretaries are Geoff Eyre and Gabriel
Chiappini (joint).
Results and dividends
The Group results for the six months ended 31 December
2020 are set out on in the Financial Review on page 33 of
the Strategic Report.
The Company’s aim is to generate long term value for its
stakeholders and design a shareholder distribution policy
that reflects the growth prospects and profitability of the
Company while maintaining appropriate levels of operational
liquidity in due course. However, due to the early stage nature
of the Company and the Vares Silver Project, no interim
dividend was paid for the year ended 30 June 2020 and no
final dividend is recommended for the 6 months ended 31
December 2020.
Share capital
The Company was granted authority at the 2020 AGM to
allot shares in the capital of the Company up to a maximum
nominal amount of £673,830, (equivalent to 50,455,260
shares) in accordance with Section 551 of the Companies Act
2006. Details of the Company’s share capital are set out in
note 15b to the Consolidated Financial Statements, including
details on the movements in the Company’s issued share
capital during the Period.
The Company’s issued ordinary share capital ranks pari passu
in all respects and carries the right to receive all dividends
and distributions declared, made or paid on or in respect
of the ordinary shares. There are currently no redeemable
non-voting preference shares or subscriber shares of the
Company in issue.
Directors’ and Officers’ Insurance
The Company has arranged appropriate Directors’ and
Officers’ insurance to indemnify the Directors and Officers
against liability in respect of proceedings brought about by
third parties. Such provisions remain in place at the date of
this report.
Auditors
BDO LLP (Chartered Accountants) have been auditors of
Adriatic Metals PLC since 2020 and will be proposed for
re-appointment at the 2021 Annual General Meeting.
64
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 DIRECTORS’ REPORT - CONTINUED
Directors’ interests
Information on share ownership, options and performance
rights held by Directors can be found in this report and in the
Remuneration Committee Report.
Substantial shareholdings
The Company’s issued share capital as of 31 December 2020
was 207,576,675 ordinary shares and at 30 March 2021 was
209,208,869 ordinary share with each share carrying the right
to one vote. No shares are held in treasury.
Shareholder
Sandfire Resources Limited
Paul D Cronin
Milos Bosnjakovic
Datt Capital
Eric De Mori
At 31 December 2020, the Company had been notified,
pursuant to the Financial Conduct Authority’s Disclosure
Guidance and Transparency Rule (DTR 5), or was otherwise
aware of the following substantial interests (3% or more) in
the Company’s issued share capital.
Number of
ordinary shares
Percentage of issued
share capital
33,372,354
17,601,132
14,300,000
8,990,101
8,745,808
83,009,395
16.08
8.48
6.89
4.33
4.21
39.99
As at 24 March 2021, being the latest practicable date
before the approval of the Annual Report and Accounts, the
Company had not been notified, pursuant to DTR 5 that the
above positions had changed.
Changes in interests that have been notified to the Company
pursuant to DTR 5 since 24 March 2021 can be found in
the Regulatory News section of the Investors page of the
Company’s corporate website: https://www.adriaticmetals.
com/investors/lse-announcements/.
Additional disclosures
For the purposes of LR 9.8.4C R, the information required to be disclosed by LR 9.8.4 R can be found in the following parts of
this Annual Report:
Section
Matter
Interest Capitalised
Publication of unaudited financial information
Location
Not applicable
Not applicable
Details of long-term incentive scheme
Remuneration Committee Report page 61
Waiver of emoluments by a Director
Not applicable
Waiver of future emoluments by a Director
Remuneration Committee Report page 61
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
Non pre-emptive issues of equity for cash
As item (7) in relation to major subsidiary undertakings
Parent participation in a placing by a listed subsidiary
(10)(a)
Contract of significance in which a Director is interested
(10)(b)
Contract of significance with controlling shareholder
(11)
(12)
(13)
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
(14)
Agreement with controlling shareholder
65
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Strategic Report page 20 - Collaboration
and Strategic Partnership Deed
Collaboration with Sandfire
ADRIATIC METALS PLC GOVERNANCE Supplier payment policy
The Company’s current policy
concerning the payment of trade
creditors is to follow the Confederation
of British Industry’s Prompt Payers
Code (copies are available from the
CBI, Centre Point, 103 New Oxford
Street, London WC1A 1DU).
Branches
Adriatic Metals PLC does not have
any branches of the Company outside
of the United Kingdom as defined in
s1046(3) of the Companies Act 2006.
Financial risk management
and financial instruments
Information regarding the financial
risk management and internal control
processes and policies and exposure
to the risks associated with financial
instruments, can be found in note 14 in
the Consolidated Financial Statements,
the Corporate Governance, Risk
Management and Internal Control
sections on pages 9 to 14.
Greenhouse Gas Emissions
The Group have assessed their energy fuel consumption and have determined that energy consumption is above the 40 MWh
threshold set by the SECR for reporting for the first time in the period, and as such the group reports its greenhouse gas on an
annual basis in kg of carbon dioxide equivalent resulting from:
• the combustion of fuel (direct Scope 1 emissions)
• and that resulting from the purchase of electricity (indirect Scope 2 emissions).
The kg Emissions for the twelve months ending 31st December 2020 are as follows:
Emissions - kg CO2(‘e)
Scope 1
Scope 2
Total
Per headcount (average 12m)
Average Headcount
UK
-
2,028
2,028
Non UK
45,025
50,677
95,702
Total
45,025
52,705
97,730
1,278
77
Energy consumption in kWh for the twelve months ending 31st December 2020 are as follows:
Energy Consumption - kWh
Energy
Methodology
Our greenhouse gas emissions
have been calculated on an average
headcount employee ratio.
This intensity metric is the best
measure available to the Group given
the geographical diversity of the
operations and with the Group not yet
in production phase with its projects.
This is the first year the Group have
calculated our Scope 1 and Scope 2
GHG emissions and worked alongside
SCS to assist with our carbon
emissions reporting. This supports
greater transparency and accuracy of
data.
UK
8,700
Non UK
266,020
Total
274,720
Emissions have derived from accurate
consumption information on utility bills
and fuel expenditure.
GHG emissions have been calculated
in accordance with the GHG Protocol
Corporate Accounting and Reporting
Standard (revised edition), using the
location based method on the Scope
2 calculation method together with the
latest emission factors from recognised
public sources in the various
jurisdictions the group operates.
In addition, the Groups carbon
emissions disclosure has been
undertaken in accordance with the
Companies Act 2006.
Political donations
Neither Adriatic Metals PLC nor its
subsidiaries have made any political
donations during the period.
Powers of Directors
Subject to the Company’s Articles
of Association, UK legislation, ASX
Rules and to any directions given by
special resolution, the business of the
Company is managed by the Board,
which may exercise all the powers
of the Company. The Articles of
Association contain specific provisions
concerning the Company’s power to
borrow money and also provide the
power to make purchases of any of its
own shares.
The Directors have the authority to allot
shares or grant rights to subscribe for
or to convert any security into shares
in the Company. Further details of the
proposed authorities are set out in the
Notice of the AGM.
66
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 DIRECTORS’ REPORT - CONTINUED
Going concern
The Group incurred a loss in the
period of £5,694,503 (30 June 2020 -
£6,238,324). However, the Group also
had a net asset position at the balance
sheet date of £48,508,513 (30 June
2020 - £20,895,753).
The Company and Group continue to
meet their working capital requirements
and with the support of investors
and completed a £6.2 million equity
private placement with the European
Bank for Reconstruction and issue of
US$20 million in convertible debentures
to Queens Road Capital during Q4
2020. The results from the October
2020 Vares Silver Project Preliminary
Feasibility Study, indicating a project
NPV8 of US$1,040 million and IRR of
113%, further underlining the Group’s
future potential as a producing mine
operator generating healthy cash flows.
The Group’s operations have been
largely unaffected by COVID-19 with
exploration and development work
continuing with only minor disruption.
The Vares Silver Project’s economics,
the resource base of which includes
a substantial element attributable to
precious metals, remain attractive
notwithstanding the impact that
COVID-19 has had on commodity
prices and demand.
Cash flow forecasts prepared inclusive
of discretionary expenditure, based on
planned levels of future activity including
commencement of construction of
the Vares Silver Project, indicate that
the Group will need to raise additional
finance within the next 12 months.
However, the Directors’ believe that
the Group can secure the additional
funding necessary to continue in
operational existence for the next 12
months at planned activity level from
the date of this report and would defer
the acceleration in cash burn rate that
would arise on the commencement of
construction until adequate funding is in
place to do so.
Cash flow forecasts prepared based
on current committed expenditure and
non-discretionary spend only indicate
that the Company has 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.
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.
Post balance sheet events
Please refer to note 25 in the
Consolidated Financial Statements for
a detailed report on major events that
occurred subsequent to 31 December
2020.
Likely future developments
In the near term, the Company expects
to complete the feasibility study,
secure the funding and commence
construction of the Vares Silver Project.
Annual General Meeting (AGM)
The date and location of the 2021
AGM will be announced in due course.
At the AGM, shareholders will have
the opportunity to put questions to
the Board, including the Chairs of the
Board Committees.
Full details of the AGM, including
explanatory notes, will be contained in
the Notice of the AGM, which will be
distributed at least 28 days before the
meeting. The Notice will set out the
resolutions to be proposed at the AGM
and an explanation of each resolution.
All documents relating to the AGM will
be available on the Company’s website
at www.adriaticmetals.com.
Corporate Governance
Statement
The Disclosure Guidance and
Transparency Rules (DTR 7.2) require
certain information to be included in a
Corporate Governance Statement set
out in a Company’s Directors’ Report.
In common with many companies,
Adriatic Metals PLC has an existing
practice of issuing, within its Annual
Report, a Corporate Governance
Report that is separate from its
Directors’ Report.
Electronic communications
A copy of the 2020 Annual Report,
other corporate publications, reports
and announcements are available
on the Company’s website at the
following link: www.adriaticmetals.
com. Shareholders may elect to receive
67
ADRIATIC METALS PLC GOVERNANCE notification by email of the availability of
the Annual Report on the Company’s
website instead of receiving paper
copies.
Share rights
Without prejudice to any rights attached
to any existing shares, the Company
may issue shares with rights or
restrictions as determined by either the
Company by ordinary resolution or, if
the Company passes a resolution, the
Directors.
Voting rights
There are no other restrictions on voting
rights or transfers of shares in the
Articles other than those described in
these paragraphs. Details of deadlines
for exercising voting rights and proxy
appointment will be set out in the
Notice of the 2021 AGM.
At a general meeting, subject to any
special rights or restrictions attached
to any class of shares on a poll, every
member present in person or by proxy
has one vote for every share that he or
she holds.
A proxy is not entitled to vote where the
member appointing the proxy would
not have been entitled to vote on the
resolution had he or she been present
in person. Unless the Directors decide
otherwise, no member shall be entitled
to vote either personally or by proxy or
to exercise any other right in relation to
general meetings if any sum due from
him or her to the Company in respect of
that share remains unpaid.
• He or she has taken all the
reasonable steps that he or she
ought to have taken as a Director
to make him or herself aware of
any relevant audit information and
to establish that the Company’s
auditors are aware of the
information.
The confirmation is given and should
be interpreted in accordance with
the provisions of Section 418 of the
Companies Act 2006.
The Adriatic Metals PLC Directors’
Report has been prepared in
accordance with applicable UK
company law and was approved by the
Board on 30 March 2021.
By order of the Board
Geoff Eyre
Chief Financial Officer and Joint
Company Secretary
Additional information relating to
holders of shares in the Company in the
form of CHESS Depositary Instruments
(CDIs) can be found in the ASX
Additional Information section of the
Annual Report.
Transfer of shares
The Company’s Articles provide that
transfers of certificated shares must
be effected in writing, and duly signed
by or on behalf of the transferor and,
except in the case of fully paid shares,
by or on behalf of the transferee. The
transferor shall remain the holder of the
shares concerned until the name of the
transferee is entered in the Register of
Members in respect of those shares.
Transfers of uncertificated shares
may be effected by means of CREST
unless the CREST Regulations provide
otherwise.
The Directors may refuse to register an
allotment or transfer of shares in favour
of more than four persons jointly.
Statement of disclosure to the
auditor
Each of the Directors who were
members of the Board at the date of
the approval of this report confirms that:
• So far as he or she is aware, there
is no relevant audit information of
which the Company’s auditors are
unaware.
68
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 RESPONSIBLE FOR KEEPING
ADEQUATE ACCOUNTING
RECORDS
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
DIRECTORS’
RESPONSIBILITIES
PURSUANT TO DTR4
The Directors confirm to the best of
their knowledge:
• The Group’s financial statements
have been prepared in accordance
with International Financial
Reporting Standards (IFRSs) as
adopted pursuant to Regulation
(EC) No 1606/2002 as it applies
in the European Union applied in
accordance with the provisions in
the Companies Act 2006 and Article
4 of the IAS Regulation and give
a true and fair view of the assets,
liabilities, financial position and profit
and loss of the Group
• The Annual Report includes a fair
review of the development and
performance of the business and the
financial position of the Group and
the parent Company, together with a
description of the principal risks and
uncertainties that they face.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and
disclose with reasonable accuracy
at any time the financial position of
the Company and enable them to
ensure that the Financial Statements
comply with the requirements of the
Companies Act 2006. They are also
responsible for safeguarding the assets
of the Company and hence for taking
reasonable steps for the prevention
and detection of fraud and other
irregularities.
Website publication
The Directors are responsible for
ensuring the Annual Report and
the Financial Statements are made
available on a website. Financial
Statements are published on the
Company’s website in accordance
with legislation in the United Kingdom
governing the preparation and
dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and
integrity of the Company’s website is
the responsibility of the Directors. The
Directors’ responsibility also extends
to the ongoing integrity of the Financial
Statements contained therein.
The Directors are responsible for
preparing the Annual Report and the
Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors
to prepare Financial Statements
for each financial year. Under that
law the Directors have elected to
prepare the Group and Company
Financial Statements in accordance
with International Financial Reporting
Standards (IFRSs) pursuant to
Regulation (EC) No 1606/2002 as it
applies in the European Union. Under
company law the Directors must not
approve the Financial Statements
unless they are satisfied that they
give a true and fair view of the state
of affairs of the Group and Company
and of the profit or loss of the Group
for that period. The Directors are also
required to prepare financial statements
in accordance with the rules of the
London Stock Exchange for Standard
List companies.
In preparing these Financial Statements,
the Directors are required to:
• prepare a director’s report, a
strategic report and director’s
remuneration report which comply
with the requirements of the
Companies Act 2006
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable and
prudent;
• state whether they have been
prepared in accordance with IFRSs
as adopted pursuant to Regulation
(EC) No 1606/2002 as it applies
in the European Union applied in
accordance with the Companies
Act 2006, subject to any material
departures disclosed and explained
in the Financial Statements; and
• prepare the Financial Statements on
the going concern basis unless it is
inappropriate to presume that the
company will continue in business.
69
ADRIATIC METALS PLC GOVERNANCE Strategic Report
Governance
Financial Statements
ASX Additional Information
FINANCIAL
STATEMENTS
Independent Auditor’s Report to the Members of Adriatic Metals PLC
Consolidated Statement of Financial Position
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes In Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Parent Company Statement of Financial Position
Parent Company Statement of Changes in Equity
Parent Company Statement of Cash Flows
Notes to the Parent Company Financial Statements
71
78
79
80
81
82
111
112
113
114
70
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ADRIATIC METALS PLC
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the
state of the Group’s and of the Parent Company’s affairs
as at 31 December 2020 and of the Group’s loss for the
period then ended;
• the Group financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006;
• the Group financial statements have been properly
prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union;
• the Parent Company financial statements have been
properly prepared in accordance with international
accounting standards in conformity with the requirements
of the Companies Act 2006 and as applied in accordance
with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies Act
2006; and, as regards the Group financial statements,
Article 4 of the IAS Regulation
We have audited the financial statements of Adriatic Metals
PLC (the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the 6 month period ended 31 December 2020 which
comprise the consolidated statement of comprehensive
income, the consolidated and parent company statements
of financial position, the consolidated and parent company
statements of changes in equity, the consolidated and
parent company statements of cash flows, and notes to
the financial statements, including a summary of significant
accounting policies. The financial reporting framework that
has been applied in their preparation is applicable law and
international accounting standards in conformity with the
requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union, and
as regards the Parent Company financial statements, as
applied in accordance with the provisions of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion. Our audit opinion is
consistent with the additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we
were appointed by the Board of Directors on 28 May 2020
to audit the financial statements for the year ending 30
June 2020 and subsequent financial periods. The period
of total uninterrupted engagement including retenders and
reappointments covers the periods ending 30 June 2020 and
31 December 2020. We remain independent of the Group
and the Parent Company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard
as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. The non-audit services prohibited by
that standard were not provided to the Group or the Parent
Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
The Company has not generated revenues from operations
and therefore its funding position is reliant upon raising capital
from either equity raises, debt financing or the sale of assets
as described in note 2c.
Given the reliance on continual funding and the significant
judgements in making the assessment as to whether it is
appropriate to prepare the financial statements on a going
concern basis we consider this to be a key audit matter.
Our evaluation of the Directors’ assessment of the Group and
the Parent Company’s ability to continue to adopt the going
concern basis of accounting and in response to the key audit
matter included:
• We agreed the opening cash position used in the cash
flow forecast to the audited position at 31 December
2020.
• We performed an accuracy check on the mechanics of the
cash flow forecast model prepared by management and
the directors.
• We assessed management’s and the Board’s financial
forecasts prepared for a period of at least 12 months
from the date of these financial statements. This included
consideration of the reasonableness of key underlying
assumptions by reference to current expenditure,
commitments on the exploration assets and any potential
impact of COVID -19 on the financial position of the Parent
Company and Group over the going concern review
period.
• We corroborated management’s assessment of future
committed expenditure on the exploration assets to the
underlying licences and key contracts and considered
whether it is reasonable that the Group has control over
the timing of these cash flows over the going concern
review period.
• We obtained an understanding of management and
the Board’s options for future fundraising that would be
required to meet the Group’s discretionary exploration
spend and assessed reasonableness of these options
based on past success.
• We evaluated the adequacy of the disclosures made in the
financial statements in respect of going concern.
Based on the work we have performed, we have not
identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant
71
ADRIATIC METALS PLC FINANCIAL STATEMENTS Our involvement with component auditors
For the work performed by component auditors, we
determined the level of involvement needed in order to
be able to conclude whether sufficient appropriate audit
evidence has been obtained as a basis for our opinion on the
Group financial statements as a whole. Our involvement with
component auditors included the following:
A planning meeting was held with the component auditor
remotely and detailed group reporting instructions for the
testing of the significant areas were sent to them. We also
reviewed the audit files remotely and discussed the findings
with the component audit partner, the audit team and
component management. The group audit team performed
specific procedures on all significant risk areas.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including
those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
In addition to the matter described in the Conclusions relating
to going concern section, we have determined the matters
described below to be the key audit matters.
doubt on the entity’s ability to continue as a going concern
for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage
99% (2019: 100%) of Group total assets
90% (2019: 100%) of Group profit before tax
Key audit matters
Carrying value and Impairment of
exploration and evaluation assets, and
license compliance
Going concern
Tethyan Bridging loan
Acquisition of the Tethyan Group
Dec
2020
June
2020
Yes
Yes
Yes
No
Yes
Yes
Yes
No
Tethyan Bridging loan no longer considered to be a key audit
matter because the convertible loan was amended upon
acquisition of the Tethyan Group and this has been considered
as part of the overall acquisition accounting for the Tethyan
Group.
Materiality
Group financial statements as a whole
£900,000 (June 2020: £330,000) based on 1.5% (June 2020:
1.5%) of total assets
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding
of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material
misstatement in the financial statements. We also addressed
the risk of management override of internal controls,
including assessing whether there was evidence of bias by
the Directors that may have represented a risk of material
misstatement.
In approaching the audit, we considered how the group is
organised and managed.
We assessed there to be three significant components
being the Parent Company, Adriatic Metals PLC, Eastern
Mining d.o.o., which is the holder of the mining licences
pertaining to the Veovaca and Rupice assets in Bosnia and
Ras Metals d.o.o., an entity which owns two exploration
licenses over the Kizevak and Sastavci silver-zinc-lead mines
in the Raska district of South-western Serbia. The remaining
non-significant components were subject to analytical review
procedures.
The Parent Company and Ras Metals d.o.o. were subject to
a full scope audit by the group auditor. A full scope audit for
group reporting purposes was performed by a BDO network
firm in Bosnia & Herzegovina on Eastern Mining d.o.o.
72
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ADRIATIC METALS PLC
Key audit matter
How the scope of our audit addressed the key audit
matter
1. Carrying value and Impairment of
Our specific audit testing in regard to this included:
exploration and evaluation assets, and
license compliance
The Group’s exploration and evaluation assets
(‘E&E assets’) per Note 9 of the financial statements
represent the most significant asset on the
consolidated statement of financial position. As at
31 December 2020 £36,479,724 (30 June 2020:
£9,045,169) of costs had been capitalised in relation
to exploration activity.
Management and the Board are required to assess
whether there are any potential impairment triggers
which would indicate that the carrying value of the
asset at 31 December 2020 may not be recoverable.
There are estimates and judgements applied in the
identification of potential impairment triggers and
within any models prepared to support the carrying
value of the assets.
Additionally, adhering to the specified terms of the
Group’s exploration licences in Bosnia and Serbia
and keeping them in good standing is paramount to
the continuance of further exploration work. Should
specified terms not be adhered to, in the worst
instance, the rights to further develop the assets
could be withdrawn, which consequently, would
impact carrying values.
Given the materiality of the E&E assets in the context
of the Group’s statement of financial position and
the significant judgement involved in making the
assessment of whether any indicators of impairment
exist we consider this to be a key audit matter.
Reviewing management’s and the Board’s assessment of potential
indicators of impairment of the E&E assets against the requirements
if IFRS 6 in order to assess if any exist.
Verifying the licence status, to confirm legal title and terms of use.
Reviewing exploration activity to assess whether there was any
evidence from exploration results to date which would indicate a
potential impairment.
Obtaining an understanding of management’s expectation
of commercial viability, inspecting any supporting technical
documentation and discussing results and operations with
management. Specifically, we reviewed both the competent
persons reports compiled on the Rupice and Veovaca projects.
Holding discussions with the Group’s independent expert to
understand and challenge the key estimates and judgements that
support the scoping study and underpin management’s assessment
of commercial viability, as well as assessing their competence,
objectivity and independence.
Inspecting approved budget forecasts and minutes of board
meetings to confirm whether or not the Group intended to continue
to explore the project areas.
Reviewing and assessing the adequacy of the disclosures in the
financial statements to check that they have been prepared in
accordance with the requirements of the accounting standards.
Key observation:
Based on the procedures performed, we found the judgement
and estimates made by management in their impairment
assessment to be reasonable.
73
ADRIATIC METALS PLC FINANCIAL STATEMENTS Key audit matter
How the scope of our audit addressed the key audit matter
2. Acquisition of the Tethyan Group
The Group acquired Tethyan Resources
during the period as part of an asset
acquisition, as the underlining transaction
does not meet the definition of a business
combination under applicable accounting
standards. See note 10 for management’s
assessment.
As part of the acquisition of Tethyan
Resources, Adriatic Metals PLC (ADT)
issued share options and warrants to certain
individuals in exchange for existing Tethyan
share options and warrants with the same
value.
As part of the acquisition ADT has acquired a
10% share in an underlying subsidiary called
Ras Metals. ADT has an option to take
control which can be exercised within its own
discretion. Management have concluded
that ADT have control over this entity as they
have a substantive right under the criteria of
applicable accounting standards.
This leads to complex accounting involving
the acquisition value, judgement regarding
the consideration paid and assigning values
between the assets acquired and the
consolidation of the Tethyan group.
Our specific audit testing in this regard included:
We considered the attributes of the Tethyan group against the criteria of the
accounting standards to corroborate that the acquisition does not meet the
definition of a business.
We reviewed the acquisition legal documents to support the key terms of
the transaction to identify the whether it was correctly taken into account by
management.
We reviewed management’s assessment of the treatment of the acquisition
during the period in both the company’s accounts as well as on the
Group consolidation in order to understand the accounting treatment and
judgements regarding consideration paid and acquisition value assigned to
the various Tethyan assets acquired.
We reviewed management’s assessment which considers whether ADT
have control over Ras Metals in line with the criteria set out in the applicable
accounting standards. In doing so, we reviewed the terms of the option that
ADT hold in Ras Metals as well as the agreement used to derive the value
of the consideration required to take up the option.
We also reviewed management’s calculation to account for the allocation of
the consideration between assets, and recalculated the consideration paid
based on the share price of ADT.
We reviewed management’s assessment and calculations in relation to the
treatment of the share based payments transferred from Tethyan Resources
to ADT.
We reviewed the adequacy of the disclosure of the acquisition in the
financial statements against the requirements of the accounting standards.
Key observation:
Based on the procedures performed, we found the judgements
made by management to be reasonable.
74
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ADRIATIC METALS PLC
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Group financial
statements
Parent company
financial statements
Dec 2020 £
June 2020 £
Dec 2020 £
June 2020 £
Materiality
900,000
330,000
310,000
210,000
Basis for determining materiality
1.5% of Total assets
35% of group
materiality
65% of group
materiality
Rationale for the benchmark applied
The materiality has been based on
total assets as the Group is in the
exploration and development phase
of its operations and is not revenue
generating or profit making. We
consider Total assets to be one of
the principal considerations for users
of the Financial Statements.
Capped 35% (2019: 65%) of Group
materiality given the assessment of
the components aggregation risk.
Performance materiality
580,000
210,000
200,000
130,000
Basis for determining performance
materiality
65% of materiality. In reaching our conclusion on the level of performance
materiality to be applied we considered a number of factors including
the expected total value of known and likely misstatements (based on
past experience), our knowledge of the group’s internal controls and
management’s attitude towards proposed adjustments.
Specific materiality
We also determined that for expenses for full scope components, a misstatement of less than materiality for the financial
statements as a whole, specific materiality, could influence the economic decisions of users. As a result, we determined
materiality for these items based on 10% of loss before tax for full scope components. We further applied a performance
materiality level of 65% of specific materiality to ensure that the risk of errors exceeding specific materiality was appropriately
mitigated.
Component materiality
We set materiality for each component of the Group based on a percentage of between 35% and 40% of Group materiality
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from £310,000 to £360,000. In the audit of each component, we further applied performance materiality levels of 65%
of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £18,000 (30 June
2020: 6,600). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative
grounds.
75
ADRIATIC METALS PLC FINANCIAL STATEMENTS Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial
period for which the financial statements are prepared is consistent with the financial
statements; and
• the Strategic report and the Directors’ report have been prepared in accordance
with applicable legal requirements.
• In the light of the knowledge and understanding of the Group and Parent Company
and its environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Matters on which we are
required to report by
exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ remuneration
report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
76
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
ADRIATIC METALS PLC
Responsibilities of Directors
As explained more fully in the Directors statement of
responsibilities, the Directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
• Holding discussions with management and the audit
committee to understand the laws and regulations
relevant to the Group and its components. These included
elements of the financial reporting framework, tax
legislation, mining laws, LSE listing rules and ASX listing
rules, QCA corporate governance code and environmental
regulations;
• Holding discussions with management and the audit
committee to consider any known or suspected instances
of non-compliance with laws and regulations or fraud;
• Testing appropriateness of journal entries made throughout
the period which met a specific risk based criteria;
• Assessing the judgements made by management when
making key accounting estimates and judgements, and
challenging management on the appropriateness of these
judgements, specifically around key audit matters as
discussed above;
• Reviewing minutes from board meetings of those charges
with governance and RNS announcements to identify any
instances of non-compliance with laws and regulations;
77
• Performing a detailed review of the Group’s period-end
adjusting entries and investigating any that appear unusual
as to nature or amount to supporting documentation; and
• Performing detailed testing on account balances which
were considered to be at greater risk of susceptibility to
fraud.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising
that the risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by,
for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures
performed and the further removed non-compliance with laws
and regulations is from the events and transactions reflected
in the financial statements, the less likely we are to become
aware of it.
A further description of our responsibilities is available on the
Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Parent Company’s members
those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Parent Company and the Parent
Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Matt Crane (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
United Kingdom
30 March 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
ADRIATIC METALS PLC FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Note
31 December 2020
(Restated) 30 June 2020
(In GBP)
Assets
Current assets
Cash and cash equivalents
Other receivables and prepayments
Financial asset at fair value through profit and loss
Total current assets
Non-current assets
Property, plant and equipment
Right of use asset
Exploration and evaluation assets
Total non-current assets
Total assets
Equity and liabilities
Current liabilities
Accounts payable and accrued liabilities
Lease liability
Option Liability
Borrowings
Total current liabilities
Non-current liabilities
Lease liability
Borrowings
Derivative Liability
Total non-current liabilities
Total liabilities
5
6
8
12
9, 10
11
12
10
7
12
7
7
Capital and reserves attributable to shareholders of the parent
Share capital
Share premium
Share-based payment reserve
Warrents reserve
Other equity
Foreign currency translation reserve
Retained deficit
Non-controlling interest
Total shareholders’ equity
Total equity and liabilities
15
15
15
15
10
10
29,580,538
654,514
-
30,235,052
969,464
236,349
36,479,724
37,685,537
67,920,589
1,900,437
35,609
2,515,399
105,515
4,556,960
219,731
11,590,172
3,045,213
14,855,116
19,412,076
2,772,186
51,471,748
5,756,069
2,797,086
(2,515,399)
225,580
(13,995,045)
46,512,225
1,996,288
48,508,513
67,920,589
9,942,729
451,546
1,241,514
11,635,789
910,920
251,898
9,045,169
10,207,987
21,843,776
682,402
10,530
-
-
692,932
255,091
-
-
255,091
948,023
2,401,777
23,992,967
4,426,185
-
-
219,805
(10,144,981)
20,895,753
-
20,895,753
21,843,776
See note 24 for details of the restatement of the prior year comparatives.
The accompanying notes on pages 82-110 are an integral part of these Consolidated Financial Statements.
The Consolidated Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised
for issue by the Board of Directors on 30 March 2021 and were signed on its behalf by:
Paul Cronin
Managing Director & Chief Executive Officer
Geoff Eyre
Chief Financial Officer & Joint Company Secretary
78
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
SIX MONTH ENDED 31 DECEMBER 2020
(In GBP)
Note
Six Months Ended
31 December 2020
Year Ended
30 June 2020
Exploration costs
General and administrative expenses
Share-based payment expense
Other income
Operating loss
Finance income
Finance expense
Revaluation of fair value asset
Loss before tax
Tax charge
Loss for the period
17
18
15e
21
19
19
6,7
16
(798,028)
(2,115,707)
(2,267,239)
4,816
-
(3,315,634)
(3,443,359)
6,131
(5,176,158)
(6,752,862)
-
(197,039)
(322,987)
203,131
(11,580)
322,987
(5,696,184)
(6,238,324)
1,681
-
(5,694,503)
(6,238,324)
Other comprehensive income that might be reclassified to profit or loss in subsequent periods:
Exchange gain arising on translation of foreign operations
5,775
5,775
145,563
145,563
Total comprehensive loss for the period
(5,688,728)
(6,092,761)
Total comprehensive loss attributable to:
Owners of the parent
Non-controlling interest
(5,169,617)
(519,111)
(5,688,728)
(6,092,761)
-
(6,092,761)
Net loss per share Basic and diluted (pence)
15f
(2.99)
(3.69)
The accompanying notes on pages 82-110 are an integral part of these Consolidated Financial Statements.
79
ADRIATIC METALS PLC FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
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The accompanying notes on pages [77 – 100] are an integral part of these Consolidated Financial Statements.
See note 24 for details of the restatement of the prior year comparatives.
The accompanying notes on pages 82-110 are an integral part of these Consolidated Financial Statements.
80
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
(In GBP)
Note
Six Months Ended
31 December 2020
Year Ended
30 June 2020
Cash flows from operating activities
Loss for the period
Adjustments for:
Loss on Disposal of Fixed Asset
Depreciation of property, plant and equipment
Amortisation of exploration & evaluation assets
Amortisation of right-of-use assets
Share-based payment expense
Finance income
Finance expense
Revaluation of fair value asset and liability
Changes in working capital items:
Increase in other receivables and prepayments
Increase in accounts payable and accrued liabilities
Net cash used in operating activities
Cash flows from investing activities:
Cash acquired on acquisition
Purchase of property, plant and equipment
Purchase of exploration & evaluation assets
Sale of Property, plant and equipment
Loans issued
Interest received
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from the issue of ordinary shares
Gross proceeds from loans and borrowings
Transaction costs arising from financing activities
Interest paid on lease liabilities
(5,694,503)
(6,238,324)
1,106
36,157
11,469
15,549
2,267,239
-
197,039
322,987
(151,833)
687,582
-
52,645
23,317
13,714
3,443,359
(203,131)
11,580
(322,987)
(85,438)
498,074
(2,307,208)
(2,807,191)
311,964
(90,864)
-
(235,117)
(3,052,019)
(4,942,689)
1,970
(723,300)
-
-
(876,201)
37,742
(3,552,249)
(6,016,265)
12,317,964
14,956,849
(1,447,201)
(10,523)
13,296,266
-
(11,580)
8
9
12
15
19
19
6,7
10
8
9
6
15i
7
15i
Net cash flows from financing activities
25,817,089
13,284,686
Net increase in cash and cash equivalents
Exchange (losses) / gains on cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
19,957,632
(319,823)
9,942,729
29,580,538
4,461,230
111,740
5,369,759
9,942,729
See note 21 for details of the restatement of the prior year comparatives in the Consolidated Statement of Cash Flows.
The accompanying notes on pages 82-110 are an integral part of these Consolidated Financial Statements.
81
ADRIATIC METALS PLC 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 Section 3 (collectively, the Group) for the period
ended 31 December 2020. Adriatic Metals PLC (the
Company or the parent) is a public company limited by
shares and incorporated in England & Wales. The Registered
office has changed during the year. 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 world-
class advanced Vares Silver Project in Bosnia & Herzegovina.
The Vares Silver Project consists of two high-grade
polymetallic deposits, located at Rupice and Veovaca. The
Group expanded its exploration activities to Serbia during
the period with the acquisition of the Tethyan Resource
Corp to order to advance the former Kizevak and Sastavci
polymetallic mines in the Raska District of southern Serbia.
Bosnia & 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.
The Vares Silver Project’s captivating economics and
impressive resource inventory have attracted Adriatic’s highly
experienced team, which is expediting exploration efforts to
expand the current JORC resource. Results of a recent Pre-
Feasibility study indicate an NPV8 of US$1,040 million and
IRR of 113%. Leveraging its first-mover advantage, Adriatic is
rapidly advancing the project into the development phase and
through to production.
2. Basis of preparation
a. Statement of compliance
These consolidated financial statements have been prepared
in accordance with international accounting standards in
conformity with the requirements of international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union in accordance
with the provisions of the Companies Act 2006. IFRS is
subject to amendment and interpretation by the International
Accounting Standards Board (“IASB”) and the IFRS
Interpretations Committee, and there is an ongoing process
of review and endorsement by the European Commission.
The Consolidated Financial Statements were authorised for
issue by the Board of Directors on 30 March 2021.
b. Basis of measurement
These Consolidated Financial Statements have been
prepared on a historical cost basis, except for certain financial
instruments that have been measured at fair value.
These Consolidated Financial Statements are presented in
Great Britain Pounds (“GBP”). The functional currency of the
Company is the Great Britain Pound.
c. Going Concern
The Group incurred a loss in the period of £5,694,503 (30
June 2020 - £6,238,324). However, the Group also had a net
asset position at the balance sheet date of £46,512,225 (30
June 2020 - £20,895,753 ).
The Company and Group continue to meet their working
capital requirements with the support of investors completed
a £6.2 million equity private placement with the European
Bank for Reconstruction and issue of US$20 million in
convertible debentures to Queens Road Capital during Q4
2020. The results from the October 2020 Vares Silver Project
Pre-Feasibility study indicated a project NPV8 of US$1,040
million and IRR of 113% further underline the Group’s future
potential as producing mine generating health cash flows.
The Group’s operations have been largely unaffected
by COVID-19 with exploration and development work
continuing with only minor disruption. The Vares Silver
Project’s economics, the resource based of which includes
a substantial element attributable to precious metals, remain
attractive notwithstanding the impact that COVID-19 has had
on commodity prices and demand.
Cash flow forecasts prepared inclusive of discretionary
expenditure, based on planned levels of future activity
including commencement of construction of the Vares Silver
Project, indicate that the Group will need to raise additional
finance within the next 12 months. However, the Directors’
believe that the Group can secure the additional funding
necessary to continue in operational existence for the next 12
months at planned activity level from the date of this report
and would defer the acceleration in cash burn rate that would
arise on the commencement of construction until adequate
funding is in place to do so.
Cash flow forecasts prepared based on current committed
expenditure and non-discretionary spend only indicate that
the Company has 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. The Directors therefore believe there is not
a material uncertainty regarding going concern that it is
appropriate to prepare the financial statements on a going
concern basis.
3. Significant 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 significant accounting policies applied
by management. The areas involving a higher degree of
judgement or complexity, or areas where assumptions
and estimates are significant to the Consolidated Financial
Statements are disclosed in note 4.
a. Basis of consolidation
Where the company has control over an investee, it is
classified as a subsidiary. The company controls an investee
if all three of the following elements are present: power over
the investee, exposure to variable returns from the investee,
and the ability of the investor to use its power to affect those
variable returns. Control is reassessed whenever facts and
circumstances indicate that there may be a change in any of
these elements of control.
82
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Basis of consolidation continued
De-facto control exists in situations where the company
has the practical ability to direct the relevant activities of the
investee without holding the majority of the voting rights. In
determining whether de-facto control exists the company
considers all relevant facts and circumstances, including:
• The size of the company’s voting rights relative to both the
size and dispersion of other parties who hold voting rights
• Substantive potential voting rights held by the company
and by other parties
• Other contractual arrangements
• Historic patterns in voting attendance.
The consolidated financial statements present the results
of the company and its subsidiaries (“the Group”) as if
they formed a single entity. Intercompany transactions and
balances between group companies are therefore eliminated
in full.
The consolidated financial statements incorporate the
results of business combinations using the acquisition
method. In the statement of financial position, the acquiree’s
identifiable assets, liabilities and contingent liabilities are
initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the
consolidated statement of comprehensive income from the
date on which control is obtained. They are deconsolidated
from the date on which control ceases.
The Consolidated Financial Statements comprise the
Financial Statements of the Company and following
subsidiaries at 31 December 2020:
Name of subsidiary
Country of
incorporation
Shareholding on
31 Dec. 2020
Shareholding on
30 June 2020
Nature of
business
Eastern Mining d.o.o.
Bosnia and Herzegovina
100%
100%
Mineral exploration & development
Canada
100%
England & Wales
100%
Tethyan Resource
Corp
Tethyan Resources
Limited
Tethyan Resources
Jersey Ltd
Taor d.o.o.
Tethyan Resources
d.o.o.
Global Mineral
Resources d.o.o.
Tethyan Resources
Bulgaria EOOD
Kosovo Resource
Company
Jersey
Serbia
Serbia
Serbia
Bulgaria
Kosovo
Ras Metals d.o.o.
Serbia
0%
0%
0%
0%
0%
0%
0%
0%
0%
Holding company - financing mining
exploration of subsidiary
Holding company - financing mining
exploration of subsidiary
Holding company - financing mining
exploration of subsidiary
Mineral exploration and development
Mineral exploration and development
Mineral exploration and development
Mineral exploration and development
Mineral exploration and development
Mineral exploration and development
100%
100%
100%
100%
100%
100%
10%*
* The Group holds 10% of the equity in Ras Metals d.o.o. and has an option to acquire remaining 90% it does not hold. The Group has
substantive control of Ras Metals and has consolidated the net assets into the Group financial statements. The Group also owns 10% equity
in EFPP d.o.o. with an option to acquire the remaining 90%, however the Group does not have substantive control over this entity and has
not consolidated the net assets into the Group financial statements. See Section 4 for more details on critical accounting judgements.
The Group also owns 10% of the equity in EFPP d.o.o. with an option to acquire the remaining 90%. However, the Group does not have
substantive control over this entity and has not consolidated the net assets into the Group financial statements. See Section 4 for more
details on critical accounting judgements.
Entities in which the Group has a shareholding that are not included in consolidation are as follows:
Name of subsidiary
Country of
incorporation
Shareholding on
31 Dec. 2020
Shareholding on
30 June 2020
Nature of
business
EFPP d.o.o.
Serbia
10%*
0%
Mineral exploration and development
83
ADRIATIC METALS PLC FINANCIAL STATEMENTS b. Standards, amendments and interpretations adopted
During the period, the following new standards and amendments have been implemented.
Standard
IAS 1
IFRS 3
N/A
IFRS 9, IFRS 7, IFRS 4
and IFRS 16
Detail
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors (Amendment – Disclosure
Initiative - Definition of Material)
Business Combinations (Amendment – Definition of Business)
Conceptual Framework for Financial Reporting (Revised)
IBOR Reform and its Effects on Financial Reporting – Phase 1
Effective date
1 January 2020
1 January 2020
1 January 2020
1 January 2020
IFRS 16
Covid-19-Related Rent Concessions – Amendment to IFRS 16
1 June 2020
c. Standards, amendments and interpretations effective in future periods
At the date of authorisation of these Consolidated Financial Statements, the following new standards, amendments and
interpretations to existing standards have been published but are not yet effective and have not been adopted early by the
Group.
Standard
IFRS 17
IAS 1
IAS 37
IAS 16
Detail
Insurance contracts
Amendment – regarding the classification of liabilities
Onerous Contracts – Cost of Fulfilling a Contract
Property, Plant and Equipment: Proceeds before Intended Use
IFRS 1, IFRS 9, IFRS 16
and IAS 41)
Annual Improvements to IFRS Standards 2018-2020
IFRS 3
References to Conceptual Framework
Effective date
1 January 2021
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2022
Management anticipates that all the pronouncements will be adopted in the Group’s accounting policies for the first period
beginning after the effective date of the pronouncement. The group does not expect these Standard or Interpretation to have a
material impact on the entity’s financial statements in the period of initial application.
d. Foreign currency transactions and translations
The Group’s consolidated financial statements are presented in GBP (£), which is considered to be the Company’s functional currency.
For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured
using that functional currency which is the currency of the primary economic environment in which the entity operates (‘the local functional
currency’).
i ) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date
the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the
reporting date.
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 GBP (£) at the rate of exchange prevailing at the
reporting date and their income statements are translated at average exchange rates prevailing during the period. 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. Other 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.
84
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 JORC-compliant reserves are established and
development is sanctioned, exploration and evaluation assets
are tested for impairment and transferred to ’Mines under
construction’ which is a sub-category of ‘Mine properties’
and will be subsequently amortised in line with the useful
economic life of the mine and rate of depletion of resources.
Exploration and evaluation assets are not amortised during
the exploration and evaluation phase and are considered to
have an indefinite life until determine as part of a mine plan.
h. Property, plant and equipment
i ) Land
Land is held at cost less accumulated impairment losses. Once
JORC-compliant reserves are established and development is
sanctioned, land is tested for impairment and transferred to ’Mines
under construction’ which is a sub-category of ‘Mine properties’
and will be subsequently depreciated in line with the useful
economic life of the mine and rate of depletion of resources. Land
is not depreciated during the exploration and evaluation phase and
is considered to have an indefinite life until determine as 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 and an estimate of
the costs of dismantling and removing the item and restoring the
site on which it is located.
iii ) Depreciation and amortisation
Land is not depreciated. All other short-lived property, plant and
equipment depreciation is provided at rates calculated to expense
the cost of property, plant and equipment, less their estimated
residual value, using the straight-line method over their estimated
useful life of the asset giving the following rates:
Land
Buildings & Leasehold
improvements
Plant and equipment
Not depreciated
Shorter of 10%
or lease term
15% - 33%
Assets under construction
Not depreciated
The assets’ residual values, useful lives and methods of
depreciation are reviewed at each financial year-end and adjusted
prospectively if appropriate.
g. Exploration and evaluation assets
Pre-license costs
Pre-license 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
period 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:
• 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
• Conducting market studies
License costs paid in connection with a right to explore in an
existing exploration area are capitalised and amortised over the
term of the permit.
Where the purchase of a business or group of assets provides the
group exploration rights, these costs are capitalised in exploration
and evaluation expenditure.
Once the legal right to explore has been acquired, exploration
and evaluation expenditure is charged to profit or loss as
incurred, unless the Group concludes that a future economic
benefit is more likely than not to be realised. These 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 on licenses where a
JORC-compliant resource has not yet been established is
expensed as incurred until sufficient evaluation has occurred
in order to establish a JORC-compliant resource.
Costs expensed during this phase are included in ’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 particular license
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.
85
ADRIATIC METALS PLC FINANCIAL STATEMENTS i. Leases
The Group applied IFRS 16 for the first time in the comparative
period using the modified retrospective approach, with recognition
of transitional adjustments on the date of initial application (1 July
2019), without restatement of comparative figures. There were no
adjustments to prior periods as a result of the application of this
standard because the Group did not have any leases in the prior year.
The Company has a single right of use asset, relating to the lease
of an office premised in the UK. Given the nature of the asset,
the amortisation charge is included in general and administrative
expenses.
If ownership of the leased asset transfers to the Group at the end of
the lease term or the cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated useful life of the asset.
The Group assesses at contract inception whether a contract is, or
contains, a lease. That is, if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for
consideration.
i )
Transition Method and Practical Expedients Utilised
The Group adopted IFRS 16 using the modified retrospective
approach, with recognition of transitional adjustments on the
date of initial application (1 July 2019), without restatement of
comparative figures. The Group elected to apply the practical
expedient to not reassess whether a contract is, or contains, a
lease at the date of initial application. Contracts entered into before
the transition date that were not identified as leases under IAS 17
and IFRIC 4 were not reassessed. The definition of a lease under
IFRS 16 was applied only to contracts entered into or changed on
or after 1 July 2019.
IFRS 16 provides for certain optional practical expedients, including
those related to the initial adoption of the standard. The Group
applied the following practical expedients when applying IFRS 16
to leases previously classified as operating leases under IAS 17:
• Apply a single discount rate to a portfolio of leases with
reasonably similar characteristics;
• Exclude initial direct costs from the measurement of right-of-use
assets at the date of initial application for leases where the right-
of-use asset was determined as if IFRS 16 had been applied
since the commencement date;
• Reliance on previous assessments on whether leases are
onerous as opposed to preparing an impairment review under
IAS 36 as at the date of initial application; and
• Applied the exemption not to recognise right-of-use assets
and liabilities for leases with less than 12 months of lease term
remaining as of the date of initial application.
As a lessee, the Group previously classified leases as operating
or finance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards of ownership.
Under IFRS 16, the Group recognises right-of-use assets and lease
liabilities for most leases. However, the Group has elected not to
recognise right-of-use assets and lease liabilities for some leases of
low value assets based on the value of the underlying asset when
new or for short-term leases with a lease term of 12 months or less.
ii ) Group as a lessee
The Group applies a single recognition and measurement
approach for all leases, except for short-term leases and leases of
low-value assets which, are either expensed as incurred though
the income statement or capitalised in exploration and evaluation
assets. The Group recognises lease liabilities to make lease
payments and right-of-use assets representing the right to use the
underlying assets.
iii ) Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of right-of-use
assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-
use assets are amortised on a straight-line basis over the shorter of
the lease term and the estimated useful lives of the assets.
The right-of-use assets are also subject to impairment.
iv ) Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities 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.
v ) 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 value 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 value 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, 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 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. Currently the
Group has not done any significant mining and thus management
have assessed that no rehabilitation provision is necessary.
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k. Interest income
Interest income is 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
Financial assets are 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 classification are met the asset is classified
as fair value through the profit and loss or unless management
elect to do so provided the classification eliminates or significantly
reduces a measurement or recognition inconsistency.
a) Cash and cash equivalents and trade and other receivables
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.
b) Fair value through profit or loss
Financial assets measured at fair value through profit or loss are
subsequently measured at fair value with changes in those fair
values recognised in the profit and loss statement.
Assets held at fair value through profit or loss comprise of the
convertible loan asset.
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.
The Group’s financial liabilities initially measured at fair value and
subsequently recognised at amortised cost include accounts
payables and accrued liabilities, and the liability associated with the
right of use asset (note 12).
iii ) Convertible debt
The proceeds received on issue of the Group’s convertible
debt are allocated into their liability 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 bond. 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
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.
With the exception of goodwill, 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.
87
ADRIATIC METALS PLC FINANCIAL STATEMENTS 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 as 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. 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.
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, share-based payments to 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 premium if applicable together
with any associated balance in share-based payments reserve are
transferred to retained earnings. The dilutive effect of outstanding
options is reflected as additional dilution in the computation of
diluted earnings per share.
r. Non-controlling Interest
The Group has the choice, on a transaction by transaction
basis, to initially recognise any non-controlling interest in the
acquiree which is a present ownership interest and entitles its
holders to a proportionate share of the entity’s net assets in
the event of liquidation at either acquisition date fair value or, at
the present ownership instruments’ proportionate share in the
recognised amounts of the acquiree’s identifiable net assets. Other
components of non-controlling interest such as outstanding share
options are generally measured at fair value.
The total comprehensive income of non-wholly owned subsidiaries
is attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
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, and 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 no deferred tax assets or liabilities.
o. Earnings/loss per share
Basic loss per share is calculated by dividing the loss attributable to
the common shareholders of the Group by the weighted average
number of common shares outstanding during the reporting
period. Diluted earnings per share is calculated by adjusting the
loss attributable to common shareholders and the weighted
average number of common shares outstanding for the effects of
all dilutive potential common shares, which comprise share options
and warrants granted.
p. Share premium
Share premium represents the excess of proceeds received over
the nominal value of new shares issued.
q. Share-based payments & 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 grants warrants to
institutions issued as part of an equity raise as part of overall
in connection with the acquisition of Tethyan. The Board of
Directors determines the specific grant terms within the limits
set by the Company’s share option plans.
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s. Segmental reporting
The reportable segments identified make up 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 has reviewed its operating segments following the
acquisition of the Tethyan Resource Corp and subsidiaries in
October 2020 and as a result of the expansion in the group’s range
to operating activities and determined that there are now three
distinct reporting segments as follows:
• Bosnia (principally the Vares Project)
• Serbia (principally the Raska Project)
• Corporate (which supports the activities of the other two
segments)
The Vares and Raska projects operate in two separate distinct
jurisdictions and are at different points in their respective project life
cycles.
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.
Non-current segment assets comprise the non-current assets used
directly for segment operations, including intangible assets and
property, plant and equipment. Current segment assets comprise
the current assets used directly for segment operations, including
other receivables and deferred costs. 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
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.
Information about the significant judgements, estimates,
and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, income and
expenses are discussed below.
Estimates
a. Exploration and evaluation asset impairment
testing
The Group reviews and tests the carrying value of
exploration and evaluation assets when events or changes in
circumstances suggest that the carrying amount may not be
recoverable in terms of IFRS 6. Indicators of impairment the
group assesses for are as follows:
a ) the period for which the entity has the right to explore
in the specific area has expired during the period or
will expire in the near future, and is not expected to be
renewed.
b ) substantive expenditure on further exploration for and
evaluation of mineral resources in the specific area is
neither budgeted nor planned.
c ) 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.
d ) 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.
When such indicators exist, management determine 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 made includes
discount rates, being the Group’s weighted average cost of
capital, future prices, E&E costs, production levels and foreign
currency exchange rates.
b. Convertible loan valuation
The financial instrument was valued at fair value through
the profit and loss account in the prior year. The Group has
utilised the Black-Scholes Option Pricing Model to estimate
the fair value of the conversion option associated with a loan
granted to Tethyan Resource Corp. The use of the Black-
Scholes option pricing model requires management to make
various estimates and assumptions that impact the value
assigned to the loan granted to Tethyan Resource Corp.
including the forecast future volatility of the share price and the
risk-free interest rate. This financial instrument was eliminated
on consolidation on the acquisition of Tethyan Resource Corp
in the current period for the Group. The conversion option was
not enacted, the loan agreement was amended to remove this
option and the conversion value was released to the profit and
loss in the current period.
c. Convertible bond valuations
The Group issued USD 20 million 8.5% Convertible bonds
through a deed of covenant dated 30 November 2020. The
bonds are convertible into fully paid equity securities in the
share capital of the issuer, subject to and in accordance with
the Conditions and the Deed of Covenant. Management
engaged experts to assist with the valuation of the bond
holders call option imbedded within this agreement. The
option is recognised as a derivative liability in the Group and
company accounts and required a separate fair valuation.
See note 6 for further details regarding these inputs.
d. Share-based payments
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 the
Black-Scholes Option Pricing 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
share which will vest. See note 14 for further details regarding
these inputs.
89
ADRIATIC METALS PLC FINANCIAL STATEMENTS 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 each entity operates in. The Group
first considers the currency that mainly influences sales prices for goods and services, and the currency that mainly influences
labour, material 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 they are primarily transacted in.
Name of Equity
Adriatic Metals PLC
Eastern Mining d.o.o.
Tethyan Resource Corp
Tethyan Resources PLC
Tethyan Resources Jersey Ltd
Taor d.o.o.
Tethyan Resources d.o.o.
Global Mineral Resources d.o.o.
Tethyan Resources Bulgaria EOOD
Kosovo Resource Company
Ras Metals d.o.o.
Country of
Incorporation
England & Wales
Bosnia and Herzegovina
Canada
England & Wales
Jersey
Serbia
Serbia
Serbia
Bulgaria
Kosovo
Serbia
Functional
Currency
GBP
BAM*
CAD
GBP
GBP
RSD*
RSD*
RSD*
EUR
EUR
RSD*
* Bosnian Marks (BAM) and Republic of Serbia Dinars (RSD) currencies are pegged to the Euro.
b. Capitalisation of exploration costs
The group uses its judgement to determine whether costs meet the capitalisation requirements in terms of the standard and
its accounting policy on exploration and evaluation assets to determine whether exploration and evaluation costs should be
capitalised or expensed based on whether the activities performed are directly attributable to increasing the value of the project.
c. Option Agreement Treatment - Control of Ras Metals
As part of the Tethyan Resource Corp acquisition, the Group became the beneficiary of three mutually exclusive option
agreements under which it could acquire, at its sole discretion, the entire share capital of Ras Metals d.o.o., EFPP d.o.o. and
Deep Research d.o.o.
The Group assessed each option agreement to determine whether it provided the Company with control over each respective
entity and if so from what point in time as follows:
i ) Ras Metals d.o.o. (Ras)
The Group determined that Ras was controlled by the Group from 8 October 2020, being the date at which Tethyan Resource
Corp (the option holder) was acquired by the Company, because the Group had the ability and intent to acquire the remaining
equity interest in Ras. On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras
further details of which are provided in note 25.
The consideration paid in order to exercise right to purchase of the remaining equity contains both fixed and variable elements.
As a result of the variable element of the consideration payable the Group did not have access to present returns in Ras at 31
December 2020 and has therefore recognised a non-controlling interest in this.
ii ) EFPP d.o.o. (EFPP)
EFPP was determined to be outside the control of the Group because the option agreement holder, Tethyan Resource Corp,
was unlikely to exercise its rights under the agreement. This position was further justified when on 22 February 2021, the Group
disposed of its 10% equity stake in EFPP for a nominal amount.
iii ) Deep Research d.o.o. (DR)
DR was determined to be outside of the control of the Group because although Tethyan Resource Corp (the option agreement
holder) had the ability to control DR via exercise of the option it did 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.
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5. Other receivables and prepayments
(In GBP)
Other receivables
Prepayments and deposits
Taxes receivable
Total
All receivables are due within one year.
31 December 2020
30 June 2020
8,729
138,088
507,698
654,514
The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia.
Split of other receivables and prepayments as follows as at 31 December 2020:
Other receivables
Prepayments and deposits
Taxes receivable
Total
Bosnia
Serbia
Corporate
829
29,475
300,426
330,730
7,900
38,196
109,200
155,296
-
70,416
98,072
168,488
Split of other receivables and prepayments as follows as at 30 June 2020:
Other receivables
Prepayments and deposits
Taxes receivable
Total
Bosnia
Serbia
Corporate
790
47,999
300,997
349,786
N/A
N/A
N/A
N/A
17,063
47,203
74,994
139,260
17,853
95,202
338,491
451,546
Total
8,729
138,088
507,698
654,514
Total
17,853
95,202
338,491
451,546
6. Financial assets at fair value through profit and loss
a. Tethyan Resources Corp Loan
As part of the agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. via a plan of arrangement in British
Columbia, the Company provided a convertible loan facility to Tethyan during the prior year and had advanced €1.8 million
under the facility to the date of acquisition on 8th October 2020. Effective the same date this loan was amended removing the
convertible option from the loan and the conversion value was released to the profit and loss in the current period. As at 31
December 2020, this financial instrument was eliminated on consolidation for the Group.
(In GBP)
At 30 June 2019
Additions
Interest
Foreign exchange gain
Revaluation of fair value asset through profit and loss
At 30 June 2020
Additions
Interest
Foreign exchange gain
Revaluation of fair value asset through profit and loss
Acquisition (loan eliminated on consolidation)
At 31 December 2020
91
Tethyan Loan Receivable
-
876,201
12,624
29,702
322,987
1,241,514
723,300
7,129
32,091
(322,987)
(1,681,047)
-
ADRIATIC METALS PLC FINANCIAL STATEMENTS The loan is revalued at its fair value at each period end using the following inputs to the Black-Scholes valuation model:
(In GBP)
Term
Share Price (CAD)
Exercise Price (CAD)
Volatility
Risk Free rate
31 December 2020
30 June 2020
-
-
-
-
-
1 year
CAD 0.22
CAD 0.15
140%
0.17%
7. Financial liabilities at fair value through profit and loss
b. QRC Convertible Loan
The Group issued USD 20 million 8.5% Convertible bonds through a deed of covenant dated 30 November 2020. The bonds
are convertible into fully paid equity securities in the share capital of the issuer, subject to and in accordance with the Conditions
and the Deed of Covenant. Key terms and conditions of the Bond agreement between the Company and Queens Road Capital
(QRC) is provided below.
Voluntary conversion
The bonds 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 on exercise of a 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 bonds are not converted, redeemed, purchased, or cancelled by the company prior to the final
maturity date, the bonds shall be redeemed by the company at their principal amount
b) Redemption at the option of the issuer: Option to the issuer to redeem all the bonds outstanding, prior to the final maturity date,
at their 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;
- 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; or
- A project refinancing has occurred
c) Redemption at the option of bondholder in change of control event: the bondholder receives an option to require the issuer
to redeem the bonds prior to the final maturity date. In the event of a change of control, the bonds 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
- 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 bondholder in the event of project financing: In any event where the company secures a
project financing before the final maturity date of the bonds, the bondholder can require the issuer to redeem the bonds at its
principal amount together with the accrued but unpaid interest to such date
Accounting Consideration and Results
QRC’s option to convert the bonds into equity and the associated potential issue of shares give rise to a variable amount of
cash that would be received by the Company and therefore the bonds fail to meet the requirements to be classified as equity.
The conversion feature of the bonds has therefore been accounted for as a derivative liability, with the value of the conversion
feature dependent on foreign exchange rates and other 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 as 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 be falling outside of the exemptions of IFRS 9 and
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 elected to account for both the imbedded option and loan liability at
fair value in the profit and loss.
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Valuation Model
The Black Scholes model was chosen as the most appropriate pricing model to value the company call options. 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. The
Group will be seeking to raise finance to progress the Vares project. Expected term of redemption calculated as 1.15 years
from the valuation date.
• Expected volatility – Weekly volatility over the 1.15 years (60 weeks) was calculated as 74.65% 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 2.33 on the valuation date on the ASX
Using the assumptions set out above, Black Scholes value of call option in hands of Bondholder is £3,045,213.
Sensitivity Analysis
Inputs to the Black Scholes model are based on management judgements regarding probabilities of future events. The results
are sensitive to changes in key assumptions, namely the expected term of the bonds and the volatility of the Company’s share
price.
Sensitivity of the loan 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
50%
Unchanged (74.65%)
100%
26 Weeks
£2.15m Decrease
£1.73m Decrease
£0.45m Decrease
Unchanged (60 weeks)
£1.28m Decrease
-
£1.27m Increase
91 Weeks
£0.67m Decrease
£0.89m Increase
£2.38m Increase
Change in
expected term
(In GBP)
At 30 June 2020
Additions
Interest
Foreign Exchange gain
Recognition of fair value embedded option
At 31 December 2020
QRC Loan Payable
-
(14,956,849)
(105,515)
321,464
3,045,213
(11,695,687)
Short term borrowings at 31 December 2020 are £105,515 (30 June 2020: £nil). Long term borrowings at 31 December 2020
are £11,590,172 (30 June 2020: £nil). Derivative liabilities as at 31 December 2020 are £3,045,213 (30 June 2020: £nil).
93
ADRIATIC METALS PLC FINANCIAL STATEMENTS 8. Property, plant and equipment
Cost (In GBP)
30 June 2019
Additions
Foreign exchange difference
30 June 2020
Acquisition Assets
Additions
Disposals
Foreign exchange difference
31 December 2020
Depreciation
30 June 2019
Charge for the year
Foreign exchange difference
30 June 2020
Acquisition Assets
Charge for the year
Disposals
Foreign exchange difference
31 December 2020
Net Book Value
30 June 2019
30 June 2020
31 December 2020
Land & Buildings
Plant & Machinery
630,978
97,989
7,987
736,954
-
29,037
-
(10,500)
755,491
-
14,481
68
14,549
0
6,769
-
(342)
20,976
630,978
722,405
734,516
105,341
139,554
1,296
246,191
87,648
61,827
(9,378)
(2,649)
383,639
15,191
38,164
4,321
57,676
70,004
29,388
(6,054)
(2,323)
148,691
90,150
188,515
234,948
Total
736,319
237,543
9,283
983,145
87,648
90,864
(9,378)
(13,465)
1,139,130
15,191
52,645
4,389
72,225
70,004
36,157
(6,054)
(2,665)
169,667
721,128
910,920
969,464
The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia.
Split of Land and buildings net book value as follows:
30 June 2019
30 June 2020
31 December 2020
Bosnia
630,978
705,951
718,939
Serbia
Corporate
Total
N/A
N/A
-
16,454
15,577
630,978
722,405
734,516
Split of other receivables and prepayments as follows as at 30 June 2020:
30 June 2019
30 June 2020
31 December 2020
Bosnia
67,664
157,840
185,129
Serbia
Corporate
Total
N/A
N/A
24,317
22,487
30,675
25,502
90,151
188,515
234,948
94
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. Exploration and evaluation assets
Cost (In GBP)
30 June 2019
Additions
Foreign exchange difference
30 June 2020
Acquisition (note 10)
Additions
Foreign exchange difference
Vares Silver Project
in Bosnia
Raska Project
in Serbia
Exploration &
Evaluation Assets
4,055,997
5,048,523
49,522
9,154,042
-
-
-
-
-
24,456,506
3,052,019
(63,870)
-
-
4,055,997
5,048,523
49,522
9,154,042
24,456,506
3,052,019
(63,870)
31 December 2020
12,142,191
24,456,506
36,598,697
Amortisation
30 June 2019
Charge for the year
Foreign exchange difference
30 June 2020
Charge for the period
Foreign exchange difference
31 December 2020
Net Book Value
30 June 2019
30 June 2020
31 December 2020
84,787
23,317
769
108,873
11,469
(1,369)
118,973
3,971,210
9,045,169
12,023,218
-
-
-
-
-
-
-
-
-
24,456,506
84,787
23,317
769
108,873
11,469
(1,369)
118,973
3,971,210
9,045,169
36,479,724
Exploration and evaluation assets include amount of £24,456,506 added in the period in respect of Tethyan exploration rights
for the TAOR d.o.o Kremice licence (measured at historical cost £1,587,934) and Ras Metals d.o.o. licences Kizevak & Sastavci
measured as the consideration paid for the combined Tethyan group minus the net book value of assets, being 22,868,571.
The remaining exploration and evaluation assets are in respect of the Vares Silver Project concession, located in Bosnia &
Herzegovina. The concession is 100% owned by Eastern Mining d.o.o. From 25 May 2020, the Vares Silver Project became
subject to a minimum annual concession fee of €199,325 per annum. Concession fees are included in additions to exploration
and evaluation assets and amortisation charged over the life of the concession granted. All other exploration and evaluation
assets are not amortised until beginning of the production phase.
Additions during the period include BAM 481,800 paid to the Zenica-Doboj Canton following the award of the new concession
area in October 2020 which adds some 32.12km2 of land in close proximity to the existing Rupice and Veovaca deposits of the
Vares Project.
95
ADRIATIC METALS PLC FINANCIAL STATEMENTS
10. Acquisition note
On 11 May 2020, the Company entered into an agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. (TSX-V:TETH)
(Tethyan) via a plan of arrangement in British Columbia. The acquisition was finalised on 8 October 2020.
The Transaction confirms the enlarged Company as the leading Balkan polymetallic explorer and developer expanding the Company
operations to the Raska region of Serbia by bringing the Kizevak & Sastavci projects into the group.
As part of the agreement the Company provided a secured convertible loan facility of €1.8 million to Tethyan was advanced. The
funding provided to Tethyan is being used for confirmation and expansion drilling, geophysics, baseline environmental studies at the
Raska project in Serbia and general working capital purposes.
Tethyan had entered into an option agreement with EFPP d.o.o. (EFPP) the holders of the Kizevak & Sastavci licences, first closing
was completed on 14 May 2020 to acquire 10% equity in EFPP d.o.o. Immediately prior to the completion of the acquisition of
Tethyan by the Company the Kizevak & Sastavci licences were spun out to a newly formed company Ras Metals d.o.o. (Ras) in
which Tethyan also held a 10% equity interest, which had been a condition precedent to closing of Tethyan acquisition.
As at 31 December 2020 Tethyan continued to hold a 10% equity interest in Ras and EFPP with the option to acquire the remaining
90% equity in each.
On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras, further details of which are
provided in note 25, and also disposed of its 10% equity stake in EFPP for a nominal amount.
Management performed an assessment and deemed that substantive control of the Tethyan Group, including Ras, was obtained on
8 October 2020. The acquisition of Tethyan was classified as an asset acquisition due to not meeting the definition of a business in
line with IFRS 3. See Significant estimates note for further details.
Cost of Acquisition
Total cost of acquisition is measured as follows:
Shares issued
Share options issued
Warrants issued
Total equity consideration
Value of consideration payable under Ras Metals d.o.o. option
Total consideration to be paid
Consideration Value
£17,129,828
£236,571
£2,797,086
£20,163,485
£2,515,399
£22,678,884
Adriatic has allotted 13,278,937 new ordinary shares pursuant to the Arrangement. The opening LSE share price on the
acquisition date was £1.29 giving value of total shares issued £17,129,828.
Pursuant to the Arrangement, on Admission Adriatic will also issue 4,128,633 warrants and 469,779 options to Tethyan warrant
holders and Tethyan option holders. Management used the Black-Scholes formula to determine the fair value of the warrants
and options issued under IFRS 2. The following assumptions were used:
• Strike price & length of contract determined by each individuals option contracts
• Underlying price (£1.29) determined by the opening share price on date of transaction
• 82.3% volatility determined by 100 day LSE: ADT1 volatility
• Risk free rate 0.01% used (on basis of short term UK gilt rate giving negative rates)
Fair value of options issued £236,571, fair value of warrants issued £2,797,086.
At any time within 12 months of the first closing, the Company may acquire the remaining 90% ownership stake in Ras Metals
by:
• making a payment of €1,375 to the sellers of Ras;
• grant a 2% NSR over the licenses
• issue 664,000 shares of the Company to the sellers in four equal tranches every six months commencing on second closing; and
• make a EUR 500,000 payment on the two-year anniversary of the first closing.
With the exception of the 2% NSR grant over the licenses which can’t be reliably estimated at this stage, the fair value of
remaining consideration payable under Ras Option agreement was estimated at £2,515,399.
96
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Measurement of assets and liabilities
IFRS 10 requirement to record assets acquired at cost; cost is allocated over the group of assets at relative fair value. In the
case of an asset acquisition (rather than business combination), the consideration equals the combined fair value of assets
acquired. Consideration above the historical book value of assets should be recognised as an exploration and evaluation asset
(representing the value of the rights contained within licenses acquired).
The Kremice and Kaznovice licenses were historically accounted for as an asset acquisition by the Tethyan Group when
originally acquired. The fair value of the consideration paid was determined and allocated as to Exploration and evaluation
assets of 250,000 EUR cash plus 12,000,000 shares issued in Tethyan, equating to £1,587,934. The net asset position of
100% owned Tethyan companies when acquired was (£189,687) which includes the aforementioned exploration and evaluation
assets. The Kizevask & Sastavci licenses held by Ras Metals d.o.o. have been assigned the balancing value between Tethyan
net assets (£189,687) and the total consideration payable £22,678,884, being £22,868,571. The combined exploration and
evaluation assets capitalised totals £24,456,505.
Treatment of Ras Metals Option Agreement
The company recognises an investment for the fair value of the equity acquired (being 10% share of Ras Metals and 100%
share of equity in all other Tethyan entities) totalling £2,097,170. The excess value of the transaction over the investment is
recognised as a call option asset totalling £20,581,714. The fair value of the remaining consideration to be paid of £2,515,399
has been recognised as an option liability. When the option liability is paid the amount will be capitalised in exploration and
evaluation assets and any difference arising from future foreign exchange movements will be recognised in the profit & loss.
Apportioned fair value to Ras Metals d.o.o. 10% owned
Total investment recognised in company accounts
Remaining fair value apportioned to 90% call option Ras Metals
Total Fair Value of Consideration to be paid
Net liability position of Tethyan 100% owned
Exploration assets included within the net assets of Tethyan 100% owned entities
Total exploration and evaluation asset value
£2,286,857
£2,097,170
£20,581,714
£22,678,884
189,687
£1,587,934
£24,456,505
Asset Acquisition
The net cash used in the acquisition of subsidiaries and the provisional fair value of assets acquired and liabilities assumed on
the acquisition date is detailed below:
Cash and cash equivalents
Other receivables and prepayments
Property, plant and equipment
Exploration & evaluation asset
Accounts payable and accrued liabilities
Related party borrowings
Other Equity
Total Assets acquired
Fair Value
£311,964
£56,349
£17,644
£1,587,934
(£506,900)
(£1,640,838)
(£15,840)
(£189,687)
Management have determined there is no present access to returns in Ras Metals d.o.o. owing to the variable consideration
included in the exercise price. As such the Group recognises a 90% non-controlling interest in Ras Metals d.o.o. totalling
£2,515,399 measured as the balancing figure between the fair value of the acquisition, fair value of Tethyan assets acquired, the
investment recognised in the company accounts.
Total assets acquired net of consolidation adjustments
Investment eliminated for Group accounts
Mining and intangible assets recognised on acquisition
Non-controlling Interest recognised
(£189,687)
(£2,097,170)
£24,456,505
£2,515,399
Total loss attributable to non-controlling interest post 8 October 2020 acquisition in the period totals (£519,111), combined
with the amount recognised on acquisition of £2,515,399, the balance of non-controlling interest at 31 December 2020 was
1,996,288.
97
ADRIATIC METALS PLC FINANCIAL STATEMENTS 11. Accounts payable and accrued liabilities
(In GBP)
Trade payables
Accrued liabilities
Other payables
31 December 2020
30 June 2020
1,222,012
639,743
38,682
1,900,437
466,610
132,826
82,966
682,402
12. Right of Use Assets
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
(In GBP)
30 June 2019
Additions
Amortisation
30 June 2020
Amortisation
31 December2020
Land & buildings
-
265,612
(13,714)
251,898
(15,549)
236,349
The right of use asset relates to the new lease for the Group’s head office. Under IFRS 16 this has been recognised as a right of
use asset.
Set out below are the carrying amounts of lease liabilities and the movements during the year:
(In GBP)
30 June 2019
Additions
Interest expense
Payments
30 June 2020
Interest expense
Payments
31 December2020
-
265,612
11,580
(11,571)
265,621
10,523
(20,803)
255,341
Of this amount, £35,609 is recognised as a current liability and the remainder £219,731 is shown within non-current liabilities.
The following are the amounts recognised in profit or loss:
Cost (In GBP)
31 December 2020
30 June 2020
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Total amount recognised in profit or loss
15,549
10,523
26,072
13,714
11,580
25,294
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. Financial instruments
IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
• 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).
• 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
(excluding short term assets and liabilities).
See note referenced for further detail on inputs to fair value for each financial instrument.
Note
At amortised
cost
At fair value
through profit
or loss
Total
Fair Value
Hierarchy
As at 31 December 2020 (In GBP)
Financial assets
Cash and cash equivalents
Other receivables and prepayments
Total financial assets
Financial liabilities
29,580,538
5
146,816
29,727,354
Accounts payable and accrued liabilities
11
1,900,437
Borrowings
Borrowings – derivative liability
FV Option Liability -acquisition of Ras Metals
Lease liabilities
Total financial liabilities
Net financial assets
7
7
10
12
11,695,687
-
-
3,045,213
3,045,213
2,515,399
2,515,399
255,341
255,341
13,851,465
5,560,612
19,412,077
15,875,889
(5,560,612)
10,315,277
-
-
-
-
29,580,538
146,816
29,727,354
1,900,437
11,695,687
N/A
N/A
N/A
Level 3
Level 3
Level 3
Level 3
As at 30 June 2019 (In GBP)
Note
At amortised
cost
At fair value
through profit
or loss
Total
Fair Value
Hierarchy
Financial assets
Financial asset at fair value through profit and loss
Cash and cash equivalents
Other receivables and prepayments
Total financial assets
Financial liabilities
Accounts payable and accrued liabilities
Lease liabilities
Total financial liabilities
Net financial assets
6
5
11
12
–
1,241,514
1,241,514
Level 3
9,942,728
113,055
–
–
9,942,728
113,055
N/A
N/A
10,055,783
1,241,514
11,297,297
682,402
265,621
948,023
–
–
–
682,402
265,621
948,023
N/A
Level 3
9,107,760
1,241,514
10,349,274
99
ADRIATIC METALS PLC FINANCIAL STATEMENTS 14. 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 other
receivables.
Due to the nature of the business, the
Company’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 Group’s cash is held in major
UK, Australian, Serbian and Bosnian
financial institutions, and as such
the Group is exposed to credit risks
of those financial institutions. Under
Standard & Poor’s short-term credit
ratings, the Group’s cash balances
are all held in institutions with either
an A-1 or A-2 rating and as such are
considered to have low credit risk.
The total carrying amount of cash and
cash equivalents, other receivables and
the fair value financial asset in respect
of Tethyan Resource Corp. represents
the Group’s maximum credit exposure.
The Group’s other receivables
predominantly relate to value added
tax receivables due from governments
in the UK and Bosnia. These amounts
are excluded from the definition of
financial instruments in the accounts
and in and event are considered to
have low credit risk. Of the remaining
other 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 if its accounts
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 illustrates the contractual maturity analysis of the Group’s gross financial liabilities based on exchange rates
on the reporting date. Contractual gross financial liabilities, shown below, are undiscounted estimated cash outflows which
were applicable includes estimated future interest payments.
As at 31 December 2020 (In GBP)
Within 30 days
Accounts payable and accrued liabilities
2,172,496
Borrowings
Derivative liability
Lease liabilities
30 days to
6 months
6 to 12
months
Over 12
months
–
105,515
–
–
11,590,172
3,045,213
-
17,805
17,805
219,731
2,172,496
123,320
17,805
14,855,116
As at 30 June 2020 (In GBP)
Within 30 days
30 days to
6 months
6 to 12
months
Over
12 months
Accounts payable and accrued liabilities
Lease liabilities
682,402
-
682,402
–
-
-
–
-
-
–
369,745
369,745
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Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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. As a result, a portion of the Group’s
expenditures, other receivables, cash and cash
equivalents, accounts payables and accrued liabilities
are denominated in Bosnian Marks, Great Britain
Pounds, Australian Dollars, US Dollars, and euros and
are therefore subject to fluctuation in exchange rates.
As at 31 December 2020, a 10% change in the
exchange rate between the Great Britain Pound
and the Bosnian Mark and Serbian Dinar, which is a
reasonable estimation of volatility in exchange rates,
would have an approximate
£0.1 million change to the Group’s total comprehensive
loss.
d. Fair values
The fair value of cash, other receivables, accounts payable
and accrued liabilities approximate their carrying values
due to the short-term nature of the instruments.
Fair value measurements recognised in the statement of
financial position subsequent to initial fair value recognition
can be classified into Levels 1 to 3 based on the degree to
which fair value is observable.
Level 1 – Fair value measurements are those derived from
quoted prices in active markets for identical assets and
liabilities.
Level 2 – Fair value measurements are those derived from
inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly,
or indirectly.
Level 3 – Fair value measurements are those derived from
valuation techniques that include inputs for the asset or
liability that are not based on observable market data.
The level 3 fair value for the loan receivable is disclosed in
note 6.
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 Company
defines capital as the equity attributable to equity
shareholders of the Company which at 31 December
2020 was £29,526,658 (30 June 2020: £20,895,753).
The Group sets the amount of capital in proportion to 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.
101
ADRIATIC METALS PLC FINANCIAL STATEMENTS 15. 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
30 June 2019
Issue of share capital
Share issue costs
Shares
150,782,587
25,083,400
–
Shares issued on exercise of options and performance rights
3,975,000
Share Capital
(In GBP)
Share Premium
In GBP)
2,013,701
334,989
–
53,087
11,084,777
13,015,388
(797,655)
690,457
30 June 2020
Issue of share capital
Shares issued on acquisition of subsidiary
Settlement placement
Share issue costs
179,840,987
2,401,777
23,992,967
5,276,595
13,278,937
4,830,156
70,469
177,340
64,507
6,129,531
16,952,489
4,791,547
0
(1,598,603)
Shares issued on exercise of options and performance rights
4,350,000
58,093
203,817
31 December 2020
207,576,675
2,772,186
51,471,748
The average price paid for shares issued in the period was £1.06 per share (30 June 2020: £0.49 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 tables summarise the
activities and status of the Company’s share option plan as at and during the six months ended 31 December 2020
Weighted average exercise
price of options (A$)
Number of
options
Number of
performance rights
Total options and
performance rights
30 June 2019
Issued
Exercised
Expired
30 June 2020
Issued
Acquired Tethyan Acquisition
Exercised
Expired
0.33
1.19
0.42
0.60
0.46
19,200,000
4,000,000
(3,225,000)
(375,000)
19,600,000
2.20
1,000,000
0.66
0.61
-
469,779
(3,700,000)
-
31 December 2020
0.53
17,369,779
-
6,560,000
(750,000)
(2,000,000)
3,810,000
2,575,000
-
(650,000)
(2,000,000)
3,735,000
19,200,000
10,560,000
(3,975,000)
(2,375,000)
23,410,000
3,575,000
469,779
(4,350,000)
(2,000,000)
21,104,779
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.
Options and performance rights granted in the period were valued using the Black-Scholes method (section f).
102
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Options
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
A$0.20
A$0.30
A$0.40
A$0.40
A$1.00
A$1.25
As at 31 December 2020
Grant date
27 April 2018
27 April 2018
27 April 2018
29 May 2018
9,000,000
1,900,000
1,000,000
1,000,000
29 November 2019
1,000,000
29 November 2019
2,000,000
8 October 2020
8 October 2020
8 October 2020
8 October 2020
8 October 2020
8 October 2020
8 October 2020
182,600
GBP £0.88
27,666
GBP £0.85
88,533
GBP £1.06
29,880
GBP £1.06
91,300
GBP £1.80
24,900
GBP £2.22
24,900
GBP £1.20
6 November 2020
1,000,000
A$2.20
17,369,779
As at 30 June 2020
Grant date
27 April 2018
27 April 2018
27 April 2018
29 May 2018
29 November 2019
29 November 2019
29 November 2019
29 November 2019
As at 31 December 2020
Grant date
29 November 2019
12 June 2020
6 August 2020
6 August 2020
18 November 2020
Options
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
9,000,000
2,500,000
3,100,000
1,000,000
1,000,000
2,000,000
500,000
500,000
19,600,000
A$0.20
A$0.30
A$0.40
A$0.40
A$1.00
A$1.25
A$1.25
A$1.25
3.0
1.0
1.0
0.9
2.4
2.4
2.4
2.4
Performance rights
outstanding
Weighted average
remaining contractual
life (Years)
1,160,000
250,000
1,000,000
500,000
825,000
3,735,000
1.9
4.0
3.0
4.0
2.0
103
2.5
0.5
0.5
0.4
1.9
1.9
0.6
1.0
1.9
2.0
3.2
3.2
3.6
2.9
Expiry date
Number
exercisable
1 July 2023
9,000,000
1 July 2021
1,900,000
1 July 2021
1,000,000
5 June 2021
1,000,000
28 November 2022
1,000,000
28 November 2022
2,000,000
16 August 2021
182,600
21 December 2021
5 December 2022
3 January 2023
28 February 2024
7 March 2024
19 August 2024
27,666
88,533
29,880
39,010
2,490
2,490
7 November 2023
1,000,000
17,272,669
Expiry date
Number
exercisable
1 July 2023
9,000,000
1 July 2021
2,500,000
1 July 2021
3,100,000
5 June 2021
-
28 November 2022
1,000,000
28 November 2022
2,000,000
28 November 2022
500,000
28 November 2022
-
18,100,000
Expiry date
Number
exercisable
28 November 2022
410,000
6 January 2025
31 December 2023
31 December 2024
31 December 2022
-
-
-
410,000
ADRIATIC METALS PLC FINANCIAL STATEMENTS As at 30 June 2020
Grant date
29 November 2019
28 February 2020
12 June 2020
12 June 2020
Performance rights
outstanding
Weighted average
remaining contractual
1,310,000
2,000,000
250,000
250,000
3,810,000
2.4
0.1
3.5
4.5
Expiry date
28 November 2022
31 July 2020
6 January 2024
6 January 2025
Number
exercisable
-
-
-
-
-
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.
There were no performance rights outstanding at 30 June 2019.
d. Warrents reserve
Warrants were issued as part of Tethyan Resource Corp acquisition.
The following table presents changes in the Group’s warrants reserve during the six months ended 31 December 2020:
(In GBP)
30 June 2020
Issue of Warrants on acquisition of Tethyan
31 December 2020
As at 31 December 2020
Grant date
8 October 2020
8 October 2020
8 October 2020
8 October 2020
Options
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
413,642
328,671
527,800
2,858,520
4,128,633
A$1.23
A$1.23
A$1.23
A$0.88
0.3
0.5
0.6
3.1
Share-based payment reserve
-
4,128,633
4,128,633
Expiry date
20 April 2021
29 June 2021
Number
exercisable
413,642
328,671
16 August 2021
527,800
30 January 2024
2,858,520
4,128,633
e. Share-based payment reserve
The following table presents changes in the Group’s share-based payment reserve during the six months ended 31 December 2020:
(In GBP)
30 June 2019
Exercise of share options
Expired options (1)
Share-based payment expense
30 June 2020
Exercise of share options
Acquisition of subsidiary
Share-based payment expense
31 December 2020
1. Expired in the same accounting period as they were granted.
Share-based payment reserve
1,714,826
(732,000)
-
3,443,359
4,426,185
(1,173,926)
236,571
2,267,239
5,756,069
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Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Equity - Continued
f. Share-based payment expense
During the year ended 31 December 2020; the Group recognised £2,267,239 (30 June 2020: £3,443,359) of share-based
payment expense. 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:
For the year ended
Risk-free interest rate
Expected volatility (1)
Expected life (years)
Fair value per option
31 December 2020
30 June 2020
0.01%
2.01%
63.65% - 97.76%
78.14% - 115.82%
0.85 – 4.41
£0.55 - £1.29
0.42 – 5.18
£0.39 – £0.68
1. Expected volatility is derived from the Company’s historical share price volatility.
With the exception of 1,000,000 options granted to non-executive directors during the year (30 June 2020: 3,000,000) that
vested immediately, all options and performance rights have both market and non-market vesting conditions. 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 Committee Report.
g. Per share amounts
Loss for the period attributable to owners of equity (In GBP)
5,694,503
6 months ended 31
December 2020
Year ended
30 June 2020
6,238,324
Weighted average number of common shares for the
purposes of basic loss per share
Weighted average number of common shares for the
purposes of diluted loss per share
190,619,399
168,915,249
213,827,441
185,645,660
Basic loss per share (pence)
(2.99)
(3.69)
3,375,000 (30 June 2020: 5,160,000) options and performance rights have not been included in the calculation of diluted EPS
because their exercise is contingent on the satisfaction of certain criteria that had not been met at 31 December 2020.
h. Foreign Currency Translation Reserve
30 June 2019
Other comprehensive income
30 June 2020
Other comprehensive income
31 December 2020
Foreign Currency
Translation Reserve
74,242
145,563
219,805
5,775
225,580
i. Cash flow from financing activities
Net cashflow proceeds from the issue of ordinary shares in the period was £12,317,964 (30 June 2020: £13,296,266).
Transaction costs arising from financing activities totals £1,447,201 (30 June 2020: £1,447,201).
105
ADRIATIC METALS PLC FINANCIAL STATEMENTS 16. Taxation
a. Current taxation
The tax charge for the period comprises:
(In GBP)
Current tax expense
Prior year tax expense
Overseas tax
Deferred tax expense
Adjustments to deferred tax liability
Total tax expense
6 months ended 31
December 2020
Year ended 3
0 June 2020
–
1,681
–
–
–
1,681
–
-
–
–
–
–
The reasons for the difference between the actual tax charge for the period and the standard rate of corporation in the United
Kingdom applied to loss for the year is as follows:
(In GBP)
Loss before tax
Expected income tax recovery at 19% (2019 - 19%)
Expenses not deductible for tax purposes
Different Tax rates applied in overseas jurisdictions
Unrecognised taxable losses and timing differences
Adjustment for under/(over) provision in previous periods
Total income taxes
6 months ended 31
December 2020
Year ended
30 June 2020
5,696,184
1,082,275
19,384
(46,601)
(1,055,058)
(1,681)
(1,681)
6,238,324
1,185,282
(654,238)
-
(531,043)
-
-
b. Deferred tax
The Group has no recognised deferred tax balance or gain/loss for the year ended 30 June 2020 or 2019 because of
uncertainty regarding future taxable profits. As at 31 December 2020, the Group has, for tax purposes, non-capital losses
available to carry forward to future years as follows:
(In GBP)
UK
Bosnia
Serbia
Canada
31 December 2020
30 June 2020
Expiry Date
12,323,011
1,417,043
3,073,548
960,972
17,774,574
4,752,719
1,258,100
-
-
6,010,819
Not applicable
5 years
5 years
20 years
The expiry of non-capital losses available to carry forward in Bosnia and Serbia is as follows:
(In GBP)
Within one year
1-2 years
2-3 years
3-4 years
Within 5 years
Serbia
514,525
49,436
653,104
722,580
1,133,903
3,073,548
31 December 2020
Bosnia
108,477
205,596
220,180
392,646
490,144
1,417,043
As a result of the Tethyan acquisition, Tethyan Resource Corp was acquired, this company is incorporated in Canada, non-
capital losses available to carry forward to future years is £960,972 with year of expiry 2040.
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Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. Exploration activities expensed
Exploration and evaluation expenditure incurred on licences where a JORC-compliant resource has not yet been established is
expensed as incurred until sufficient evaluation has occurred in order to establish a JORC-compliant resource.
(In GBP)
6 months ended
31 December 2020
Year ended
30 June 2020
Exploration activities expensed
798 ,028
-
18. General and administrative expenses
(In GBP)
Wages and salaries
Consultancy fees
Cash remuneration in respect of qualifying services
Professional fees
Amortisation
Depreciation
Audit fee
Marketing
Stock exchange fees
Other costs
19. Finance income and expense
(In GBP)
Interest income
Foreign exchange gain
Finance income
(In GBP)
Interest Expense
Interest expense on lease liabilities
Foreign exchange loss
Finance expense
107
6 months ended
31 December 2020
Year ended
30 June 2020
616,278
468,047
1,084,325
313,760
27,017
36,157
100,175
75,250
136,166
342,857
350,526
676,149
1,026,675
1,051,354
37,031
52,645
47,289
161,003
358,663
580,974
2,115,707
3,315,634
6 months ended
31 December 2020
Year ended
30 June 2020
-
-
-
50,366
152,765
203,131
6 months ended
31 December 2020
Year ended
30 June 2020
82,744
10,523
103,772
197,039
-
11,580
-
11,580
ADRIATIC METALS PLC FINANCIAL STATEMENTS 20. Segmental information
It is the opinion of the Directors that there are three reporting segments within the operations of the Group which are assessed
when evaluation performance
Split of performance is below:
Segmental Split
Six months ended 31 December 2020
Year ended 30 June 2020
(In GBP)
Bosnia
Serbia Corporate
Total
Bosnia Corporate
Total
Exploration activities expenses
(5,015)
(793,013)
0
(798,028)
0
0
General and administrative
expenses
(249,932)
(425,935)
(1,440,840)
(2,115,707)
(465,903)
(2,849,731)
(3,315,634)
Share-based payment expense
0
(2,267,239)
(2,267,239)
(3,443,360)
(3,443,360)
Other Income
4,816
4,816
6,131
6,131
Operating Loss
(254,947)
(1,217,948)
(3,703,263)
(5,176,158)
(465,903)
(6,286,960)
(6,752,863)
Finance income
Finance expense
-
-
203,131
203,131
(197,039)
(197,039)
(11,580)
(11,580)
Revaluation of fair value asset
(322,987)
(322,987)
322,987
322,987
Loss before tax
(254,947)
(1,217,948)
(4,223,289)
(5,696,184)
(465,903)
(5,772,422)
(6,238,325)
Tax charge
Loss sfter tax
0
0
1,681
1,681
0
0
(254,947)
(1,217,948)
(4,221,608)
(5,694,503)
(465,903)
(5,772,422)
(6,238,325)
Exploration and evaluation
assets additions capitalised
3,052,019
24,456,506
-
27,456,506
5,048,523
-
5,048,523
21. 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.
The Company engaged Swellcap Limited, a related party controlled by Paul Cronin to provide the Company with corporate office
facilities and services, payments totalled £18,972 for the six months ended 31 December 2020 (30 June 2020: £34,622). Following
the Company entering in to a lease for office premises in December 2019 the Company invoiced Swellcap Limited £4,816 for office
facilities and services for the six months ended 31 December 2020 (30 June 2020: £6,131).
Balances outstanding with related parties was £13,899 at 31 December 2020 (30 June 2020: £nil)
Transactions with key management personnel are disclosed below.
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Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b. Key management personnel compensation
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, the Chief Executive
Officer and the Chief Financial Officer, their remuneration is presented below:
(In GBP)
Board fees
Consultancy fees
Cash remuneration in respect of qualifying services
Share based payments expense
Social security costs
6 months ended
31 December 2020
Year ended
30 June 2020
104,767
172,991
277,758
736,715
15,030
1,029,503
243,594
539,629
783,223
2,880,487
16,835
3,680,545
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 15f of the accounts.
Consultancy fees above include the following amounts paid to related party companies controlled by key management
personnel:
(In GBP)
Related party
Swellcap Limited
GPE Consulting Limited
Gumtree Limited
Controlling party
Paul Cronin
Geoff Eyre
Sean Duffy
6 months ended
31 December 2020
Year ended
30 June 2020
84,999
87,992
-
198,998
80,830
72,718
There were no balances outstanding with related parties as at 31 December 2020 (30 June 2020: £nil).
22. Directors and employees
Employees of the Group are all employees including Directors, key management personnel and personnel in management
positions engaged via management services contracts. The below information relates to all employees and all costs, including
those capitalised.
(In GBP)
Gross salaries
Consultancy fees
Cash remuneration in respect of qualifying services
Social security costs
Defined contribution pension cost
Share based payments expense
Total
Average number of employees
6 months ended
31 December 2020
Year ended
30 June 2020
724,217
305,914
1,030,131
80,813
2,306
2,267,239
3,380,489
73
416,930
882,432
1,299,362
62,407
2,975
3,443,359
4,808,103
39
Average number of employees has increased to 73 in the period (30 June 2020 – 39 employees) due to increasing staff
numbers as the Vares Project progresses as well as the acquisition of Tethyan group.
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 15f of the accounts.
109
ADRIATIC METALS PLC FINANCIAL STATEMENTS Directors’ remuneration totalled the following:
(In GBP)
Board fees
Consultancy fees
Cash remuneration in respect of qualifying services
Average number of Directors
6 months ended
31 December 2020
Year ended
30 June 2020
104,767
84,999
189,766
6
243,594
386,081
629,675
6
Additionally, the monetary value of directors’ share awards that vested in the period, calculated as the number of awards vested
multiplied by the share price on the vesting date less options exercise price or performance rights nominal value payable, was
£66,244 (30 June 2020: £853,978) of which £66,244 relates to Non-Executive Directors (30 June 2020: £233,247).
The highest paid Director in the six months ended 31 December 2020 received cash remuneration, excluding notional gains
on share options or performance rights, of £106,859 (30 June 2019: £238,897). The highest paid Director in the year ended
30 June 2020 received remuneration, inclusive of the monetary value of share awards that vested in the year, of £106,859 (30
June 2020: £858,889).
Of the total amount incurred as Directors remuneration, £nil (30 June 2020: £nil) remains in accounts payable and accrued
liabilities on 31 December 2020.
23. Commitments and contingencies
The Group had no significant commitments as at 31 December 2020 (30 June 2020: £nil), other than the lease of the Group’s
head office disclosed in note 12 and annual concession fees disclosed in note 9.
24. Prior year adjustment
During the year ended 30 June 2020 (the comparative reporting period) the exercise of share options which had previously
generated a cumulative share based payment expense of £732,000 within the share based payment reserve. On exercise the
£732,000 cumulative charge was incorrectly transferred against the share premium account.
Under the provisions of the accounting standards and Companies act, when new shares are issued in connection with an
employee share scheme, the share premium account will normally need to reflect only the cash subscribed for the shares.
The amount recognised as a cumulative share based payment expense should be credited to a reserve other than share
premium. The basis for this is that the services undertaken by the employee do not, as a matter of law, form part of the
consideration received for the shares issued on exercise of the options.
The adjustment to the comparative figures for the year ended 30 June 2020 represents a change in classification within equity
only. With a £732,000 decrease in the share premium account and an equal increase in retained earnings. There is no impact
on the Group and Parent Company Net assets, profit or loss or cash flow statement for the year ended 30 June 2020.
25. Subsequent events
On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras Metals d.o.o. (Ras)
under an agreement held by Tethyan Resource Corp, a wholly owned subsidiary of the Company. The consideration paid for
the remaining 90% of the shares in Ras that the Company did not already hold was EUR 1,365,000 in cash plus the allotment
of 166,000 Ordinary shares of £0.013355 each in the Company. Additionally, deferred consideration of EUR 500,000 in cash,
is payable on 14 May 2022, and 498,000 Ordinary shares in the Company that will be allotted in three equal tranches on or
around 22 August 2021, 22 February 2022 & 22 August 2022.
110
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
(In GBP)
ASSETS
Current assets
Cash and cash equivalents
Other receivables and prepayments
Financial asset at fair value through profit and loss
Total current assets
Non-current assets
Investment in subsidiaries
Fair value option asset on acquisition
Property, plant and equipment
Right of use asset
Total non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities
Lease liabilities
Option liability
Borrowings
Total current liabilities
Non-current liabilities
Lease liabilities
Borrowings
Derivative Liability
Total non-current liabilities
Total liabilities
Shareholders’ equity
Share capital
Share premium
Share-based payment reserve
Warrants reserve expense
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
Note
31 December 2020
(Restated)
30 June 2020
f
j
i
j
g
o
h
p
j
j
p
j
j
l
l
l
l
l
27,983,443
5,118,660
-
9,577,188
139,261
1,241,514
33,102,103
10,957,963
17,324,405
20,581,714
41,079
236,349
38,183,547
71,285,650
3,740,393
35,609
2,515,399
105,515
6,396,916
219,731
11,590,172
3,045,213
14,855,116
21,252,032
2,772,186
51,471,748
5,756,069
2,797,086
(12,763,471)
50,033,618
71,285,650
11,021,333
-
47,129
251,898
11,320,360
22,278,323
314,047
10,530
324,577
255,091
255,091
579,668
2,401,777
23,992,967
4,426,185
-
(9,122,274)
21,698,655
22,278,323
See note 24 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.
The accompanying notes on pages 114 – 118 are an integral part of these Parent Company Financial Statements.
The Company’s loss after tax for the six months ended 31 December 2020 was £4,957,675 (year ended 30 June 2019: £5,782,084).
The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for
issue by the Board of Directors on 30 March 2021 and were signed on its behalf by:
Paul Cronin
Managing Director & Chief Executive Officer
Geoff Eyre
Chief Financial Officer & Joint Company Secretary
111
ADRIATIC METALS PLC FINANCIAL STATEMENTS PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
(In GBP)
Number of
shares
Note
Value
(Restated)
Share
premium
Share-
based
payment
reserve
Warrants
reserve
(Restated)
Retained
earnings
Total
equity
30 June 2019
150,782,587
2,013,701
11,084,777
1,714,826
-
(4,072,190)
10,741,114
-
-
-
-
Loss for the year
Total comprehensive loss
-
-
-
-
-
-
Issue of share capital
Share issue costs
Exercise of options
Issue of options
30 June 2020
Loss for the period
Total comprehensive loss
Issue of share capital
Settlement Placement
Share issue costs
Exercise of options
Issue of options
l
l
l
l
l
l
l
l
l
25,083,400
334,989
13,015,388
-
-
(797,655)
3,975,000
53,087
690,457
(732,000)
–
–
–
3,443,359
179,840,987
2,401,777
23,992,967
4,426,185
-
-
-
-
-
-
5,276,595
70,469
6,129,531
4,830,156
64,507
4,791,547
-
-
(1,598,603)
-
-
-
-
-
4,350,000
58,093
1,203,817
(1,173,926)
-
-
-
2,267,239
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,782,084)
(5,782,084)
(5,782,084)
(5,782,084)
-
-
13,350,377
(797,655)
732,000
743,544
–
3,443,359
(9,122,274)
21,698,655
(4,957,675)
(4,957,675)
(4,957,675)
(4,957,675)
-
-
6,200,000
4,856,054
142,551
(1,456,052)
1,173,927
1,261,911
-
-
2,267,239
20,163,486
Acquisition of subsidiary
13,278,937
177,340
16,952,489
236,571
2,797,086
31 December 2020
207,576,675
2,772,186
51,471,748
5,756,069
2,797,086 (12,763,471)
50,033,618
See note 24 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.
The accompanying notes on pages 114-118 are an integral part of these Parent Company Financial Statements.
112
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2020
(In GBP)
Cash flows from operating activities
Loss for the period
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of right-of-use assets
Share-based payment expense
Finance income
Finance expense
Revaluation of fair value asset
Changes in working capital items:
Increase in other receivables and prepayments
Increase Accounts payable and accrued liabilities
Net cash used in operating activities
Cash flows from investing activities:
Investment in subsidiaries
Purchase of property, plant and equipment
Loan issued
Interest received
Net cash from/(used) in investing activities
Cash flows from financing activities
Issues of ordinary shares
Transaction costs arising from financing activities
Proceeds from loans and borrowings
Interest paid on lease liabilities
Net cash flows from financing activities
Net increase in cash and cash equivalents
Exchange (losses) / gains on cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
Note
Six months ended 31
December 2020
Year ended
30 June 2020
e
g
o
l
l
l
q
(4,957,675)
(5,782,084)
6,969
15,549
2,267,239
-
134,504
322,987
(3,110,904)
3,407,207
(1,914,124)
(3,309,554)
(919)
(1,881,641)
-
16,946
13,714
3,443,359
(193,468)
11,580
(322,987)
(42,015)
211,350
(2,643,605)
(5,390,808)
(48,789)
(876,201)
28,079
(5,192,113)
(6,287,719)
12,317,964
(1,447,201)
14,956,849
(10,523)
25,817,089
18,710,852
(304,597)
9,577,188
27,983,443
13,296,266
-
(11,580)
13,284,686
4,353,362
123,062
5,100,764
9,577,188
The accompanying notes on pages 114-118 are an integral part of these Parent Company Financial Statements.
113
ADRIATIC METALS PLC FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
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 six months ended 31 December 2020.
Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England & 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
These Parent Company Financial Statements have been prepared in accordance with International Financial Reporting
Standards, International Accounting Standards and Interpretations (collectively “IFRS”) adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union (“EU”) applied in accordance with the provisions of the Companies Act 2006.
IFRS is subject to amendment and interpretation by the International Accounting Standards Board (“IASB”) and the IFRS
Interpretations Committee, and there is an ongoing process of review and endorsement by the European Commission.
The Parent Company Financial Statements were authorised for issue by the Board of Directors on 30 March 2021.
ii ) Basis of measurement
These Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that have been
measured at fair value.
The presentation currency of these Financial Statements is Great Britain pounds (“GBP”). The functional currency of the
Company is deemed to be the GBP under IAS 21.
iii ) Going concern
Refer to accounting policies in note 3 of the notes to the Consolidated Financial Statements.
c. Accounting policies
In addition to the accounting policies in note 3 of the 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, which is the primary mechanism used for funding the subsidiary, are made via capital
contributions and recorded as additions to investments in subsidiaries.
d. Critical accounting estimates and judgements
The preparation of the Parent Company’s 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. In addition to the critical accounting estimates and judgements in note 4 of
the Consolidated Financial Statements, the following information about the significant 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, investments in subsidiary, which are made via capital contributions, 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. No impairment indicators were identified in the six months ended 31 December 2020.
e. Loss for the period
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 period is £4,957,675 (Year ended 30 June 2020 – £5,782,084).
f. Other receivables and prepayments
Other receivables contain amounts receivable for VAT, prepaid expenses and deposits paid. All receivables are held at cost
less any provision for impairment. A provision for impairment is made where there is objective evidence that the receivable is
irrecoverable. All receivables are due within one year.
(In GBP)
Other receivables
Prepayments and deposits
Taxes recoverable
Amounts receivable from subsidiaries (note m)
31 December 2020
30 June 2020
-
70,415
98,072
4,950,173
5,118,660
17,063
47,203
74,995
-
139,261
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Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
g. Property, plant and equipment
Land & Buildings
Plant and machinery
-
17,425
17,425
-
17,425
–
970
–
970
878
1,848
-
16,455
15,577
26,454
27,405
53,859
-
53,859
3,968
19,217
–
23,185
6,091
29,276
22,486
30,674
25,502
Total
26,454
44,830
71,284
-
71,284
3,968
20,187
-
24,155
6,969
31,124
22,486
47,129
41,079
31 December 2020
30 June 2020
Cost (In GBP)
30 June 2019
Additions
30 June 2020
Additions
31 December 2020
Depreciation
30 June 2019
Charge for the period
Disposals
30 June 2020
Charge for the period
31 December 2020
Net Book Value
30 June 2019
30 June 2020
31 December 2020
h. Accounts payable and accrued liabilities
(In GBP)
Trade payables
Accrued liabilities
Other payables
Amounts payable to subsidiaries (note m)
238,940
405,205
14,570
3,081,678
3,740,393
Investments in subsidiaries
i.
The breakdown of the investments in subsidiaries is as follows:
Cost (In GBP)
30 June 2019
Additions
30 June 2020
Additions
31 December2020
Eastern Mining d.o.o.
Tethyan Resource Corp.
5,623,315
5,398,018
11,021,333
4,205,902
15,227,235
-
-
-
2,097,170
2,097,170
The list of subsidiaries of the Company is presented in note 3a of the notes to the consolidated financial statements.
115
233,058
74,474
6,515
-
314,047
Total
5,623,315
5,398,018
11,021,333
6,303,072
17,324,405
ADRIATIC METALS PLC FINANCIAL STATEMENTS j. Financial Instruments
The Company’s financial assets and liabilities are classified as follows:
As at 31 December 2020
(In GBP)
Note
At amortised cost
At fair value through
profit or loss
Total
Financial assets
Related Party Receivables
FV Option Asset on acquisition
Cash and cash equivalents
Other Receivables and prepayments
Total financial assets
Financial liabilities
Accounts payable and accrued liabilities
Borrowings
Derivative Liability
FV Option Liability on acquisition
Lease liabilities
Total financial liabilities
Net financial assets
m
r
f
h
q
q
r
p
1,868,495
1,868,495
27,983,443
70,416
29,922,354
658,715
11,695,687
255,340
12,609,742
17,312,612
20,581,714
20,581,714
27,983,443
70,416
20,581,714
50,504,068
658,715
11,695,687
3,045,213
3,045,213
2,515,399
2,515,399
255,340
5,560,612
18,170,354
15,021,102
32,333,714
As at 30 June 2020
(In GBP)
Note
At amortised cost
At fair value through
profit or loss
Total
Financial assets
Cash and cash equivalents
Other receivables
Financial asset at fair value through profit and
loss
Total financial assets
Financial liabilities
Accounts payable and accrued liabilities
Lease liabilities
Total financial liabilities
Net financial assets
f
n
h
p
9,577,188
139,261
–
–
9,577,188
139,261
-
1,241,514
1,241,514
9,716,449
1,241,514
10,957,963
314,047
265,621
579,668
-
-
-
314,047
265,621
579,668
9,136,781
1,241,514
10,378,295
k. Financial Risk Management
The Company is exposed to risks that arise from its use of financial instruments. The principle financial instruments used by the
Company, from which financial risk arises, are set out in note k. The types of risk exposure the Company is subjected during the
year are as follows:
i ) Credit risk
The credit risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group
as a whole. Further details are provided in note 13 of the notes to the Consolidated Financial Statements.
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ii ) Liquidity Risk
The liquidity risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the
Group as a whole. Further details are provided in note 13 of the notes to the Consolidated Financial Statements.
The following table illustrates the contractual maturity analysis of the Company’s gross financial liabilities based on exchange
rates on the reporting date.
As at 31 December 2020
(In GBP)
Within 30 days
30 days to
6 months
6 to 12
months
Accounts payables and accrued liabilities
658,716
Borrowings
Derivative Liability
Lease liabilities
-
-
658,716
-
105,515
-
17,805
123,320
-
-
17,805
17,805
As at 30 June 2020
(In GBP)
Within 30 days
30 days to
6 months
6 to 12
months
Accounts payable and accrued liabilities
Lease liability
314,047
-
314,047
–
–
–
–
Over 12
months
-
11,590,172
3,045,213
219,731
14,855,116
Over 12
months
–
369,745
369,745
iii ) Market risk
The market risk that the Parent Company is exposed to, and
the mitigation thereof, is substantially the same as that of the
Group as a whole. Further details are provided in note 14 of
the notes to the Consolidated Financial Statements.
As at 31 December 2020, a 10% change in the exchange
rate between the Great Britain Pound and the Australian
Dollar, which is a reasonable estimation of volatility in
exchange rates, would have an approximate £0.6 million
change to the Parent Company’s total comprehensive loss.
iv ) Fair values
The fair value of cash, other receivables, and accounts
payable and accrued liabilities and joint venture obligation
approximate their carrying values due to the short-term nature
of the instruments.
Fair value measurements recognised in the Statement of
Financial Position subsequent to initial fair value recognition
can be classified into Levels 1 to 3 based on the degree to
which fair value is observable.
Level 1 – Fair value measurements are those derived from
quoted prices in active markets for identical assets and
liabilities.
Level 2 – Fair value measurements are those derived from
inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly, or
indirectly.
Level 3 – Fair value measurements are those derived from
valuation techniques that include inputs for the asset or
liability that are not based on observable market data.
The level 3 fair value for the convertible loan asset is disclosed
in note 6 of the Consolidated Financial Statements. There
were no transfers between any levels of the fair value
hierarchy in the current period or prior years.
l. Equity
The movements in share capital, share premium, share based
payment reserve, warrants reserve are as detailed in note 15
of the notes to the Consolidated Financial Statements. There
are no differences between this and the Parent Company’s
transactions.
117
ADRIATIC METALS PLC FINANCIAL STATEMENTS m. Related party disclosures
The Company’s related parties include key management personnel, companies which have directors in common and its
subsidiaries. Transactions with its Directors and key management personnel and transactions with companies which have
directors in common during the period have been disclosed in note 21 of the notes to the Consolidated Financial Statements.
The Company had the following related-party balances and transactions during the six months ended 31 December 2020 and
the year ended 30 June 2020.
(In GBP)
Subsidiary
Six months
ended 31
December
2020
Year ended
30 June 2020
At 31 December
2020
At 30 June
2020
Nature of
transaction
Transaction
amount
Transaction
amount
Balance owed
by / (owed to)
Balance owed
by/ (owed to)
Eastern Mining d.o.o.
Trading
3,081,678
-
3,081,678
Eastern Mining d.o.o.
Tethyan Resources Corp.
Tethyan Resources Limited
Tethyan Resources Jersey
Capital
contribution
4,205,902
5,398,018
(3,081,678)
Loan
Loan
Loan
1,518,929
236,488
55,700
-
-
-
1,632,007
236,488
-
-
-
-
-
-
Intercompany loan receivables are assessed for impairment at period end. Intercompany loans were made to fund both
corporate costs and exploration projects undertaken by subsidiaries. In company subsidiaries other than Eastern Mining (who
hold a JORC resource), exploration expenditure is expensed as incurred and not capitalised, as a result these companies net
asset position is lower than their loans payable to the company and not recoverable in the short term. Company policy is to
impair intercompany loans provided to fund corporate costs but not to impair intercompany loans provided to fund exploration
projects on the basis that these exploration projects will add additional long term value. Management will assess for any
impairment indicators on an ongoing basis.
n. 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 6 of the Consolidated
Financial Statements. There are no differences between this
and the Parent Company’s transactions.
o. Right of use asset
The movements in right of use asset are as detailed in
note 12 of the Consolidated Financial Statements. There
are no differences between this and the Parent Company’s
transactions.
p. Lease liabilities
The movements in lease liabilities are as detailed in note
12 of the Consolidated Financial Statements. There are
no differences between this and the Parent Company’s
transactions.
q. Borrowings and Derivative Liability
The movements in external loans and imbedded derivative
liability are as detailed in note 7 of the Consolidated Financial
Statements. There are no differences between this and the
Parent Company’s transactions.
r. Fair Value of Option Asset and Liability
The movements in fair value of option asset and fair value of
option liability are as detailed in note 10 of the Consolidated
Financial Statements. The Company may acquire the
remaining 90% ownership stake in Ras Metals d.o.o. The
excess value of the Tethyan transaction over the investment
recorded is recognised as a call option asset totalling
£ 20,581,714. Value of remaining consideration payable
under Ras Option agreement being £2,515,399 held as a call
liability.
These balances are eliminated in the Consolidation Group
accounts which includes Ras Metals d.o.o.
s. Commitments
Commitments relating to the Parent Company have
been disclosed in note 23 of the Consolidated Financial
Statements.
t. Subsequent events
Subsequent events relating to the Parent Company have
been disclosed in note 25 of the Consolidated Financial
Statement
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Corporate governance statement
The Company’s corporate governance statement for the 6
months ended 31 December 2020 is available on the Company’s
website at https://www.adriaticmetals.com/downloads/corp-
governance-files-/adt-2020-06-05-cgp-v03.pdf.
This statement has been approved by the Company’s Board
of Directors and is current as at 30 March 2021. To the
extent applicable, the Company has adopted The Corporate
Governance Principles and Recommendations (3rd Edition)
as published by the ASX Corporate Governance Council
(Recommendations).
Principles of Best Practice Recommendations
In accordance with ASX Listing Rule 4.10, Adriatic Metals
PLC is required to disclose the extent to which it has followed
the Principles of Best Practice Recommendations during the
financial year. Where Adriatic Metals PLC has not followed a
recommendation, this has been identified and an explanation
for the departure has been given.
Principles and recommendations
Comment
Lay solid foundations for management and oversight
A listed entity should disclose: (a) the respective roles
and responsibilities of its board and management; and
(b) those matters expressly reserved to the board and
those delegated to management.
A listed entity should: (a) undertake appropriate checks
before appointing a person, or putting forward to
security holders a candidate for election, as a director;
and (b) provide securityholders with all material
information in its possession relevant to a decision on
whether or not to elect or re-elect a director.
The Board is ultimately accountable for the performance
of the Company and provides leadership and sets the
strategic objectives of the Company. It is responsible
for overseeing all corporate reporting systems,
remuneration frameworks, governance issues, and
stakeholder communications. Decisions reserved for the
Board relate to those that have a fundamental impact
on the Company, such as material acquisitions and
takeovers, dividends and buy backs, material profits
upgrades and downgrades, and significant closures.
Management is responsible for implementing Board
strategy, day-to-day operational aspects, and ensuring
that all risks and performance issues are brought to the
Board’s attention. They must operate within the risk
and authorisation parameters set by the Board.
The Company undertakes comprehensive reference
checks prior to appointing a director, or putting that
person forward as a candidate to ensure that person is
competent, experienced, and would not be impaired in
any way from undertaking the duties of a director. The
Company provides relevant information to shareholders
for their consideration about the attributes of candidates
together with whether the Board supports the
appointment or re-election.
A listed entity should have a written agreement with
each director and senior executive setting out the terms
of their appointment.
The terms of the appointment of a non-executive
director, or executive directors and senior executives
are agreed upon and set out in writing at the time of
appointment.
The company secretary of a listed entity should be
accountable directly to the board, through the chair,
on all matters to do with the proper functioning of the
board.
The Company Secretary reports directly to the Board
through the Chairman and is accessible to all directors.
1.
1.1
1.2
1.3
1.4
119
ADRIATIC METALS PLC ASX ADDITIONAL INFORMATION Principles and recommendations
Comment
1.5
1.6
1.7
2.
2.1
A listed entity should (a) have a diversity policy which
includes requirements for the board or a relevant
committee of the board lo set measurable objectives for
achieving gender diversity and to assess annually both
the objectives and the entity’s progress in achieving
them; (b) disclose that policy or a summary of it; and
(c) disclose as at the end of each reporting period the
measurable objectives for achieving gender diversity
set by the board or a relevant committee of the board
in accordance with the entity’s diversity policy and
its progress towards achieving them, and either: (1)
the respective proportions of men and women on the
Board, in senior executive positions and across the
whole organisation (including how the entity has defined
“senior executive” for these purposes); or (2) if the entity
is a “relevant employer” under the Workplace Gender
Equality Act, the entity’s most recent “Gender Equality
Indicators”, as defined in and published under that Act.
A listed entity should (a) have and disclose a process
for periodically evaluating the performance of the
Board, its committees and individual directors; and (b)
disclose, in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
A listed entity should (a) have and disclose a process
for periodically evaluating the performance of its
senior executives: and (b) disclose, in relation to each
reporting period, whether a performance evaluation was
undertaken in the reporting period in accordance with
that process.
Structure of the board to add value
The board of a listed entity should:
(a) have a nomination committee which: (1) has at least
three members, a majority of whom are independent
directors: and (2) is chaired by an independent director,
and disclose: (3) the charter of the committee; (4)
the members of the committee; and (5) as at the end
of each reporting period. the number of times the
committee met throughout the period and the individual
attendances of the members at those meetings: or
(b) if it does not have a nomination committee, disclose
that fact and the processes it employs to address board
succession issues and to ensure that the board has the
appropriate balance of skills, knowledge, experience,
independence and diversity to enable it to discharge its
duties and responsibilities effectively.
The Company’s Corporate Governance Plan includes
a ‘Diversity Policy’, which provides a framework for
establishing measurable objectives for achieving gender
diversity and for the Board to assess annually both the
objectives and progress in achieving them.
The Board has also set formal diversity objectives from
2021 which are included as KPIs in the Company’s
Short Term Incentive Plan.
Further detail on the Diversity Policy is included in the
Strategic Report of the Directors.
The Company’s Corporate Governance Plan includes a
section on performance evaluation practices adopted
by the Company.
The Chairman reviews the performance of the Board,
its committees and individual directors to ensure that
the Company continues to have a mix of skills and
experience necessary for the conduct of its activities.
The most recent performance evaluation of the board
was performed during August 2020.
The Company’s Corporate Governance Plan includes a
section on performance evaluation practices adopted
by the Company.
The Chairman will monitor the Board and the Board
will monitor the performance of any senior executives
who are not Directors, including measuring actual
performance against planned performance.
The most recent performance evaluation of the
Managing Director and CEO was performed during
August 2020.
The Company has established a formal nomination
committee.
The Company’s Corporate Governance Plan includes
a Nomination Committee Charter, which discloses the
specific responsibilities of the committee.
In August 2020 the Nominations Committee was
amalgamated with the Remuneration Committee.
Refer to the Company’s Annual Report for further details
regarding the Nomination Committee.
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Principles and recommendations
Comment
2.2
A listed entity should have and disclose a board skills
matrix setting out the mix of skills and diversity that
the board currently has or is looking to achieve in its
membership.
The Board’s skills matrix is set out below.
The matrix reflects the Board’s objective to have an
appropriate mix of industry and professional experience
including skills such as leadership, governance, strategy,
finance, risk, IT, HR. policy development, international
business and customer relationship.
Additionally, external consultants may be brought it with
specialist knowledge to complement the board’s matrix
of skills in the evernt that a deficiency were to exist in
required areas.
Those directors who are considered to be independent
are specified in the Directors Report.
The length of service of each of the Company’s directors
is included in the Directors Report.
A listed entity should disclose: (a) the names of the
directors considered by the board to be independent
directors; (b) if a director has an interest. position,
association or relationship of the type described in
Box 2.3 but the board is of the opinion that it does
not compromise the independence of the director,
the nature of the interest, position. association or
relationship in question and an explanation of why the
board is of that opinion; and (c) the length of service of
each director.
A majority of the board of a listed entity should be
independent directors.
The majority of the Company’s directors are
independent.
The Chair of the board of a listed entity should be an
independent director and, in particular, should not be
the same person as the CEO of the entity.
A listed entity should have a program for inducting
new directors and provide appropriate professional
development opportunities for directors to develop and
maintain the skills and knowledge needed to perform
their role as directors effectively.
Both Mr. Bilbe, who was the Chairman through
the reporting period, and Mr. Rawlinson, who was
subsequently appointed Chairman on 3 August 2020,
are independent.
The Chairman and Company Secretary brief and inform
New Directors on all relevant aspects of the Company's
operations and background. A director development
program is also available to ensure that directors can
enhance their skills and remain abreast of important
developments.
Act ethically and responsibly
A listed entity should: (a) have a code of conduct for
its directors, senior executives and employees; and (b)
disclose that code or a summary of it.
The Company's Corporate Governance Plan includes
a 'Corporate Code of Conduct', which provides a
framework for decisions and actions in relation to ethical
conduct in employment.
The Company has established an Audit & Risk
Committee.
Refer to the Company’s Annual Report for further details
regarding the Audit & Risk Committee.
Safeguard Integrity In financial reporting
The board of a listed entity should: (a) have an audit
committee which: (1) has at least three members, all
of whom are non-executive directors and a majority
of whom are independent directors; and (2) is chaired
by an independent director, who is not the chair of the
board, and disclose: (3) the charter of the committee;
(4) the relevant qualifications and experience of
the members of the committee; and (5) in relation
to each reporting period, the number of times the
committee met throughout the period and the individual
attendances of the members at those meetings; or (b) if
it does not have an audit committee, disclose that fact
and the processes it employs that independently verify
and safeguard the integrity of ifs corporate reporting,
including the processes for the appointment and
removal of the external auditor and the rotation of the
audit engagement partner.
2.3
2.4
2.5
2.6
3.
3.1
4.
4.1
121
ADRIATIC METALS PLC ASX ADDITIONAL INFORMATION 4.2
4.3
5.
5.1
6.
6.1
6.2
6.3
6.4
Principles and recommendations
Comment
A declaration in accordance with these requirements
has been provided by the CEO and CFO.
The board of a listed entity should, before it approves
the entity’s financial statements for a financial period,
receive from its CEO and CFO a declaration that, in their
opinion, the financial records of the entity have been
properly maintained and that the financial statements
comply with the appropriate accounting standards
and give a true and fair view of the financial position
and performance of the entity and that the opinion has
been formed on the basis of a sound system of risk
management and internal control which is operating
effectively.
A listed entity that has an AGM should ensure that its
external auditor attends its AGM and is available to
answer questions from security holders relevant to the
audit.
The Company seeks to ensure that where possible a
representative of the audit engagement partner attends
the forthcoming AGM and is available to answer
questions from shareholders relevant to the audit.
Make timely and balanced disclosure
A listed entity should (a) have a written policy for
complying with its continuous disclosure obligations
under the Listing Rules; and (b) disclose that policy or a
summary of it.
The Company has a continuous disclosure program
in place designed to ensure the compliance with ASX
Listing Rule disclosure and to ensure accountability
at a senior executive level for compliance and factual
presentation of the Company's financial position.
Respect the rights of shareholders
A listed entity should provide information about itself
and its governance to investors via its website.
A listed entity should design and implement an investor
relations program to facilitate effective two-way
communication with investors.
A listed entity should disclose the policies and
processes it has in place to facilitate and encourage
participation at meetings of security holders.
A listed entity should give security holders the
option to receive communications from, and send
communications to, the entity and its security registry
electronically.
The Company maintains information in relation
to governance documents, directors and senior
executives. Board and committee charters, annual
reports. ASX announcements and contact details on the
company's website.
The Company encourages shareholders to attend its
AGM and to send in questions prior to the AGM so
that they may be responded to during the meeting. It
also encourages ad hoc enquiry via email which are
responded to and actively uses social media to engage
with shareholders.
Refer to commentary at Recommendation 6.2
The Company engages its share registry to
manage the majority of communications with
shareholders. Shareholders are encouraged to receive
correspondence from the company electronically,
thereby facilitating a more effective, efficient and
environmentally friendly communication mechanism
with shareholders. Shareholders not already receiving
information electronically can elect to do so through the
share registry, Computershare Australia at
www.computershare.com/au.
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Principles and recommendations
Comment
7.
7.1
7.2
7.3
Recognise and manage risk
The board of a listed entity should: (a) have a committee
or committees to oversee risk, each of which: (l)
has at least three members, a majority of whom
are independent directors; and (2) is chaired by an
independent director, and disclose: (3) the charter of
the committee; (4) the members of the committee; and
(5) as at the end of each reporting period, the number
of times the committee met throughout the period and
the individual attendances of the members at those
meetings; or (b) if it does not have a risk committee or
committees that satisfy (a) above, disclose that fact and
the processes it employs for overseeing the entity’s risk
management framework.
The board or a committee of the board should: (a)
review the entity’s risk management framework at least
annually to satisfy itself that it continues to be sound;
and (b) disclose, in relation to each reporting period,
whether such a review has taken place.
The Company has established an Audit & Risk
Committee.
The Company’s Corporate Governance Plan includes
an Audit & Risk Committee Charter, which discloses the
specific responsibilities of the committee.
Refer to the Company’s Annual Report for further details
regarding the Audit & Risk Committee.
The Company’s Corporate Governance Plan includes a
risk management policy.
The Company maintains a risk register as part of its risk
management strategy which is periodically updated and
subject to scrutiny by the Audit & Risk Committee.
The Audit & Risk Committee receives the report from
the Company’s external auditors which includes an
assessment of internal controls. In the event that
weaknesses in internal control processes are identified
these matters are brought to the attention of and dealt
with by the Board.
A listed entity should disclose: (a) if it has an internal
audit function, how the function is structured and what
role it performs; or (b) if it does not have an internal
audit function, that fact and the processes it employs for
evaluating and continually improving the effectiveness of
its risk management and internal control processes.
The Company is currently not in compliance with this
recommendation as it does not maintain a separate
internal audit function as the Board considers the
Company is not currently of the relevant size or
complexity to warrant the formation of a formal internal
audit function.
The Board, as a whole, evaluates and continually
strives for improvement in the effectiveness of risk
management and internal control processes.
The Audit and Risk Committee receives the report
from the Company’s external auditors which includes
an assessment of internal controls. In the event that
weaknesses in internal control processes are identified
these matters are brought to the attention of and dealt
with by the Board.
Refer to the Company’s Annual Report for disclosures
relating to the company’s material business risks. The
Company does not currently have material exposure
to any economic, environmental or social sustainability
risks. Refer to commentary at Recommendations
7.1 and 7.2 for information on the company’s risk
management framework.
7.4
A listed entity should disclose whether it has any
material exposure to economic, environmental and
social sustainability risks and, if it does, how it manages
or intends to manage those risks.
123
ADRIATIC METALS PLC ASX ADDITIONAL INFORMATION Principles and recommendations
Comment
8.
8.1
8.2
8.3
Remunerate fairly and responsibly
The board of a listed entity should: (a) have a
remuneration committee which: (1) has at least three
members, a majority of whom are independent
directors; and (2) is chaired by an independent director,
and disclose: (3) the charter of the committee; (4)
the members of the committee; and (5) as at the end
of each reporting period, the number of times the
committee met throughout the period and the individual
attendances of the members at those meetings; or (b)
if it does not have a remuneration committee, disclose
that fact and the processes it employs for setting the
level and composition of remuneration for directors and
senior executives and ensuring that such remuneration
is appropriate and not excessive..
A listed entity should separately disclose its policies and
practices regarding the remuneration of non-executive
directors and the remuneration of executive directors
and other senior executives.
A listed entity which has an equity-based remuneration
scheme should: (a) have a policy on whether
participants are permitted to enter into transactions
(whether through the use of derivatives or otherwise)
which limit the economic risk of participating in the
scheme; and (b) disclose that policy or a summary of it
The Company has established a Remuneration
Committee.
The Company’s Corporate Governance Plan includes a
Remuneration Committee Charter, which discloses the
specific responsibilities of the Remuneration Committee.
Refer to the Company’s Annual Report for further details
regarding the Remuneration Committee.
Refer to the Renumeration Committee report in the
Company’s Annual Report.
Refer to the Renumeration Committee report in the
Company’s Annual Report.
124
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020 ADDITIONAL ASX INFORMATION - CONTINUED
Board skills matrix
Michael Rawlinson
Peter Bilbe
B. Economics. Master of Science
B. Engineering Mining
Investment banking
Resources
Mining Finance
NED – LSE, ASX
Paul Cronin - CEO
B.Com & MBA
Resource Finance
CEO experience
M&A
Mining Engineer
Gold, Base Metals
NED - ASX
Sanela Karic
LLB
Bosnian Law
corporate affairs
M&A
Exec & NED ASX, LSE, TSX
Human Resources
Operational experience
M&A
Sandra Bates
B.Com & LLB
Corporate Law
Corporate Finance
Resources focus
NED – ASX, LSE, AIM
Julian Barnes
BSC (Hons), PhD
Geologist
Exploration & development
Balkan experience
Project generation & DD
NED – TSX, LSE, ASX
Shareholdings
At the time of publishing this Annual Report there is no on-market buy-back.
Substantial shareholdings
The Directors are aware of the Company’s top 20 shareholders at 9 March 2021 as follows:
Rank
Name
Number of
ordinary shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SANDFIRE RESOURCES LIMITED
CITICORP NOMINEES PTY LIMITED
DWELLSTONE LIMITED
MR MILOS BOSNJAKOVIC
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
GLAMOUR DIVISION PTY LTD
EUROCLEAR NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
ABADI INVESTMENTS PTY LTD
NATIONAL NOMINEES LIMITED
MR PAUL DAVID CRONIN
UBS NOMINEES PTY LTD
MR ALBERTO LAVANDEIRA ADAN
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
PERSHING NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
INTERACTIVE BROKERS CANADA INC
33,613,556
24,018,720
14,351,132
14,300,000
14,013,190
13,212,786
8,255,808
6,497,286
5,748,578
5,659,400
3,452,464
3,250,000
2,800,000
2,666,664
2,577,863
1,952,993
1,708,145
1,688,314
1,378,832
1,369,116
Percentage of
issued share
capital
16.08
11.49
6.87
6.84
6.71
6.32
3.95
3.11
2.75
2.71
1.65
1.56
1.34
1.28
1.23
0.94
0.82
0.81
0.66
0.66
Totals: Top 20 holders
Total Remaining Holders Balance
162,514,847
46,469,030
80.93%
19.07%
As at 9 March 2021 the Directors are aware of six shareholders who held a substantial shareholding within the meaning of the
Australian Corporations Act as outlined in the top 20 listing above. A person has a substantial holding if the total votes that they
or their associates have relevant interests in is five per cent of more of the total number of votes.
125
ADRIATIC METALS PLC ASX ADDITIONAL INFORMATION
Distribution of Ordinary Shares as at 9 March 2021
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Unmarketable Parcels
Number of
shareholders
Number of
ordinary shares
Percentage of issued
share capital
620
622
240
367
113
1,962
279,600
1,677,279
1,913,081
12,167,754
192,946,163
208,983,877
0.13
0.80
0.92
5.82
92.33
100.00
Minimum Parcel
Size Shares
Number of
shareholders
Total Shares
ASX Minimum trade parcel AUD$500.00 parcel at
AUD$2.06per share
279,600
0.13
279,600
Substantial Option and Performance Rights
Holders
There are no substantial options or performance rights
holders other than those disclosed in the Remuneration
Committee Report.
Restricted securities
There were no restricted securities or securities or subject to
voluntary escrow as at 31 December 2020.
Tenement holdings
The Company’s tenements at 9 March 2021 are set out in the table below. The Company holds a 100% interest in all
concession agreements and licences via its wholly owned subsidiaries with the exception of the Raska (Suva Ruda) licence held
by Deep Research d.o.o.. The Company has an option agreement to acquire 100% ownership of Deep Research d.o.o. but
has no equity interest in that entity at present.
Concession
document
Registration number
License
holder
Concession
Agreement
No.:04-18-21389-
1/13
Eatsern
Mining d.o.o.
i
a
n
v
o
g
e
z
r
e
H
d
n
a
i
a
n
s
o
B
i
a
b
r
e
S
Annex 3 - Area
Extension
No.: 04-18-21389-
3/18
Annex 5 - Area
Extension
No: 04-18-14461-
1/20
Exploration
License
Exploration
License
Exploration
License
310-02-1721/2018-
02
310-02-1722/2018-
02
310-02-1114/2015-
02
Exploration
License
310-02-00060/2015-
02
Concession
name
Veovaca1
Veovaca 2
Area
(Km2)
1.08
0.91
Date
granted
Expiry
date
12-Mar-2013
11-Mar-2038
12-Mar-2013
11-Mar-2038
Rupice-Jurasevac,
Brestic
0.83
12-Mar-2013
13-Mar-2038
Rupice - Borovica
4.52
14-Nov-2018
13-Nov-2038
Veovaca - Orti -
Seliste - Mekuse
Barice - Smajlova
Suma - Macak
1.32
14-Nov-2018
13-Nov-2038
19.45
03-Dec-2020
03-Dec-2050
Droskovac - Brezik
2.88
03-Dec-2020
03-Dec-2050
Eatsern
Mining d.o.o.
Eatsern
Mining d.o.o.
Eatsern
Mining d.o.o.
Eatsern
Mining d.o.o.
Eatsern
Mining d.o.o.
Borovica – Semizova
Ponikva
9.91
03-Dec-2020
03-Dec-2050
Ras Metals
d.o.o.
Ras Metals
d.o.o.
Kizevak
1.84
03-Oct-2019
03-Oct-2022
Sastavci
1.44
12-Mar-2013
03-Oct-2022
Taor d.o.o.
Kremice
8.54
21-Apr-2016
21-April-2022
Deep
Research
d.o.o.
Raska (Suva Ruda)
87.17
28-Dec-2015
18-Feb-2022
126
Strategic ReportGovernanceFinancial StatementsASX Additional InformationAnnual Report for the Six Months Ended 31 December 2020
As each CDI represents one Share, a
CDI Holder will be entitled to one vote
for every CDI they hold.
Proxy forms, CDI voting instruction
forms, and details of these alternatives
will be included in each notice of
meeting sent to CDI holders by the
Company.
These voting rights exist only under the
ASX Settlement Operating Rules, rather
than under British Columbia Law. Since
CDN is the legal holder of the applicable
Shares and the holders of CDIs are
not themselves the legal holder of their
applicable Shares, the holders of CDIs
do not have any directly enforceable
rights under the Company’s articles of
association.
As holders of CDIs will not appear
on our share register as the legal
holders of shares of ordinary shares,
they will not be entitled to vote at our
shareholder meetings unless one of
the above steps is undertaken.
ADDITIONAL ASX INFORMATION - CONTINUED
Chapters 6, 6A, 6B and 6C of
the Corporations Act
As the company is incorporated in
England and Wales, chapters 6, 6A, 6B
and 6C of the Corporations Act dealing
with the acquisition of shares (i.e.
substantial holdings and takeovers) do
not apply to the Company. In the United
Kingdom, the City Code on Takeovers
and Mergers (City Code) regulates
takeovers and substantial shareholders
and the Company is subject to the City
Code.
Voting rights
The Company is incorporated under
the legal jurisdiction of England and
Wales. To enable the Company to
have their securities cleared and
settled electronically through CHESS,
Depositary Instruments called CHESS
Depositary Interests (CDIs) are issued.
Each CDI represents one underlying
ordinary share in the Company (Share).
The main difference between holding
CDIs and Shares is that CDI holders
hold the beneficial ownership in the
Shares instead of legal title. CHESS
Depositary Nominees Pty Limited
(CDN), a subsidiary of ASX, holds the
legal title to the underlying Shares.
Pursuant to the ASX Settlement
Operating Rules, CDI holders receive
all of the economic benefits of actual
ownership of the underlying Shares.
CDIs are traded in a manner similar to
shares of Australian companies listed
on ASX.
CDIs will be held in uncertificated form
and settled/transferred through CHESS.
No share certificates will be issued to
CDI holders. Each CDI is entitled to one
vote when a poll is called, otherwise
each member present at a meeting or
by proxy has one vote on a show of
hands.
If holders of CDIs wish to attend
and vote at the Company’s general
meetings, they will be able to do so.
Under the ASX Listing Rules and the
ASX Settlement Operating Rules, the
Company as an issuer of CDIs must
allow CDI holders to attend any meeting
of the holders of Shares unless relevant
English law at the time of the meeting
prevents CDI holders from attending
those meetings.
In order to vote at such meetings, CDI
holders have the following options:
a ) instructing CDN, as the legal owner,
to vote the Shares underlying their
CDIs in a particular manner. A voting
instruction form will be sent to CDI
holders with the notice of meeting
or proxy statement for the meeting
and this must be completed and
returned to the Company’s Share
Registry prior to the meeting; or
b ) informing the Company that they
wish to nominate themselves or
another person to be appointed as
CDN’s proxy with respect to their
Shares underlying the CDIs for the
purposes of attending and voting at
the general meeting; or
c ) converting their CDIs into a holding
of Shares and voting these at the
meeting (however, if thereafter the
former CDI holder wishes to sell
their investment on ASX it would
be necessary to convert the Shares
back to CDIs). In order to vote in
person, the conversion must be
completed prior to the record date
for the meeting. See above for
further information regarding the
conversion process.
As holders of CDls will not appear on
the Company’s share register as the
legal holders of the Shares, they will
not be entitled to vote at Shareholder
meetings unless one of the above steps
is undertaken.
127
ADRIATIC METALS PLC ASX ADDITIONAL INFORMATION Annual Report for the Six Months Ended 31 December 2020
128
Strategic ReportGovernanceFinancial StatementsASX Additional Information COMPANY DIRECTORY
Board of Directors
Michael Rawlinson* (Chairman from 3 August 2020)
Peter Bilbe* (Chairman until 3 August 2020)
Paul Cronin (Managing Director and CEO)
Julian Barnes* (Non-Executive Director)
Sandra Bates* (Non-Executive Director)
Sanela Karic* (Non-Executive Director) (from 3 August 2020)
John Richards (Non-Executive Director) (resigned 8 July 2020)
Chief Financial Officer
Geoff Eyre
Company Secretary
Geoff Eyre, Gabriel Chiappini (joint secretaries)
Registered Office
Australian Office
Regent House, 65 Rodney Road, Cheltenham GL50 1HX
+44 (0) 20 7993 0066
24 Outram Street, West Perth WA 6005
+61 417 717 480
Canaccord Genuity Limited, 88 Wood Street, London EC2V 7QR
Brokers
RBC Europe Limited, 100 Bishopsgate, London EC2N 4AA
Stifel Nicolaus Europe Limited, One Broadgate, London EC2M 2QS
Auditors
BDO LLP, 55 Baker Street, London W1U 7EU
Stock Exchange Listings
London Stock Exchange (Code: ADT1)
Australian Securities Exchange (Code: ADT)
Computershare
UK: The Pavilions, Bridgwater Road, Bristol BS13 8AE
+44 (0) 370 702 0003
Share Registrars
Computershare Australia:
Australia: Level 11, 172 St George’s Terrace, Perth, WA 6000
+61 08 9323 2000
Country of Incorporation
England & Wales
Registered Number
10599833
Web site
www.adriaticmetals.com
* Determined by the Board to be independent in accordance with the UK Corporate Governance Code.
Designed by Presentation Graphics Design Ltd
129
ADRIATIC METALS PLC NOTES
130
Annual Report for the year ended 30 June 2020 Ground Floor, Regent House
65 Rodney Road
Cheltenham
GL50 1HX
United Kingdom
Tel: +44 (0) 207 993 0066
www.adriaticmetals.com