ANNUAL
REPORT
FOR THE YEAR ENDED
31 DECEMBER 2021
BUILDING EUROPE’S NEXT
OPERATING MINE
1
Adriatic Metals PLC
(ASX:ADT, LSE:ADT1, OTCQX:ADMLF)
Is a precious and base metals developer that is advancing the world-class Vares Silver Project in
Bosnia & Herzegovina, as well as the Raska Zinc-Silver Project in Serbia.
The Vares Silver Project is fully-funded to production, which is expected in Q2 2023. The 2021 Project
Definitive Feasibility Study boasts robust economics of US$1,062 million post-tax NPV8,
134% IRR and a capex of US$168 million. Concurrent with ongoing construction activities,
the Company continues to explore across its highly prospective 41km2 concession package.
2
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 2021
2
STRATEGIC REPORT
Business Review
Chairman’s Statement
Strategy
Business Model
2
4
6
7
8
60
GOVERNANCE REPORT
60 Corporate Governance Report
70 Audit & Risk Committee Report
74 Environmental, Social & Governance Committee Report
80 Remuneration & Nominations Committee Report
Vares Project Feasibility Study
98 Directors’ Report
22 Adriatic Foundation
24 Diversity
24 Social & Human Rights
25 Covid-19 Impact
26 Principal Risks and Uncertainties
36 Directors’ Section 172(1) Statement
43 Principal Decisions by the Board During the Year
44 Our Assets
50 CEO Statement
52 Operational Review
56 Financial Review
110 Statement Of Directors’ Responsibilities
111
FINANCIAL STATEMENTS
112
Independent Auditor’s Report to the members
of Adriatic Metals PLC
119 Consolidated Statement of Financial Position
120 Consolidated Statement of Comprehensive Income
121 Consolidated Statement of Changes in Equity
123 Consolidated Statement of Cash Flows
164 Notes to the Consolidated Financial Statements
161 Parent Company Statement of Financial Position
162 Parent Company Statement of Changes in Equity
163 Parent Company Statement of Cash Flows
164 Notes to the Parent Company Financial Statements
173
ADDITIONAL ASX INFORMATION
(UNAUDITED)
1 1
Annual Report for the Year Ended 31 December 2021 HIGHLIGHTS OF THE YEAR
ENDED 31 DECEMBER 2021
BUSINESS REVIEW
FEASIBILITY STUDY
The Vares Project Feasibility Study
was completed in August 2021
with a simplified process flowsheet
that significantly de-risks project
execution. Initial capital cost
estimate reduced by US$4.8 million
to US$168.2 million, post-tax NPV8
improved by US$22 million to
US$1,062 million and the post-tax
IRR increased from 113% to 134%
compared to the 2020 Preliminary
Feasibility Study.
ENVIRONMENT & SOCIAL
IMPACT ASSESSMENT
Adriatic Metals plc and its
subsidiaries (the Company)
released its Environmental & Social
Impact Assessment (ESIA) for the
Vares Project during Q4 2021 to
conform with the Performance
Requirements (“PR”) set out in the
European Bank for Reconstruction
and Development’s (“EBRD”) 2019
Environmental and Social Policy, as
well as taking into consideration,
amongst others, the World Bank’s
International Finance Corporation
(“IFC”) Performance Standards and
the recently published findings of the
Global Tailings Review.
EXPLORATION
Vares Project, Bosnia & Herzegovina
• Step-out exploration drilling
intersected high-grade massive
sulphide mineralisation as far as
145 metres northwest of Rupice
underground deposit.
• Concession wide airborne
geophysical survey completed
in Q2 2021.
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ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION CONCESSION RIGHTS AND PERMITS
Vares Project, Bosnia & Herzegovina
• Veovaca Exploitation Permit and Rupice underground deposit
Environmental Permit both received in Q1 2021.
• Urban Planning Permit for the Rupice underground deposit received in Q2
2021.
• Exploitation Permit for the Rupice underground deposit received in Q3
2021, marking the final permit required to commence construction.
• Exploration permit received in Q3 2021 for the additional 32km2 of
concession area extension originally granted in September 2020.
Raska Project, Serbia
• Awarded a new licence area in Q4 2021, called Kaznovice, southwest of
the existing Raska Project concession area in Serbia. The 37 km2 of new
licence area increases the total licence area held within the Raska project
by over 35% to 136km2.
ADRIATIC FOUNDATION
The Adriatic Foundation was established as a charitable trust in Bosnia &
Herzegovina with the objective of supporting the communities around the
Vares Project to create a positive long-term legacy. Donations of more than
€500,000 have been received by the Foundation thus far.
FINANCIAL
Secured US$244.5 million project finance package which provides the Group
with sufficient funding through to the production of the Vares Project. The
package consists of:
• US$142.5 million project finance debt package from Orion Resource
Partners, comprising US$120 million in senior secured debt, and a
US$22.5 million copper stream; and,
• An equity raise of US$102 million, which included a US$50 million
subscription from Orion Resource Partners, and issuing 49.4 million new
ordinary shares in total.
Cash balance at 31 December 2021 of US$112 million (£83.2 million) and
undrawn debt of US$142.5 million.
CORPORATE
In Q1 2021, the Company exercised an option to acquire the remaining 90%
of Ras Metals d.o.o. in Serbia.
Concurrent with the Q4 2021 equity raise of US$102 million, Sandfire
Resources Limited sold down its entire 16% ownership in Adriatic, ceasing to
be shareholder going forward.
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 to reflect the transition to construction.
3 3
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 2021 WAS THE YEAR THE
COMPANY TRANSITIONED FROM
EXPLORER TO DEVELOPER
CHAIRMAN’S STATEMENT
The Company announced its project
finance package for the Vares Project
in October. It included a private
placement of US$102 million and a
debt package of US$142.5 million.
The debt package, along with US$50
million of equity, was provided by Orion
Resource Partners. Concurrently, a
secondary placement also took place
where the 16.1% shareholding held by
Sandfire Resources was sold down and
placed with a number of institutions.
Almost two-thirds of the demand
for both the primary and secondary
placement came from funds within the
UK, broadening our shareholder base.
The, admission of shares occurred on
1 November 2021. Definitive document
for the debt package was executed
post year end on 10 January 2022.
We welcome our many new
shareholders who took place in the
primary placement, as well as the
concurrent secondary placement. We
also thank Sandfire Resources for their
support in Adriatic since their initial
investment was made at IPO back in
2018.
We are also very excited to have
received the exploration license
issued for the 32km2 concession area
extension that was originally granted in
September 2020. The new concession
area is highly prospective and takes the
total concession areas permitted for
exploration to 41 km2. Drilling continued
to focus around Rupice in H2 2021,
however we have plans for drilling on
these new areas during 2022.
KEY MILESTONES
The Environmental Permit was issued
for the Rupice underground deposit in
February and was later followed by the
issue of the Urban Planning Permit by
the Federal Ministry for Spatial Planning
in June. The Exploitation permit was
subsequently issued in July 2021,
which was the final required permit to
commence construction. The strong
progress on permitting was only 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.
The Vares Project Feasibility Study
was announced on 19 August 2021.
This projected an impressive post-tax
project NPV8 of US$1.1 billion, an
improvement of US$22 million over
the 2020 PFS. The estimated project
capital cost requirement was reduced
to US$168.2million, a US$4.8 million
reduction from the 2020 PFS. The
post-tax IRR increased from 113%
to 134%. The Feasibility Study was
focused on de-risking the project
execution by removing the inclusion
of mining the Veovaca open pit and
removing barite recovery, which
simplified the process flowsheet and
reduced the the number of concentrate
products streams from four to two
(a zinc concentrate and a silver-lead
concentrate).
The project team has immediately
transitioned to the various workstreams
necessary to commence construction.
This included a number of new
appointments to further build out
our in-house technical capability.
Construction activities commenced
in late November 2021 with civil
earthworks around the Rupice Surface
Infrastructure focused on building the
access roads to the portals ready
for decline development which are
expected to commence in spring 2022.
Michael Rawlinson
Chairman of the Board
I am pleased to report that
in the 12 months since our
previous annual report, we
have made exceptional
progress towards our main
objective of advancing the
Vares Project into construction:
In July 2021, the final permit
was received to commence
construction; in August an
outstanding Feasibility Study
was delivered and in October
an equity raise was completed
alongside a signed project
finance term sheet with Orion
Resource Partners to fully fund
the project into production.
With construction activities
now underway, this marks
one of the fastest paces of
development for any junior
mining company. The Company
has advanced from exploration
discovery to construction in
less than 5 years.
44
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION We have been incredibly encouraged
by the new mineralised zone discovered
northwest of Rupice. In Q3 the first hole
delineated high grade mineralisation
that appears to be slightly off to the
northwest of the Rupice underground
deposit. The Company continues to
work with Zenica-Doboj Canton on its
application to extend the Vares Project’s
concession area boundary further
northwest along strike.
We made great progress on our
Environmental and Social plan for
the project with the ESIA that was
released for public review on the 27
October 2021. The undertaking of the
ESIA was a voluntary exercise and
not required in Bosnia & Herzegovina,
which is the reason why it was the first
ESIA produced by a private company
in Bosnia & Herzegovina. The high
standard to which it was produced
was praised by our local partners, as
well as our financial partners EBRD
and Orion. In June 2021, we formed
a Bosnian registered charity, called
the Adriatic Foundation, with the
purpose of investing in initiatives to
improve education, healthcare and
the environment in the communities
surrounding the Vares Project.
The cash balance at 31 December 2021
was US$112 million (£83.2 million).
In addition, to the private placement of
US$102 million received, an undrawn
$142.5 million debt facility ensures
the group is fully financed through to
production at the Vares Project.
overhauled in preparation to becoming
a producer with a balanced scorecard
of metrics to ensure management are
incentivised to deliver the Vares Project
on time and on budget, but also safely
and in a socially constructive manner.
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 first implemented in 2020.
Our operational productivity continues
to be only minimally 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 Project on time.
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 2022
being another exciting year of progress.
Michael Rawlinson
Chairman of the Board
BOARD AND
MANAGEMENT CHANGES
2021 was the year the Company
transitioned from explorer to developer.
There were no changes to the Board
during the year, however the ongoing
strengthening of the executive
management and operations team
continued. Our Managing Director and
Chief Executive Officer Paul Cronin has
showed great leadership in his decision
to move to Bosnia & Herzegovina at the
beginning of the year which I am certain
has augmented the great progress we
have made in the project there this year.
We commenced the hiring of the project
delivery team who will be responsible
for delivering the Vares Project under
the leadership of Project Director, Collin
Ellison. Over the course of 2021 the
Group headcount has increased by
39 to 133. Notable hires to deliver the
project are as follows:
Collin Ellison,
Project Director
Adriana Tufis,
Project Manager
Ruben Fernandez Barrado,
Underground Mine Manager
Jonathan Rao,
Processing Manager
Mark Richards,
Logistics and Procurement Manager
In addition, we hired Thomas Horton,
Head of Corporate Development and
Investor Relations, to professionalise
our communications with investors and
to develop our project pipeline post-
production.
The Company announced on 14
March 2022 that the Geoff Eyre, the
incumbent Chief Financial Officer and
Joint-Company Secretary, would be
leaving the Company after a short
transition period and handing over the
Chief Financial Officer responsibilities to
Mr. Norris who is a qualified Chartered
Accountant with over 30 years of
commercial and operational experience
in the mining industry.
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 Project as it
advances toward production.
On the governance front we also made
good progress, having conducted
a constructive board evaluation.
Our renumeration policy was also
5 5
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
A CLEAR STRATEGY
AND DIRECTION
STRATEGY
Adriatic is a precious and base metals
developer focused in Southeast
Europe. The Company’s vision is to
build a European-focused, multi-asset
mining company.
In order to achieve this long-term
vision, while concurrently delivering
shareholder returns, the Company is
primarily focused on creating value
through the development of its current
asset portfolio. However, where
value-accretive, the Company will
expand its pipeline of projects through
opportunistic acquisitions.
In addition, the Company is committed
to setting a high standard in responsible
extraction of its mineral resources.
Core to this strategy is setting a high
benchmark for Environmental, Social
and Governance (ESG) standards, not
only in comparison to its European
peers, but also across the mining
industry globally. Since 2020 EBRD has
been a shareholder in the Company.
A project support agreement between
EBRD and Adriatic commits the
Company to international best practices
and to working to the standards set out
in EBRD Performance Requirements as
well as the Equator Principles, and the
IFC Performance Standards.
In the short-to-medium term, Adriatic’s
strategy will continue to leverage its
competitive advantages, of:
• its early mover advantage in Bosnia
& Herzegovina. The Company is the
only publicly-listed development-
stage mining concession holder in
the country. Bosnia & Herzegovina
has a rich mining history, a pro-
mining outlook, highly prospective
geology and a stable fiscal and
political system;
• an experienced, capable and multi-
disciplinary management team
which includes well regarded mining
professionals with a track record
of project delivery and operating
success;
• its strong cash position, which
fully-funds the Vares Project to
production;
• the high-margin project economics
for the Vares Project, as determined
by the 2021 Feasibility Study; and
• a strong commitment to contribute
to the sustainable development of
the communities associated with our
operations, to ethical conduct in all
our business activities and a focus
on the professional management of
ESG aspects of the project.
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ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION BUSINESS MODEL
The primary focus of Adriatic is
advancing the construction of the
Company’s flagship asset, the Vares
Project in Bosnia & Herzegovina,
followed by the continued exploration of
the Zinc-Silver Raska Project in Serbia.
also offers further resource potential.
Therefore, where deemed sufficiently
prospective, the Company will continue
to expand its concessions area
boundaries to surrounding, strategic
land holdings.
Adriatic, through its wholly owned
subsidiary company, Eastern Mining
d.o.o., owns 100% of the Project
concession, which is located in the
municipality of Vares, within the
Zenica-Doboj canton. approximately
50km north of the Bosnian capital of
Sarajevo. The Project’s underground
deposit, called Rupice, has high-grade
silver and zinc dominant polymetallic
mineralised widths of up to 65m from
250-300m deep. In August 2021, a
Feasibility Study was completed that
further improved on the economics of
the 2020 Pre-Feasibility Study and the
2019 Scoping Study. These engineering
studies confirm the robust, high-
margin project economics, however
with reduced execution risk due to
the simplification of the Feasibility
Study flow sheet, as the number
of concentrate products produced
was reduced from four to two (a
zinc concentrate and a silver-lead
concentrate).
The Vares Project in is the construction
phase, for which it is fully permitted
and fully funded. Construction activities
commenced in late Q4 2021 and
the Company expects to commence
production in Q2 2023.
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. The 32km2
of new concession areas were granted
in September 2020 and later permitted
for exploration in June 2021. These
new areas will be an area of greater
exploration focus in 2022.
Building on the current Mineral
Resource Estimates of Rupice and
Veovaca, the Company plans to
continue concurrent exploration
activities across its 42 km2 of permitted
Vares Project concession area. The
Company is confident that the,
predominantly greenfield, land package
has significant exploration potential
to add to the current 11 year Rupice
life of mine. In addition, the wider
region surrounding the Vares Project
Concurrent to the development of
the Vares Project, the Company will
continue exploration activities at the
Zinc-Silver Raska Project in Serbia. This
project originated from the acquisition
of Tethyan Resource Corp, which
completed in October 2020. To date,
exploration activities has been focused
around the targets of the Kizevak,
Sastavci and Karadak Veins. However,
exploration activities will commence
in the Kaznovice concession following
the granting of the licence in Q4
2021. Exploration activities include
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.
The development of both the Vares and
Raska Projects, benefits from existing
infrastructure, built during prior mining
operations. This includes power, water,
rail, sealed roads, accommodation
facilities, service providers and
international airports.
Since the Company’s inception, it has
been able to successfully meet all of
its funding needs. Most recently, the
company undertook a US$102 million
private placement financing in October
2021, with Canaccord Genuity, RBC
Capital Markets and Stifel Nicholas
acting as joint bookrunners. In addition,
the Company signed a term sheet with
Orion Resource Partners for a project
finance facility of US$142.5 million.
Definitive documentation for the project
finance facility was executed in January
2022. The combined US$244.5
million funding package fully funds the
Group through to production of the
Vares Project, as well as continuing
concurrent exploration activities.
7 7
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION OUTSTANDING
PROJECT ECONOMICS
VARES PROJECT FEASIBILITY STUDY
Following the completion of the 2020
Pre-Feasibility Study (2020 PFS), an
internal review was undertaken with
Ausenco and the Company’s team
of Subject Matter Experts (SMEs),
to determine options for further
optimisation during the Feasibility
Study. The Feasibility Study, which was
completed in August 2021, determined
the details of the Future Operations.
The principal considerations at the
outset of the Feasibility Study were as
follows;
• Optimise the mine plan to maintain
consistent high-grade feed for as
long as possible
• Take into consideration the prevailing
market conditions
• Maximise revenue received from
concentrate sales
• Optimise operational efficiency and
reduce costs
• Reduce potentially adverse
environmental, social, and economic
impacts
• Minimise project execution risks
These considerations generated the
following operational changes:
MODIFIED UNDERGROUND
MINE PLAN
The Feasibility Study mine plan is
focused on mining the high-grade
sections of the Rupice deposit as
early as possible and delivering
consistent high-grade feed to the
Vares Processing Plant for as long as
possible. As a result, the mine plan was
modified to accommodate new lower
(ingress) and upper (egress) declines for
optimised access, which also improves
operational flexibility and safety.
The Ore Reserve tonnage of Rupice has
decreased from 8.4 Mt to 7.3 Mt, while
the Ore Reserve grade increased from
463g/t AgEq to 485g/t AgEq. This was
due to the application of updated Net
Smelter Return (NSR) cut-of Feasibility
Study by ore type determined during
geo-metallurgical domaining and
metallurgical test work. The average
dilution factor increased from 10% to
13%, taking into account the potential
spalling of backfill from adjacent primary
stopes when mining secondary stopes.
An additional third decline will be built,
replacing the previously considered
raisebore, dedicated solely to
ventilation. Use of a ventilation decline
rather than the vent-raisebore removes
the risks associated in the near-surface
ground conditions and provides an
improved emergency egress. The third
decline can also provide additional
access for ore-haulage later in the mine
life by relocating the ventilation fans.
REMOVAL OF VEOVACA
OPEN PIT FROM THE MINE
PLAN
The Vares Processing Plant has been
designed around the ore from the
Rupice Underground Mine, as this
is the highest value ore. Processing
of ore from the Veovaca open pit,
without modifying the process design,
is anticipated to produce concentrates
with marginal project economics.
Further metallurgical test work and
engineering will be undertaken to
better understand how a higher
value concentrate can be produced.
Therefore, it was decided to defer the
Veovaca open pit from the Feasibility
Study mine plan until further work has
been completed.
As the Feasibility Study does not
include the mining of the Veovaca
open pit, this reduces the tonnage of
tailings that will require storage in the
Tailing Storage Facility (TSF) by 1.91
Mt over life of mine. Additionally, mining
the Veovaca open pit would have also
required stripping waste rock to access
the ore, which would also require a
dump area with a capacity to store
8.64 Mt of waste rock. Total tailings and
waste from mining Veovaca would have
been 10.6 Mt.
REMOVAL OF THE BARITE
CONCENTRATE CIRCUIT
Market research conducted by an
independent barite marketing expert
concluded that, while the barite
concentrate produced by the Vares
Processing Plant had a suitable end-
market, the current weak demand
for and prices of barite and the high
shipping rates negatively affected its
contribution to the project. The price
for barite is correlated with oil and gas
exploration activity, due to its primary
use as a drilling mud.
Not recovering the barite concentrate
reduces the project execution risk
by removing 200kt of concentrate
movement in the first year of
Commercial Production and in excess
of 1.1Mt over first 5 years.
REMOVAL OF THE
SULPHIDE (PYRITE)
CONCENTRATE CIRCUIT
The sulphide (pyrite) concentrate
was developed and introduced as a
process to remove sulphide minerals
from the barite concentrate to improve
the quality of the barite. It followed the
silver-lead and zinc flotation stages and
preceded the barite flotation stage. The
sulphide (pyrite) concentrate produced
was found to contain reasonable
quantities of gold and silver and the
marketing team found potential buyers.
Further validation of the detailed market
during the Feasibility Study, resulted in
a lack of confidence in the marketability
of the sulphide (pyrite) concentrate.
Therefore, the Company took the
decision to remove the sulphide (pyrite)
concentrate from the Feasibility Study
taking into account that the barite was
also not going to be included at this
time.
88
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION OPTIMISED COMMINUTION DESIGN
The process flowsheet was optimised with the introduction of a three-stage crushing plant processing ore for the Vares
Processing Plant, as well as waste rock for aggregates for the backfill plant. This eliminated the need for the Semi-autogenous
Grinding (“SAG”) Mill in the Vares Processing Plant saving US$1.8 million and further reducing project execution risk.
This has contributed to a decrease in Initial Capital Costs of US$4.8 million.
CUMULATIVE IMPACT
The cumulative impact of the principal design considerations used in the Feasibility Study are:
• To significantly de-risk project execution through simplifying the process flowsheet, with negligible impact on Project
economics;
• To simplify Project logistics considerations by removing 1.1 Mt of barite handling costs in the first five years;
• The reduction of Initial Capital Costs by US$4.8 million to US$168.2 million, an improvement in NPV8 by US$22 million to
US$1,062 million and IRR from 113% to 134%;
• The removal of 10.6 Mt in the tailings and waste rock associated with not mining the Veovaca open pit;
• Comparatively low Green House Gas (“GHG”) emissions on a per unit of metal recovered, relative to industry peers.
HIGHLIGHTS OF PROJECT METRICS
Key Metrics Feasibility Study vs 2020 PFS
Key Metric
Post-tax NPV (8%)1
Post-tax Internal Rate of Return1
Project Payback from First Production1
Initial Capital Costs
Total Mined Tonnes to Plant
Life of Operation
Cash Cost1,2
All-in Sustaining Cost (AISC) 1,3
Average Annual AgEq Production Years 1-5
Underground Mining Costs (mined)
Underground Mining Costs (milled)
Processing Costs
G&A Costs
Refining & Freight Costs
Revenue1
Average Annual EBITDA Years 1-51
Profitability Index1
Unit
2021 FS
2020 PFS
US$ million
%
years
US$ million
Mt
years
US$/AgEq ounce
US$/AgEq ounce
koz/year
US$/t mined
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$ million
(Post-Tax NPV8/
CAPEX)
1,062
134%
0.7
168.2
7.3
10
7.0
7.3
1,040
113%
1.2
173.0
11.1
14
9.5
9.7
14,975
15,302
24.1
30.0
30.3
7.7
35.7
376.9
281.1
6.3
27.6
31.9
31.5
4.8
52.1
296.3
251.0
6.0
1. Silver Price US$25/oz, Zinc Price US$3,000/t, Lead Price US$2,300/t, Copper Price US$9,500/t, Gold Price US$1,800/oz, Antimony
Price $2,300/t.
2. Cash costs are inclusive of mining costs (US$/t milled), processing costs, site G&A, refining & freight and concession fees (3.90 BAM
per Mt of Run of Mine).
3. AISC are inclusive of cash costs plus sustaining capital, closure cost, salvage value.
9 9
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION VARES PROJECT FEASIBILITY STUDY - CONTINUED
FUTURE OPERATIONS
The Feasibility Study envisages future operations at the Vares Project once in production commences will include:
Ore Reserve
Mining Rate
Life of Mine
Mining Method
MINING
7.3 Mt at 485g/t AgEq
800,000 tonnes / year
10 years
Transverse Longhole Open Stoping and Longitudinal Longhole
Open Stoping
Operations
Contractor Mining
Head Grades (UG)
Ag 202g/t, Zn 5.7%, Pb 3.6%, Au 1.9g/t, Cu 0.6%, Sb 0.2%
Roads
24.5 km of haul road (which includes 9 km of existing road) will be
constructed by the Vares Municipality with funding and oversight of
construction provided by the Company
Tailings Storage Facility
Dry stacked filtered tailings adjacent to the Vares Processing Plant
INFRASTRUCTURE
Water
Power
Existing reticulated supply to Vares Processing Plant, plus supply
from a nearby stream that used to supply Vares town to Rupice
Surface Infrastructure
Rupice Surface Infrastructure: 6.5 MW average load to be
provided by JP Elektroprivreda BiH, plus a 1 MW emergency diesel
generator.
Vares Processing Plant: 10.0 MW average load to be provided by
JP Elektroprivreda BiH
MARKETING &
LOGISTICS
Logistics
Containerised rail transport from Vares to the Port of Ploće and sea
freight to end user
CAPITAL AND OPERATING COST ESTIMATE
The capital and operating cost estimates were compiled
by Ausenco with inputs from other engineering consultants
and the Company. All estimates have been prepared using
estimated quantities and quoted unit costs. The Initial Capital
Costs and Life of Mine (“LOM”) capital costs are summarised
in the Tables 4 and 5 below.
The underground mining costs increased due to the re-
classification of operating costs to capital expenditure,
reflecting an advancement in the timing of that expenditure.
Initial Capital Cost Estimate
In addition, the optimisation of the crushing plant and
expanded footprint at the Rupice Surface Infrastructure, to
accommodate larger stockpiles, resulted in an increase in the
volume of earthworks in comparison to the 2020 PFS. These
increases in capital expenditure are largely offset by savings
from the exclusion of the barite and sulphide (pyrite) circuits
in the Vares Processing Plant. Including the other items noted
below, the net reduction in Initial Capital Cost is US$4.8
million from the 2020 PFS estimate to US$168.2 million.
Initial Capital Cost Estimate (US$ Million)
2021 FS
2020 PFS
Change
% Change
Rupice Underground Mining
Rupice Surface Site Infrastructure
Minerals Processing
Vares Processing Plant Site Infrastructure
Regional Infrastructure and Utilities
Temporary Infrastructure Construction
Product Handling and Logistics
Common Costs and Services
Owners Costs
Total
1010
21.1
35.8
46.1
6.4
5.7
5.8
0.0
0.8
46.5
168.2
6.3
24.0
58.1
8.9
4.5
5.3
3.4
7.2
55.3
173.0
14.8
11.8
-12
-2.5
1.2
0.5
-3.4
-6.4
-8.8
-4.8
235%
49%
-21%
-28%
26%
10%
-100%
-89%
-16%
-3%
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Changes in Initial Capital Cost Estimate from 2020 PFS to Feasibility Study (US$ million)
n
o
i
l
l
i
m
$
S
U
200
190
180
170
173.0
160
150
S
F
P
11.8
14.8
-12.1
-2.5
1.2
0.5
-3.4
-6.4
-8.7
168.2
i
g
n
n
M
i
.
r
f
n
I
i
e
c
p
u
R
i
g
n
s
s
e
c
o
r
P
.
a
r
f
n
I
P
P
V
.
a
r
f
n
I
l
i
a
n
o
g
e
R
.
a
r
f
n
I
y
r
a
r
o
p
m
e
T
s
c
i
t
s
g
o
L
i
s
t
s
o
C
n
o
m
m
o
C
r
e
n
w
O
s
t
s
o
C
S
F
D
In addition to the changes in the Initial
Capital Cost estimates as provided
above, sustaining capital increased by
US$13 million due to the increased size
of the stockpile terrace, backfill plant
replacement pumps and additional pipe
reticulation. Rehabilitation and closure
costs reduced, reflecting savings arising
from not mining Veovaca.
Summary of Changes in Initial Capital Costs
Regional Infrastructure
• There was a saving of US$4.5 million
as the haul road was re-categorised
to the main earthworks (Rupice
Surface Infrastructure)
• Additional costs of US$5.7 million
for electrical connection costs, most
of which is additional, as supply
company now requires payment for
new line, in addition to a connection
fee.
Logistics
• The 2020 PFS assumed US$3.4
million in improvement costs at the
Port of Ploće, Croatia, which are not
required.
Common Costs
• Significant savings in freight
(US$4.2 million) due to reduction in
equipment used for barite and pyrite
concentrate, as well as associated
specialist consultants and vendor
costs (US$2.2 million).
Owners Costs
• Saving of US$8.7 million in
Engineering Procurement and
Construction Management
(EPCM) costs, Owner’s costs
and contingency and some re-
assignment of capital costs to other
cost categories
Mining
• The total increase in mining costs
is the result of the reassignment
of costs previously included as
operating costs in the 2020 PFS,
to Initial Capital Costs to reflect the
early mining activities.
Rupice Infrastructure
• Upgrading the crushing plant to
three-stage crushing, reallocated
US$1.8 million in costs from the
Vares Processing Plant
• Additional earthworks (from 0.45M
cubic metre to 1.8M cubic metre)
required for the larger stockpile
area and associated infrastructure,
increased costs by US$6.8 million
• More accurate pricing in haul road
costs accounted for an increase of
US$2.7 million
• The addition of shotcrete batching
and mixing to the backfill plant
(US$0.9 million) as well as heating
added for water and aggregate,
increased costs by US$1.1 million.
Processing
• The upgrading of the crushing plant
at Rupice Surface Infrastructure
negated the need for a SAG mill at
the Vares Processing Plant, saving
US$1.8 million
• The removal of the processing
equipment associated with the
barite and pyrite circuits saved
US$6.1 million, as well as associated
building and concrete costs (US$2.0
million).
1111
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
VARES PROJECT FEASIBILITY STUDY - CONTINUED
LOM Capital Cost Estimate
Lom Capital Cost Estimate (US$ Million)
2021 FS
2020 PFS
% Change
Initial Capital Cost
Sustaining Capital
Rehabilitation and Closure
Salvage Value
LOM Average Operating Costs
Metric
Mining Cost1
Underground Mining Cost (mining)
Open Pit Mining Cost (mining)
Mining Cost1
Underground Mining Cost (milling)
Open Pit Mining Cost (milling)
Processing Cost
G&A Cost
Operating Costs2
Operating Costs2
Refining & Freight Cost
Refining & Freight Cost
Cash Cost3
All-in Sustaining Cost4
168.2
32.4
12.0
(15.9)
173.0
19.1
19.3
(5.8)
-3%
+70%
-38%
-174%
Unit
2021 FS
2020 PFS
US$/t mined
US$/t mined
US$/t mined
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$/ AgEq oz
US$/t milled
US$/ AgEq oz
US$/ AgEq oz
US$/AgEq oz
24.1
24.1
n/a
30.0
30.0
n/a
30.3
7.7
68.0
4.5
35.7
2.4
7.0
7.3
14.0
27.6
2.7
26.5
31.9
9.4
31.5
4.8
62.8
5.1
52.1
4.2
9.5
9.7
1. Blended mining cost – only relevant to the 2020 PFS as it included both open pit and underground mining
2. Operating costs are inclusive of (blended1) mining costs (US$/t milled), processing costs and site G&A
3. Cash costs are inclusive of operating costs, refining, freight and concession fees (3.90 BAM per mt of Run of Mine)
4. AISC are inclusive of cash costs plus sustaining capital, closure cost, salvage value
Financial Analysis
LOM annual average feed grade and tonnes processed by the Vares Processing Plant
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Tonnes
kt
638
800
800
800
802
800
794
775
769
260
56
Feed Grade
Silver
Zinc
Lead
Copper
Gold
Barite
Antimony
g/t
%
%
%
g/t
%
%
340
242
199
204
231
240
182
127
110
98
186
6.6%
9.0%
9.5%
8.7%
5.4%
5.9%
3.7%
2.6%
1.8%
1.3%
1.4%
4.4%
5.4%
5.7%
5.0%
3.3%
3.7%
2.6%
1.9%
1.3%
1.0%
1.6%
0.7%
1.0%
1.1%
0.9%
0.6%
0.5%
0.4%
0.3%
0.3%
0.3%
0.4%
2.8
2.5
2.1
2.3
2.3
2.2
1.6
1.0
0.7
0.6
0.9
42%
35%
30%
34%
37%
37%
30%
23%
23%
26%
57%
0.2%
0.3%
0.3%
0.3%
0.2%
0.2%
0.2%
0.2%
0.2%
0.2%
0.3%
1212
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Revenue split by metal over LoM
s
n
o
i
l
l
i
M
$
S
U
450
400
350
300
250
200
150
100
50
0
42%
16%
2%
15%
25%
25%
27%
29%
14%
3%
19%
11%
2%
22%
35%
40%
14%
2%
20%
37%
37%
38%
17%
2%
15%
27%
16%
2%
16%
29%
40%
15%
2%
16%
25%
40%
13%
3%
16%
26%
47%
10%
3%
15%
23%
Zn (Zinc)
Pb (Lead)
Cu (Copper)
Au (Gold)
Ag (Silver)
Sb (Antimony
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
LOM average revenue split by commodity
Ag - 34%
Zn (Zinc)
Pb (Lead)
Cu (Copper)
Au (Gold)
Ag (Silver)
Sb (Antimony
Au - 14%
Pb - 18%
Sb - 1%
Other - 3%
Zn - 31%
Cu - 2%
Waterfall of major changes to the NPV from the 2020 PFS
$
S
U
8
V
P
N
1,100,000
1,050,000
1,000,000
950,000
900,000
850,000
1,040,000
(43,700)
0
2
0
2
S
F
P
/
a
c
a
v
o
e
V
y
t
i
l
i
b
a
y
a
P
c
n
o
C
b
P
g
A
(57,800)
e
t
i
n
a
B
t
i
u
c
r
i
C
73,500
1,062,000
98,000
(48,000)
i
e
d
h
p
u
S
l
t
i
u
c
r
i
C
)
e
t
i
r
y
P
(
e
c
i
r
P
y
t
i
d
o
m
m
o
C
r
e
h
t
O
S
F
1
2
0
2
Note: Changes in the waterfall are subject to historical cost allocations that are not directly comparable to this study and should
be used as a guide only.
1313
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
VARES PROJECT FEASIBILITY STUDY - CONTINUED
Key financial assumptions
Metric
Exchange Rate
Silver Price
Zinc Price
Lead Price
Copper Price
Gold Price
Antimony Price
Barite Price
Unit
2021 FS
2020 PFS
BAM/US$
US$/oz
US$/tonne
US$/tonne
US$/tonne
US$/oz
US$/tonne
US$/tonne
1.60
25
3,000
2,300
9,500
1,800
2,300
n/a
1.75
24
2,500
2,000
6,500
1,900
6,500
150
-$10/oz Ag or
-$400/t Zn
-$5/oz Ag or
-$200/t Zn
--
+$5/oz Ag or
+$200/t Zn
+$10/oz Ag or
+$400/t Zn
Silver Metal Price
Change (US$/oz)
Zinc Metal Price
Change (US$/t)
NPV8
IRR
NPV8
IRR
$823
109%
$991
128%
$937
121%
$1,026
131%
$1,062
134%
$1,062
134%
$1,188
147%
$1,097
138%
$1,301
159%
$1,132
141%
Mineral Resources
The JORC compliant Mineral Resource Estimate for the Vares Project is 19.4 Mt. The Rupice Mineral Resource Estimate was
updated in August 2020 by CSA Global of Perth and comprised of 12.0 Mt Indicated and Inferred Resources at 149g/t Ag,
1.4g/t Au, 4.1% Zn and 2.6% Pb, as set out in below. This estimate remains unchanged for the Feasibility Study.
Rupice Mineral Resource Estimate by Classification
Rupice Mineral Resources, August 2020
Grades
Contained Metal
Class.
(Mt)
AgEq
(g/t)
Ag
(g/t)
Zn
(%)
Pb
(%)
Cu
(%)
Au
(g/t)
BaSO4
(%)
Sb
(%)
AgEq
(Moz)
Ag
(Moz)
Zn
(kt)
Pb
(kt)
Cu
(kt)
Au
(koz)
BaSO4
(kt)
Sb
(kt)
Ind.
Inf.
9.5
2.5
450
176
4.9
111
49
0.9
Total
12.0
387
149
4.1
3.1
0.7
2.6
0.5
0.2
0.5
1.6
0.3
1.4
29
9
25
0.2
0.1
0.2
137
54
465
294
52
500
2,730
9
4
23
18
4
27
218
149
58
488
312
56
526
2,948
21
3
24
Veovaca Mineral Resource Estimate by Classification
Veovaca Mineral Resources, July 2019
Grades
Contained Metal
Class.
(Mt)
AgEq
(g/t)
Ag
(g/t)
Zn
(%)
Pb
(%)
Au
(g/t)
BaSO4
(%)
AgEq
(Moz)
Ag
(Moz)
Zn
(kt)
83
23
9
1
10
106
Pb
(kt)
Au
(koz)
BaSO4
(kt)
55
11
66
14
4
18
860
123
984
Ind.
Inf.
Total
5.3
2.1
7.4
225
116
193
50
17
41
1.6
1.0
1.1
0.5
1.4
0.9
0.1
0.1
0.1
16
6
13
38
8
46
1414
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Combined Notes:
• Mineral Resources are based on
• Metal recoveries and payabilities
from the PFS have been applied
Veovaca Notes:
• A cut-off grade of 0.6% ZnEq has
JORC Code definitions
• The applied formula was: AgEq =
been applied
Ag(g/t) * 92% * 86% + 32.4 * Zn(%)
* 97% * 71% + 25.9 * Pb(%) * 93% *
84% + 1.9 * BaSO4(%) * 58% * 99%
+ 79.2 * Au(g/t) * 70% * 76% + 84.2
* Sb(%) * 96% * 17% + 84.2 * Cu(%)
* 97% * 82%
• 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
• Metallurgical recoveries of 90% have
been applied in the metal equivalent
formula based on recent and
ongoing test work results
• ZnEq was calculated using
conversion factors of 0.80 for lead,
0.08 for International Financial
Reporting Standards, 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. AgEq – silver
equivalent is calculated using
ZnEq*1/51.84
• 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%
• A bulk density was calculated for
each model cell using regression
formula BD = 2.70855 + BaSO4
* 0.01487 + Pb * 0.03311 + Zn *
0.03493
• It is the opinion of Adriatic Metals
and the Competent Person that all
elements and products included in
the metal equivalent formula have a
reasonable potential to be recovered
and sold
• Rows and columns may not add up
exactly due to rounding
• Ind. = Indicated
• Inf. = Inferred
Rupice Notes:
• A cut-off grade of 50g/t silver
equivalent has been applied
• AgEq – Silver equivalent was
calculated using conversion factors
of 32.4 for Zn, 25.9 for Pb, 79.2
for Au, 1.9 for BaSO4, 84.2 for Cu
and 84.2 for Sb. 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, $24/oz for Ag, $6,500/t
for Sb and $6,500 for Cu. ZnEq –
zinc equivalent is calculated using
AgEq*1/31.1
Mining
Ore Reserves
The Ore Reserve Estimate was prepared by Mining Plus and comprises Probable Reserves as shown in table below:
Vares Project Ore Reserve Estimate
Vares Project Ore Reserve Estimate, August 2021
Deposit
JORC Class.
Rupice
Probable
Ore
Mt
7.3
AgEq
g/t
Ag
g/t
Zn
%
485
202
5.7
Pb
%
3.6
Au
g/t
1.9
Cu
%
0.6
Sb
%
0.23
Notes:
• Mineral Resources are based on JORC Code definitions
•
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
• Rows and columns may not add up exactly due to rounding
• FS metal prices, payabilities and recoveries have been applied
• AgEq – Silver equivalent was calculated using conversion factors of 37.31 for Zn, 28.6 for Pb, 72.0 for Au, 118.2 for Cu and 118.2 for
Sb
• The applied formula was: AgEq = Ag(g/t) * 89% * 88% + 37.3 * Zn(%) * 91% * 75% + 28.6 * Pb(%) * 92% * 87% + 72.0 * Au(g/t) * 64% *
77% + 118.2 * Sb(%) * 95% * 84% + 118.2 * Cu(%) * 94% * 16%
• ZnEq – zinc equivalent is calculated using AgEq * 1/31.1
The Ore Reserves for the Vares Project deposits have been estimated in accordance with the JORC Code. The Indicated
Mineral Resources are inclusive of those Mineral Resources modified to produce the Ore Reserves. The JORC Code defines
an Ore Reserve as: “An ‘Ore Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource.
It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is
defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such
studies demonstrate that, at the time of reporting, extraction could reasonably be justified.” The Ore Reserve assumes a direct
conversion between Indicated Mineral Resources and Probable Ore Reserves.
1515
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
VARES PROJECT FEASIBILITY STUDY - CONTINUED
Mining Production Rate
The Rupice Underground Mine
production rate is designed to match
the nameplate capacity of the Vares
Processing Plant at 800,000 tonnes per
annum.
Stope development of the Rupice
Underground Mine will start eight
months prior to commissioning of the
Vares Processing Plant. This will ensure
sufficient ore is available in the surface
stockpiles at the Rupice Surface
Infrastructure for consistent and optimal
grade of feed to the Vares Processing
Plant during commissioning and
ramp-up. This provides considerable
versatility and reduced risk during
commissioning and early operations.
Starting commissioning on ore other
than high grade is preferable and
as operations ramp-up so it will be
possible to increase the feed grade as
confidence builds and plant operating
stability is achieved. At the time of
starting commissioning there will be
approximately 210,000 tonnes of high-
grade ore, 190,000 tonnes of medium-
grade and 26,000 tonnes of low-grade
ore – in total about six months at
full production. During the mine life,
sufficient ore is produced to maintain
the Vares Processing Plant production
rate, with excess lower-grade ore being
stockpiled for treatment later in the
mine life. During the later stages of the
mine life, the underground production
rate drops off due to reduced stoping
areas being available and the cyclic
nature of the cut-and-fill mining
methods.
Mining Method
Access to the underground workings
will be via two declines developed from
the surface accessing the orebody via
further development of ramps, level
access drives and footwall drives. All
the development access will be suitable
for trackless equipment.
The underground stoping will be divided
into two main mining method zones
as follows and as shown in in the mine
plan in the Rupice Underground Mine
design:
• Transverse Longhole Open Stoping
zone (“TLOS”)
• Longitudinal Longhole Open Stoping
zone (“LLOS”)
The TLOS zone will be below the
1,065m height above mean sea level
(AMSL) and the LLOS zone will be from
and above the 1,065m ASML.
TLOS will be used in areas where the
ore zone thickness is greater than
20 m. Stopes will be oriented in a
transverse fashion with stope access
drives orientated from the footwall
towards the hanging wall, perpendicular
to the general orebody strike.
LLOS will be used in areas where the
ore zone thickness is less than 20 m.
Stopes will be oriented in a longitudinal
fashion along a strike drive.
Primary stopes represent the initial
phase of production mining within the
TLOS section of the mine. Primary
stopes are mined in a “chequerboard”
fashion on each level, with temporary
pillars left between the primary stopes.
The primary stopes are then backfilled
with either Cemented Aggregate Fill or
Paste Aggregate Fill, or a combination
of both. Once the fill has cured, the
temporary pillars between the primary
stopes can then be mined out. These
pillars are known as secondary stopes.
Rupice Underground Mine design (view from the northeast) showing the two mining method zones
Upper Return
Airway Portal
Middle Access
Portal
Upper
Longitudinal
Long hole
Stopes
Lower
Transverse
Long hole
Stopes
Lower
Access
Portal
N
View From North-East
The mining recovery for Rupice is 95% with and average underground dilution factor is 13%. NSR calculations were performed and
incorporated in the block model and were the basis for determination of ore and waste classification.
1616
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Mine Design
The primary access to the underground
workings will be via two separate access
declines developed from surface. A third,
primary main return airway decline has
replaced the previously proposed return
air raise-bore shaft.
Following the excavation of the box cuts
and installation of appropriate portal
support systems, the declines will be
developed with dimensions of 5.5 m
wide X 5.5 m high. The main return
airway and middle access decline will be
developed at a maximum gradient of 14
% (1 in 7) while the lower access decline
will be developed at a maximum gradient
of 16 % (1 in 6). The lower access
decline will serve as the main ingress
route into the mine while the middle
decline will serve as the main egress,
hence allowing for dedicated traffic in
one direction with minimal disruption to
the hauling operations. The additional
benefit of the lower decline is that it
enables rapid access to a high-grade
zone of the orebody early in the mine life.
The remaining ramps going up and down
from the different underground access
positions are all developed at the 1:7
inclination. All decline ramps have been
positioned to minimise development
required to access the initial high-grade
stoping areas and to provide the shortest
distances to the centre of mass of each
of the major stoping areas.
The declines will be developed in a
“figure of 8” geometry to allow for better
visibility, aid driver fatigue associated
with turning in only one direction, reduce
vehicle wear and to gradually follow the
higher-grade zones along the strike of
the orebody.
Secondary development will consist
of level access drives that are driven
to connect the ramps with the footwall
drives on each sub-level. The footwall
drives are designed with a minimum
stand-off of 25 m from the orebody and
will have dimensions of 5.0 m wide X 5.5
m high.
The transverse stopes will be accessed
along horizontal cross-cut drives leading
from the footwall drive at dimensions of
5.0 m wide X 5.0 m high and developed
at right angles to the strike of the
deposit.
Once the crosscut ore-drive is in its final
position (just through the hanging wall
contact), a 10-hole (9-holes charged)
blast slot will be developed using a long-
hole production drilling rig to create a free
face for subsequent ring blasting (1.5
metre spaced rings) by retreat extraction.
The longitudinal stopes will be accessed
along a strike orientated ore drive, with
dimensions of 5.0 m wide X 5.0 m high,
which exits the sub-level access drive.
There will be one ore drive per sub-level
for the longitudinal stopes. The ore drive
is developed along strike to the distal
Rupice Underground Mine design (view from the southeast)
end of the sub-level and then stoping
occurs in a retreat direction along the ore
drive. For the longitudinal and transverse
stopes the loading of the blasted material
by underground loader into underground
haul trucks located at the intersection
point of the crosscut and the footwall
drive and then hauled via the internal
ramp and decline to surface and tipped
onto one of three Run of Mine (“ROM”)
stockpiles depending upon the grade.
The ore will be recovered from the ROM
stockpiles by front end loader, with a pre-
planned recovery method to achieve the
planned grade for feed to the processing
plant. The front end loader will discharge
into the primary crusher so that blending
effectively takes place in the crushing
plant. Recovery from more distant
stockpiles will be by trucks. The crushed
ore is deposited onto a stockpile before
being reloaded onto on-highway trucks
for haulage to the Vares Processing
Plant.
Rupice Underground Mine design
illustrates the planned declines, ramps,
levels and stopes at Rupice. The mine
design comprises largely of the access
and ventilation portal areas (shown in
red in diagram below), main declines
(light blue), trackless ramps (light purple)
sub-level access drive (green), and the
sub-level footwall drives (green).
Decline
Return Air Drive
Ore Drive
Cross-cut
Ramp
Footwall Drive
Return Air Raise
View From South-East
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION VARES PROJECT FEASIBILITY STUDY - CONTINUED
Scheduling rates for Rupice are based on the activities
required and the estimated cycle times for each activity in the
mining cycle. The general sequencing follows geotechnical
considerations for primary and secondary stope extraction,
a general mining direction of “bottom-up” and the delays
associated with in-stope void filling.
This underground mine operating model assumes the following
underground working calendar and shift arrangements:
365 working days per year
2
11
working shifts per day
underground hours of shift duration
10.5 hrs effective hours per shift
Vares Processing Plant
Equipment
The loading of blasted feed material and waste as well as
the backfilling of the stopes will be achieved using a single
type of load haul dump unit (“LHD”) model and size in order
to minimise the inventory of equipment spares. Mucking of
waste development, drive development and stoping materials
will utilise a 14-tonne class LHD. Backfilling of waste (when
available) into the open stopes will utilise the same class
14-tonne LHD, but stope backfilling will mostly try to utilise the
backfill plant and system.
Transport of ore and waste to surface will be achieved by
42-tonne class diesel haul trucks via the main transport drives,
ramps and declines to surface.
The ancillary equipment fleet will consist of various utility
vehicles for the transport of equipment, consumables and
stores in and out of the underground mine. There will also be
an underground motor grader, integrated tool handler and light
vehicles.
The Vares Processing Plant is located on a brownfield site. The historic surface infrastructure has already been demolished, except
for the administration building and the historical tailings thickener that will be repurposed for future use. Inspections have confirmed
that the thickener is suitable to be re-used as the process water tank. The administration building has been in use as the Company’s
offices since 2020. The new buildings can be constructed on the existing concrete pads remaining from the historical processing
facilities.
Crushed Coarse Ore Handling
Crushed ore will be trucked 24.5 km from the Rupice Surface Infrastructure site to the Vares Processing Plant and end-dumped into
a crushed ore hopper with a capacity of 37.5 t. The crushed ore will be fed by a belt feeder to a belt conveyor. The belt conveyor
will transport the crushed ore to two coarse ore bins. Each bin provides a live residence time of 23 hours and a corresponding
capacity of 2,260 tonnes of ore on a wet basis. Ore will be reclaimed from the bins by belt feeders and discharged to the ball mill
feed conveyor.
The crushed ore bins provide surge capacity between the crushing system and the ball mill and will be independently filled and
discharged. The throughput to the mill will be controlled by adjusting the speed of the crushed ore bin belt feeders based on the ball
mill feed conveyor weightometer output and the mill control system set-point.
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ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Grinding
The grinding circuit consists of a ball mill and cyclones. The grinding circuit will be designed to reduce ore from an 80% passing size
of 7 mm to 40 µm.
The ball mill will be a single pinion overflow mill, operating in a closed circuit. The mill has an inside diameter of 4.3 m and an
effective grinding length of 7.5 m. The ball mill discharge passes over a slotted trommel screen with an aperture size of 10 mm x 25
mm. The ball mill will be charged with high chrome grinding media, ranging in diameter from 25-40 mm utilising the grinding building
hoist and ball kibble.
Operators will monitor the grinding mills discharge density, cyclone overflow and underflow densities, power draw, cyclone pressure,
and other parameters to maintain a product size of 80% passing 40 µm.
Flotation
The flotation circuit at the Vares processing plant consists of silver-lead flotation and zinc flotation circuits.
Silver-Lead Flotation
The silver-lead flotation stage will recover a silver-lead
concentrate. Copper mineralisation also reports to the silver-
lead concentrate. The mill cyclone overflow reports to a trash
screen to remove any oversize particles and then reports to a
conditioning tank. Reagents are added to the ball mill and the
conditioning tank. The slurry will flow by gravity to silver-lead
rougher flotation at a nominal density of 40% w/w and pH 8.
Silver-Lead Rougher Flotation
The silver-lead rougher flotation cells are conventional forced
air tank cells. The concentrate from the silver-lead rougher
flotation cells will report to the silver-lead regrind surge tank,
while the tailings report to the zinc flotation circuit.
Silver-Lead Regrind Circuit
The regrind circuit consists of a cyclone cluster and stirred
horizontal regrind mill operating in open circuit. Slurry from the
surge tank will be pumped to the cyclones to densify the feed
to the regrind mill. The overflow will target an 80% passing
product size of 10 µm. The cyclone overflow reports to the
silver-lead cleaner circuit, while the underflow flows by gravity
to the regrind mill. The regrind mill uses ceramic media with a
2-3 mm diameter and mill discharge also reports to the silver-
lead cleaner circuit.
Silver-Lead Cleaner Flotation
The silver-lead cleaner circuit consists of three sequential
stages of cleaning. The flotation concentrates flow from the
first stage through to the third and concentrate from the
third stage reports to the silver-lead concentrate thickener.
The tailings flow counter-current to the concentrate, and first
cleaner tailings report to the zinc cleaner flotation circuit.
Zinc Flotation
The zinc flotation circuit will recover a zinc concentrate.
Tailings from the silver-lead flotation circuit report to two
conditioning tanks and the conditioned slurry will be then
pumped to the zinc rougher cells at a nominal density of 40%
w/w and pH 9. The zinc flotation circuit follows the same
arrangement as the silver-lead circuit, described as follows.
Zinc Rougher Flotation
The zinc rougher flotation cells are conventional forced air
tank cells. The concentrate from the zinc rougher flotation
cells report to the zinc regrind surge tank, while the tailings
report to the zinc rougher scavenger cells. The scavenger
concentrate also reports to the zinc regrind surge tank, while
the tailings report to the final tailings thickener.
Zinc Regrind Circuit
The regrind circuit consists of a cyclone cluster and stirred
horizontal regrind mill operating in open circuit. Slurry from the
surge tank will be pumped to the cyclones to densify the feed
to the regrind mill. The overflow will target an 80% passing
product size of 20 µm. The cyclone overflow reports to the
zinc cleaner circuit, while the underflow flows by gravity to the
regrind mill. The regrind mill uses ceramic media with a 2-3
mm diameter and the mill discharge also reports to the zinc
cleaner circuit.
Zinc Cleaner Flotation
The zinc cleaner circuit consists of three sequential stages of
cleaning. The flotation concentrates flow from the first stage
through to the third and concentrate from the third stage
reports to the zinc concentrate thickener. The tailings flow
counter-current to the concentrate, and tailings from the first
stage reports to the final tailings thickener.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION VARES PROJECT FEASIBILITY STUDY - CONTINUED
Concentrate Handling
The concentrate handling circuit consists of thickening and filtration equipment to dewater the silver-lead and zinc concentrates
prior to loadout and shipment.
Each concentrate stream reports to a dedicated high-rate thickener, where flocculant will be added to assist in the settling of
the solids. The thickener overflows report to the process water tank, while the underflows report to dedicated filter feed tanks
which have a residence time of 12 hours.
Aerial view of the brownfield site for the Vares Processing Plant. Photo: Adriatic Metals July 2021
Process Description - Vares Processing Plant
Isometric view of the Vares Processing Plant
2020
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Haul-Road
A new haul-road of 24.5 km will be built for transporting crushed ore and dewatered tailings between the Rupice Surface
Infrastructure and the Vares Processing Plant, as well as transporting full and empty concentrate containers between the Vares
Processing Plant to the Vares Railhead. It is also planned that shipments of reagents, consumables, spare parts etc. will be
delivered in containers to the railhead for onward movement to Rupice Mine and Vares Processing Plant using the haul-road.
The haul-road will consist of sealed and unsealed sections, which by-pass villages and dwellings as well as the town of
Vares. The 24.5 km of haul-road will be made up of both newly constructed (15.5 km) and upgraded (9 km) sections. It will
be permitted, constructed and owned by the Municipality of Vares, and the Company will provide funding and oversight of its
construction and ongoing maintenance during life of mine.
Topography map showing the haul-road route between Rupice and Vares Processing Plant
Concentrate transportation
Map of the rail route from
Vares to Ploče
2121
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Port of Ploće has been the recipient
of recent funding from both EBRD
and IFC. The funding provided an
infrastructure upgrade, which included
increasing the container terminal annual
capacity to 60,000 TEU, with a new
TEREX crane, Hyster reach stackers as
well as other new plant and vehicles.
The port’s container terminal is
operating at just under 50% of capacity.
In 2020, port container traffic was
approximately 28,000 TEU. In recent
years the peak traffic was 35,124 TEU
in 2008. There is more than adequate
capacity for the concentrates produced
by the Vares Processing Plant. During
the peak year, the Vares Project will
require 7,520 TEU of capacity.
VARES PROJECT FEASIBILITY STUDY - CONTINUED
Rail
Port
The Port of Ploće is located on the
Croatian Adriatic coast, located near
the mouth of the Neretva River. It has
extensive railway sidings, dedicated
road and rail access, modern security
measures and provides full stevedoring
services. It is a sheltered deep-water
port, with depth of up to 17.8 m,
allowing vessels as large as Capesize
(100,000 dwt) to berth. The container
terminal has a length of 280 m and
depth of 14 m. The port operates
24/7, 362 days a year. All the main
thoroughfares and terminals are floodlit.
The port benefits from a large, well
equipped, dedicated fire service.
The rail journey from the Vares Railhead
to the Port of Ploće passes through
three locations where locomotives
will be changed according to the line
requirements.
The first 25 km section of the line
from Vares to Podlugovi uses diesel
locomotives and was last used in 2012.
This section of line requires upgrading
in places. Railways FBiH have surveyed
the route and consider this to be easily
completed within a short timescale.
The remaining journey to the Port of
Ploće will be on electrified lines, with
regular other freight traffic until final
exchange at the Bosnian/Croatian
border to the port’s own diesel engines.
The complete journey from the Vares
Railhead to the Port of Ploće will take
approximately 10 hours.
ADRIATIC FOUNDATION
In June 2021, the Company announced it had established the Adriatic Foundation,
a Bosnian-registered charitable organisation.
OBJECTIVE OF THE FOUNDATION
The Foundation’s objective is to support the communities around the Vares Project
by investing in initiatives designed to create a positive long-term legacy, as well
as alignment between the Company and the communities that the Foundation
supports. The initiatives are specifically focused on improving education, healthcare,
and environmental protection.
Education
Healthcare
Environment
The Foundation will support local youth
education programs, with courses and
activities to support further education,
as well as developing the broader set
of skills required for the job market and
professional development.
The Foundation will promote the
awareness of disease prevention and
improve local primary healthcare.
The Foundation will improve awareness
of the importance of conservation and
environmental protection. It will do
this by supporting initiatives focussed
on the transition to technologies and
renewable energy resources that
reduce pollution, as well as support
projects that address key environmental
issues of common interest.
2222
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION MANAGEMENT OF THE FOUNDATION
The Foundation is managed by a Board of Trustees, which includes 4 independent representatives from the local communities
surrounding the Company’s Vares Project. In due course, the Company’s appointed President will step down to facilitate fully
independent management of the Foundation. The Trustees will each have a tenure of 4 years. The Board of Trustees will meet
quarterly to discuss and approve submitted proposals that meet the Foundation Objectives.
Position
Name
Rationale
President of the Board of Trustees
Vildana Mahmutovic
Adriatic Metals Environmental and Social Manager
Director
Trustee
Trustee
Trustee
Trustee
Secretary
Sanela Karic
Adriatic Metals Independent Director
Gordana Lukic
Resident of Vares - long term experience in NGO sector
Mirela Masic
Nusret Muftic
Zlatko Jarmanovic
Almedina Likic
Resident of Kakanj – civil servant
Resident of Vares – police administrator
Resident of Vares – forestry worker
Eastern Mining Info Centre Manager
FUNDING OF THE FOUNDATION
The Foundation’s programme funding will be primarily received through grants. Adriatic Metals provided an initial donation
of €100,000 to the Foundation, as well as an ongoing commitment of 0.25% of profits from its operations in Bosnia &
Herzegovina. Sanela Karic, Non-Executive Director of Adriatic Metals, as referred to in Adriatic Metal’s 2020 Annual Report,
donated her Director’s fees from March to June 2021, and Paul Cronin, CEO and MD of Adriatic Metals donated 250,000 of his
personal shares in Adriatic Metals to the Foundation. The Foundation has already received contributions from other individuals,
companies and institutions to co-fund programmes that support the Foundations Objectives.
Organisation/Individual
Adriatic Metals
Adriatic Metals
Sanela Karic
Amount
€100,000
Remarks
Initial Funding
0.25% Annual Profits
Annual from commencement of operations
£9,477
Director’s fees March to June 2021
Orion Resources Partners
US$100,000 per annum
An annual donation throughout the tenure of Orion
Resource Partner’s debt financing tenure
Tamesis Partners
Alisa Teletovic
Gazibegovic Law Office
City Transport Vares
Trgosped Kakanj
US$10,000
€2,500
€500
€500
€500
One Off Donation
Proceeds from charity art auction
For student scholarships
For student scholarships
For student scholarships
FOUNDATION INVESTMENTS
The Foundation Trustees met twice in 2021 and reviewed five initial requests for funding. Funding approved to date includes the
provision of 27 financial scholarships for students from Vares, Breza and Kakanj municipalities to assist with the costs of their
high school education.
2323
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
EMBEDDING OUR VALUES IN
BOTH THE CORPORATE CULTURE
AND PRACTICES
DIVERSITY
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 that assist the Company in maintaining and improving the diversity of its
workforce. The Board has also set formal diversity objectives which are included as KPIs in the Company’s Short Term Incentive
Plan (STIP). The Company achieved the following diversity in the workplace:
Proportion of women:
Vares Project
Executive Management Team
Board
Proportion with a registered disability:
Organisation as a whole
SOCIAL & HUMAN RIGHTS
Year Ended
31 December 2021
Period Ended
31 December 2020
25%
25%
33.3%
30%
Nil
33.3%
0.8%
1.1%
Following the establishment of the
ESG committee in the prior period,
the Company has adopted important
policies requiring it to respect human
rights and its core project stakeholders,
which are the communities and
environments that it operates in.
The Company is committed to
supporting 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 project level, the Company continues
to adopt best international practice, as
well as maintaining national compliance.
As the Vares project commences
construction and the start of its
procurement program, 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 its most junior
members of staff.
The Company is committed to
embedding these values in both its
corporate culture and practices and as
it ramps up with the recruitment of the
workforce for the construction phase of
Vares Project and that of an operating
mine.
2424
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION COVID-19 IMPACT
The COVID-19 pandemic continues to impact both the Company and
its host communities. However, with ever increasing experience and
enhanced protection measures operations have continued throughout
2021 with minimal disruption. The Balkan states have followed a similar
trajectory of infection, hospitalisation and death rates to that of wider
Europe, albeit with a one-to-two-month lag. At year end, the latest
variant Omicron had just started to increase infection rates within the
region.
The Company has maintained robust and rigorous COVID-19
prevention measures throughout the year and although there are
ongoing restrictions to international travel, our operations are in general
returning to pre-COVID levels.
Through the community engagement conducted during the ESIA, the
Company’s staff were able to continue providing advice and support to
the near-mine communities. Stakeholder engagement since the start of
the pandemic has been guided by the advice issued by EBRD.
Annual Report for the Year Ended 31 December 2021
252525
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION ROBUST RISK MANAGEMENT
AND CONTROLS
PRINCIPAL RISKS AND UNCERTAINTIES
The Board is responsible for putting in place a system to manage risk
and implement internal controls.
The Audit & Risk Committee is responsible, inter alia, for:
• Reviewing the Company’s risk
• Ensuring that the material business
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; and
• 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.
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 the 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 is chaired
by Sandra Bates who has recent
and relevant financial and business
experience. All of the members of the
Committee are Non-Executive.
2626
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION a) Financial controls
b) Internal controls
c) Risk management policy
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, and 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.
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.
In December 2021, Ausenco Pty Ltd
was appointed as the engineering
and procurement contractor for the
Project. Ausenco was first engaged
by the Company in Q4 2019 as
the engineering consultant for the
delivery of the 2020 FS. They were
subsequently retained for the FS the
following year. The preservation of
knowledge and experience from the
2021 DFS and 2020 PFS is a major
advantage in the swift transition of the
Project to the detailed engineering
phase.
The Audit & Risk Committee reviews
the adequacy of accounting and
financial controls together with the
implementation of any associated
recommendations of the external
Auditor.
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
& Risk Committee responsibility for
implementing the risk management
system.
The Audit & Risk Committee submits
particular matters to the Board for its
approval or review.
Among other things the Audit & 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;
• 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.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION PRINCIPAL RISKS AND UNCERTAINTIES - CONTINUED
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.
The Company has yet to commence
production and is exposed to
development risk
While the Company’s strategy is to
commence Commercial Production
of the Vares Project in H1 2023, the
Company currently has no producing
assets. Therefore, it does not currently
generate positive cash flow and has
incurred losses since inception.
The Vares Project is anticipated to be
the Company’s sole source of near-
term earnings and positive cash flow.
The Company’s ultimate success will
depend on its ability to commence
development of the Vares Silver
Project, reach Commercial Production
and generate positive cash flow from
operations.
It is not uncommon for new mining
developments to experience
unexpected problems, increased
costs and delays during construction,
commissioning and production start-
up, or indeed for such projects to fail.
Any adverse event affecting the Vares
Project, either during its development
or following the commencement of
production, would have a material
adverse effect on the Company’s
business, results of operations, financial
condition and the price of its Ordinary
Shares.
A further factor potentially affecting the
Company’s development the continuing
supply chain fragility and increased
shipping rates/delays as a resulting of
the ongoing COVID-19 pandemic. The
Company is monitoring the unfolding
geo-political tensions between Europe
and Russia and the associated energy
crisis that is impacting diesel costs
(required during development and
production) and electricity pricing (an
inflatory risk most applicable to the
operations of the Vares Processing
Site and Rupice Surface Infrastruture
(including crushing).
Development and operations of the
Vares Project
The Company’s future success will
largely depend upon the Company’s
ability to develop and manage the
Vares Project in accordance with the
plans set out in the Feasibility Study.
The Feasibility Study is a conceptual
study based on certain technical and
economic assessments. As such, it
is insufficient to provide certainty that
the conclusions of the Feasibility Study
will be realised or that any conceptual,
projected or indicative net present value
or internal rate of return is assured or
certainty as to the estimation of ore
reserves. The Company continues to
work with internationally recognised
technical consultants to deliver on this
plan and mitigates these risks where
possible through the use of industry
best practice and the recruitment
of capable, experienced staff and
contractors.
The development and operations of
the Company’s projects could be
delayed, experience interruptions,
incur increased costs or be unable to
complete due to a number of factors.
In the event that any of these potential
risks eventuate, the Company’s
operational and financial performance
may be adversely affected. This
includes, but is not limited to:
• unforeseen escalation in anticipated
costs of development, or delays to
construction, or adverse currency
movements resulting in insufficient
funds being available to complete
planned development;
• unexpected geological anomalies or
other geological characteristics that
require plans or projections for the
Vares Project to be amended;
• shortages or delays in obtaining
critical mining and processing
equipment, or the breakdown or
failure of such equipment;
• operational and technical difficulties
encountered during mining;
• insufficient or unreliable
infrastructure, such as power, water
and transportation;
• difficulties in commissioning and / or
operating the plant and equipment;
• mechanical failure or plant
breakdown;
• shortage of transportation and
interruptions in transportation
services;
• increases in extraction, processing
or transportation costs;
• unanticipated metallurgical problems
which may affect extraction costs;
• construction, procurement and/ or
performance of the Vares Processing
Plant and ancillary operations falling
below expected levels of output or
efficiency;
• changes in the regulatory
environment including environmental
compliance requirements;
• inability to comply with the
conditions attached to the various
permissions, permits and licences;
• non-performance by third party
consultants and contractors;
• inability to attract and retain a
sufficient number of qualified
workers;
• hazards associated with the use of
heavy machinery;
• catastrophic events such
as fires, adverse weather,
explosions, flooding, seismic
activity, underground integrity
issues, discharges of gas in the
air or lubricants and fuel oil into
watercourses
• potential opposition from
environmental groups, local
residents or others;
• civil unrest in and/ or around the
mine site, processing plant and
supply routes;
• changes to anticipated levels of
taxes and royalties; and/ or
• a material and prolonged
deterioration in the prices of the
commodities to be produced by the
Vares Project.
It is not uncommon for new mining
projects to experience these
factors during their construction,
commissioning and production ramp-
up, or indeed for such projects to fail
as a result of one or more of these
factors occurring to a material extent.
There can be no assurance that the
2828
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Company will complete the various
stages of development necessary in
order to achieve its strategy in the
timeframe currently anticipated by the
Company, or at all. Any of these factors
may have a material adverse effect
on the Company’s business, results
of operations and activities, financial
condition and prospects.
Reliance on infrastructure
The Company’s planned activities
depend on adequate infrastructure,
including reliable roads, rail and port
facilities, as well as power sources and
water supplies. It is not uncommon for
new mining infrastructure to experience
unexpected costs, problems and delays
during construction, often resulting in
significant upward revisions to expected
costs and/or delays.
The planned transportation of
concentrates from the Vares Processing
Plant is reliant on infrastructure and
equipment to be supplied by the
Bosnian State rail operator and the port
authorities in Croatia. There may be
matters beyond the Company’s control
related to the availability, reliability and
capacity of rail and port facilities and
related equipment for the movement
and storage of concentrates from the
Vares Railhead to the port, including
unusual weather or other natural
phenomena, capacity and allocation
constraints, key equipment failure,
collapse of railway tunnels or bridges,
derailment, accidents, sabotage,
industrial action or other interference
in the maintenance or provision of
such infrastructure. Any impact to the
availability, reliability and/or performance
of the rail and port networks could have
a material adverse effect on the Group’s
ability to deliver to the port and to
export its concentrates, which is likely
to have a significant negative impact
on the Group’s revenues and financial
condition.
The processing of ore at the Vares
Processing Plant requires the supply of
power from the Bosnian State energy
provider. Any power outage, disruption
or shortage in power supply available to
the Group’s operations could therefore
have a material adverse impact on
the Group’s production and employee
safety. Whilst back-up power can
be provided on site by mobile diesel
generators, operating such generators
would increase the Group’s overall
operating costs and its exposure to fuel
prices.
The processing of ore at the Vares
Processing Plant, also requires a
supply of the water, some of which will
be provided from a third-party local
supplier. Any restriction or disruption
in the water supply could adversely
affect the Group’s processing activities
and whilst a secondary source of water
may be available from a river source
at both the Vares Processing Plant
and the Rupice Surface Infrastructure,
accessing and utilising the river source
may result in increased operating costs
and downtime in the processing of ore.
A haulage road will be constructed for
the haulage of Run of Mine ‘ROM ‘ore
from the Rupice Underground Mine,
located within the Rupice Surface
Infrastructure, to the Vares Processing
Plant, as well as transport of tailings
back to Rupice Surface Infrastructure
and concentrates from the Vares
Processing Plant to the Vares Railhead.
The haulage road will be constructed
by the Vares municipality and paid for
by the Company. The Company will
also pay for the maintenance of the
haulage road with the maintenance
being carried out by the municipality.
There may be matters outside of
the Company’s control related to
its maintenance, especially during
seasonal changes and adverse
weather, which may affect the ability
of the Company to access the Rupice
Surface Infrastructure and the Vares
Processing Plant at certain times. This
in turn is likely to have an adverse
effect on the Company’s overall cost of
operations and its financial condition.
Any other failure or unavailability of the
infrastructure on which the Company’s
planned operations rely (for example,
through non-delivery of equipment,
spare parts unavailability, failure or
service disruption) could adversely
affect the Company’s development of
the Vares Project or revenue generated
in the future from mining activities.
If the Company’s operating costs
increase due to inadequate or unreliable
infrastructure the Company’s business,
results of operations and financial
condition and the price of the Ordinary
Shares could be materially adversely
affected.
Reliance on third-party contractors
The Company will need to enter into
agreements with various third party
service providers for the construction
and operation of the Vares Project.
Such as; the Bosnian State rail
operator, key mining contractors and
equipment suppliers, the Bosnian
state electricity provider and the port
operator. There can be no assurance
that the Company will be able to secure
the provision of all the required services
and supply of equipment;
• in a timely manner
• on commercially acceptable terms
(including as to cost)
• or at all
Further, all contracts carry risks
associated with the performance by the
parties thereto of their obligations as
to time and quality of work performed
and the Company’s business and
development plans may be adversely
affected by:
• a failure to secure or any failure or
delay by third parties in supplying the
relevant services and/or equipment
• by any change to the terms on
which these services are made
available or by the lack of availability
of key personnel or equipment
• or the failure of such third-party
contractors to provide services
that meet the Company’s quality or
volume requirements.
Although the Company will seek
to retain contractors it regards as
reputable and competent for the scope
of work required and will seek to reduce
its risk by negotiating contracts that
apportion risk and liability appropriately,
the risk that those contractors may
breach their contracts with the
Company or that contractors may
be negligent or otherwise deficient in
performing the services for which they
were contracted cannot be excluded. It
is not uncommon for mining companies
to have disputes with third party
contractors, and for these disputes
to have a material and adverse effect
on the companies’ operations and/or
financial performance.
Exploration
There can be no assurance that
continued exploration on the Vares
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 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 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
2929
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION PRINCIPAL RISKS AND UNCERTAINTIES - CONTINUED
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.
Mineral Resource and Ore Reserve
estimates
Resource and reserve estimates are
expressions of judgement based on
knowledge, experience and industry
practice. Estimates which were valid
when initially calculated may alter
significantly when new information
or techniques become available. In
addition, by their very nature, resource
and reserve estimates are imprecise
and depend to some extent on
interpretation which may prove to be
inaccurate.
The Company follows industry standard
Quality Assurance and Quality Control
(“QA/QC”) practices and has engaged
CSA Global and Mining Plus, both
internationally recognised geological
consultancy companies, to undertake
resource estimates and reduce the
inherent risks associated with resource
and reserves estimation.
Grant of future authorisations to
explore and mine
If the Company acquires further
exploration properties or discovers
additional economically viable mineral
deposits that it then intends to develop,
it will, among other things, require
various approvals, licences and permits
before it will be able to undertake
exploration or mine the deposit. There
is no guarantee that the Company
will be able to obtain all required
approvals, licences and permits relating
to its exploration and subsequent
development and 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.
Environmental risks
The Company’s activities are subject
to the environmental laws inherent in
the mining industry and those specific
to Bosnia & Herzegovina and Serbia.
The Company intends to conduct
its activities in an environmentally
responsible manner and in compliance
with all applicable laws, as well as the
requirements set out in the Company’s
Project Support Agreement with the
European Bank for Reconstruction
and Development. However, there
can be no assurance that the systems
and procedures implemented by
the Company will be adequate to
manage the environmental impact of
its activities, and the Company may be
the subject of environmental accidents
or unforeseen circumstances that could
subject it to extensive liability.
In addition, environmental approvals are
required from relevant government and
regulatory authorities before activities
may be undertaken which are likely
to impact the environment. Failure or
delay in obtaining such approvals will
prevent the Company from undertaking
its planned activities. Further, the
Company is unable to predict the
impact of additional environmental laws
and regulations that may be adopted in
the future, including whether any such
laws or regulations would materially
increase the Company’s cost of doing
business or affect its operations in any
area.
Climate Change Risks
The Company has considered the
resilience of its strategy, taking into
consideration different climate-
related scenarios, including a 2°C
or lower scenario. Although overall
precipitation rates are expected to
decrease, higher intensity events may
occur and increased temperatures in
winter mean that snowfall melts more
quickly than was previously the case
and this, in turn, could increase the
risk of flooding. The design of both
Rupice and Vares Processing Plant
allows for accommodating drainage
and storage from intense stormwater
events. However, the haul road may be
at increased risk of surface damage,
wash outs and landslides. Climate
change risks and mitigations have
been considered in the TCFD Climate
Disclosure within the Directors report.
Health and safety
The Company’s safety record can
impact the Company’s reputation.
Mines and mining construction sites
are inherently dangerous workplaces
and the Company’s employees
and contractors may come into
close proximity with large pieces
of mechanised equipment, moving
vehicles, regulated materials and other
hazardous conditions associated
with construction and underground
mining (for example relating to flooding,
seismic activity, shaft and tunnel
integrity issues).
As a result, the Group is subject to a
variety of health and safety laws and
regulations dealing with occupational
health and safety. The Company
intends to conduct its activities in
compliance with all applicable laws
and internationally recognised mining
safety standards with the objective
of zero harm operations. However,
there can be no assurances that these
standards and any measures taken
by the Company will be successful in
preventing accidents and injuries or
violations of health and safety laws and
regulations, some of which may be
beyond the Company’s control.
Any failure to maintain safe work
sites or any serious health and safety
incident could expose the Company
to significant financial losses as well
as civil and criminal liabilities or loss
of rights to operate, any of which
could have a material adverse effect
on the Company’s business, financial
condition, results of operations and
prospects.
The Company took steps during the
past year to establish and maintain a
strong health & safety focused work-
place culture. New joiners go through
an induction program which covers
Occupational Health and Safety ‘OHS’
and there is a program of continuation
training run by the Health & Safety
Manger. Notably training courses have
been provided for working at height and
winter driving.
3030
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION The Company routinely monitors
commodity pricing trends, exploration
results and technical study outcomes to
ensure efficient use of capital. The FS
indicated the LOM average contribution
to revenue split by commodity,
based on the Feasibility Study pricing
assumptions as follows:
Concentrate offtake agreements
Although in principle terms have
been negotiated with offtakers for
the sales of concentrates that will be
produced in the future from the Vares
Project, changes in the commercial
terms ultimately entered into by the
Company with offtakers could arise
prior to the Company entering into
binding offtake agreements and there
can be no assurance that the Company
will be able to secure binding offtake
agreements in a timely manner, on
the negotiated terms or on otherwise
commercially acceptable terms. These
factors could have a detrimental impact
on future cash flows generated by the
Vares Project and on the Company’s
business, results of operations and
activities, financial condition and
prospects.
Commodity prices
The value of the Company’s assets and
potential earnings will be affected by
fluctuations in commodity prices, such
as the US$ and GBP denominated
silver, zinc, lead, gold and copper
prices.
Commodity prices can significantly
fluctuate and are exposed to numerous
factors beyond the control of the
Company such as world demand for
precious and other metals, forward
selling by producers, and production
cost levels in major metal producing
regions. Other factors that can affect
commodity prices include expectations
regarding inflation, the financial impact
of movements in interest rates, global,
regional and local economic trends,
and domestic and international fiscal,
monetary and regulatory policy settings.
LOM average revenue split by commodity
$
S
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8
V
P
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1,100,000
1,050,000
1,000,000
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900,000
850,000
1,040,000
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3131
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
PRINCIPAL RISKS AND UNCERTAINTIES - CONTINUED
The price performance during the year of relevant commodities for the Vares Project are shown in the graph below.
Zn (Zinc)
Pb (Lead)
Cu (Copper)
Au (Gold)
Ag (Silver)
Sb (Antimony
100%
80%
60%
40%
20%
0%
-20%
Dec 20
Jan 21
Feb 21
Mar 21
Apr 21
May 21
Jun 21
Jul 21
Aug 21
Sep 21
Oct 21
Nov 21
Dec 21
79
47
29
Au
Gold
196.967
Ag
Silver
107.868
Cu
Copper
63.546
Gold
The gold price has remained fairly
flat depreciating 4% over the 12
months from 1 January 2021 and
averaging US$1,799/oz. The gold
price reached its highest price of
US$1,957/oz at the start of the
year in January 2021. The precious
metal has maintained its strength
from 2020 and after its post-COVID
rebound remaining well above its
low of US$1,474/oz in March 2020.
Silver
Has been more volatile than gold
and has depreciated by 13% over
the 12 months from 31 December
2020. After the Covid shock in
March 2020 the silver price dropped
to a low of US$12/oz; since this low
point the price has recovered and
remains 93% higher at US$23.1/oz
as of end 31 December 2021.
Copper
In the 12 months since 1 January
2021 the copper price has
appreciated strongly, ending
up 25% as a result of positive
supply-demand dynamics and
the aggressive transition to green
energy. Copper reached a low of
US$4,618/t during the COVID shock
in March 2020. Since then, the price
has over doubled to US$9,692/t as
of end December 2021 peaking at
US$10,725/t during May 2021.
30
82
51
Zn
Zinc
65.39
Pb
Lead
207.2
Sb
Antimony
121.760
Zinc
Zinc has appreciated by 33% in the
12 months since 1 January 2021
averaging US$3,008/t. The price
has steadily increased throughout
the year ending at a price of
US$3,630/t as of 31 December
2021. The metal remains 105%
higher from its low of US$1,774/t at
the end of March 2020.
Lead
Lead has been the worst
performing of all the base metals
considered here, and one of
the more volatile, with the lead
price appreciating 18% in the 12
months from 1 January 2021 end
at US$2.329/t. The price remains
48% above its post-COVID low of
US$1,577/t.
Antimony
(price delivered to Rotterdam
of 99.65% ingots)
Of all the metals considered here
Antimony has been the strongest
performing over the past 12 months
due to supply side issues. The
antimony price has increased by
87% over the 12 months from
1 January 2021 ending the year
at US$12,500/t, not far from its
US$12,700/t peak in October 2021.
3232
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
and opportunity afforded to residents
of the near-mine communities. And
the importance of carefully managing
the contractors and sub-contractors
engaged to build the Project to ensure
that they also adhere to the highest
standards of environmental, social and
safety practices.
In December an information centre
was also opened in Raska. Raska, like
Vares is a community with a rich mining
history and therefore broadly supportive
of the Company’s activities to date,
with no community grievances reported
or community environmental activism
experienced.
Land acquisition
The Company, following the guidance
of EBRD’s Performance Requirement
5, commissioned an internationally
renowned consultant to assist
in drafting its Land Acquisition
Resettlement and Compensation
Policy. Following this policy and
after independent valuation of the
private land required for Rupice
surface infrastructure the Company
purchased, from willing sellers, 5 plots
in the autumn. No resettlement has
been required for the Vares Project,
and it is not foreseen that any future
resettlement will be required.
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. A whistleblower
policy is in place, providing all staff the
opportunity to anonymously disclose
any infringement of the Company’s
codes, including incidences of bribery
& corruption, directly to the Chair of
the Audit Committee. There were no
reported breaches in 2021.
Foreign exchange risk
The Company’s reporting currency
is Pounds Sterling. However, the
Company’s costs and expenses in
Bosnia & Herzegovina and Serbia and
other foreign countries are likely to be
in foreign currencies. Accordingly, the
appreciation of the foreign currency
relative to the GBP could result in a
translation loss on consolidation which
is taken directly to shareholder equity.
The majority of the Group’s revenues
once the Vares Project is in production
are expected to be earned in US
dollars. Any depreciation of the US
dollar relative to the GBP will therefore
result in lower than anticipated revenue.
The Orion Debt Financing, will be
denominated in US dollars. Any
depreciation in the US dollar relative
to the non-US dollar expenditure
requirements of the Group will therefore
result in a reduction in the effective
value of the funding received.
Management undertook a review on
an entity-by-entity basis to determine
the impact of the anticipated debt
financing as well as commencement
of the construction phase of the
Vares Project. Initial indication shows
that USD appears to be the most
appropriate functional currency for
several entities within the Group with
a trigger point being the agreement of
debt documentation on 11 January
2022 subsequent to the year end.
Management are considering updating
the Group presentational currency to
US dollar for future periods and will
conclude on this ahead of the FY22
H1 Interim accounts.The Company
does not currently have and does
not plan to put in place any hedging
arrangements in respect of its foreign
currency risk. However, it holds the
majority of its cash in various currencies
in approximate proportion to the
denomination of its projected costs.
Historic Tailing Storage Facility
Whilst, the Historic Tailings Storage
Facility (“TSF”) is the legal responsibility
of the Municipality of Vares and is not
located inside the area covered by
Veovaca Exploitation Permit, there
remains a residual risk to the Company
that the community near Vares may
consider or perceive the Historic
TSF to be the responsibility of the
Company, which may adversely affect
the Company’s standing within the local
community and community relations
generally.
The Company has cooperated closely
with the Municipality of Vares on this
matter and while it is not required to do
so, the Company has commissioned
an independent expert appraisal of
the Historic TSF, including assessment
of its structural integrity and any
associated environmental degradation.
The water, air and dust monitoring
during the ESIA process established
baseline conditions around the Historic
TSF and a management plan will be
developed to address any ongoing
issues identified.
If the Company elects to further
address any concerns relating to the
Historic TSF, which it may choose to
do to maintain and protect its standing
in the community, the Company
may incur unrecoverable costs and
spend associated management time
on the matter which could affect the
Company’s overall operating costs and
revenues.
Community/NGO concerns
affecting exploration/
operational activity
The Company continues to maintain
an active, two-way dialogue with its
communities surrounding the Project.
This is primarily achieved through
three channels; The Public Liaison
Committee (“PLC”), the Vares Project
Information Centre as well as the many
staff that the Company employs from its
local communities. The PLC consists of
30 members, was set up in July 2020
and meets on a quarterly basis. The
Information Center is a staffed location,
open to the public, located centrally in
the town of Vares and has been open
since September 2019. The Company
currently employs 48 staff from the
local communities of Vares, Breza and
Kakanj.
In addition, the Company’s engagement
with all its stakeholders increased
substantially in 2021 in line with the
delivery of the ESIA. After the ESIA was
published on 27 October 2021, a 60-
day public disclosure and consultation
period took place. During this time,
the Company directly engaged with all
its stakeholders and culminated in a
week-long dissemination programme,
with town-hall meetings in Vares and
the presentation of the ESIA and its
consequent Environmental and Social
Management Plan to an audience
of government and international
stakeholders. The community of
Vares, our government stakeholders
and the wider audience in Bosnia
& Herzegovina remain supportive
of the project. As the Company’s
Vares Project moves from exploration
to development, the Company is
conscious of its requirements to
honour commitments made to date,
most pressingly levels of employment
3333
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION PRINCIPAL RISKS AND UNCERTAINTIES - CONTINUED
In-country risks in Bosnia &
Herzegovina and Serbia
The Vares Project is located in Bosnia
& Herzegovina and the Raska Project
is located in Serbia. The Company
will be subject to the risks associated
with operating in those countries,
including various levels of political,
sovereign, economic and other risks
and uncertainties.
These risks and uncertainties include,
but are not limited to, labour unrest,
the risks of conflict or civil unrest,
expropriation and nationalisation,
renegotiation or nullification of existing
concessions, licences, permits
and contracts, changes in taxation
policies, restrictions on foreign
exchange and repatriation of funds,
changing political conditions 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.
Changes, if any, in mining or investment
policies or shifts in political attitude in
Bosnia & Herzegovina and/or Serbia
may adversely affect the operations or
profitability of the Company. Operations
may be affected in varying degrees by
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 laws
and regulations on mining in Bosnia
& Herzegovina and Serbia are still
developing.
Any material adverse changes in
government policies, legislation,
political, legal and social environments
in Bosnia & Herzegovina or Serbia or
any other country that the Company
has (or may in the future have)
economic interests in that affect mineral
exploration activities, may affect the
viability and profitability of the Company.
Failure to comply strictly with
applicable laws, regulations and local
practices relating to mineral rights
applications and tenure, could result
in loss, reduction or expropriation
of entitlements, or the imposition of
additional local or foreign parties as joint
venture partners with carried or other
interests.
Outcomes in courts in Bosnia &
Herzegovina and Serbia may be
less predictable than in the United
Kingdom, which could affect the
enforceability of contracts entered into
by, or judgements obtained by or given
against, members of the Company in
Bosnia & Herzegovina and/or Serbia.
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 both
the Vares Project and Raska Project,
respectively. 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.
In Q4 2021, the political leader of
Republika Srspka (“RS”), one of
constituent entities that form Bosnia
& Herzegovina, started publicising
secessionist rhetoric, which recieved
national and international attention.
RS then temporarily withdrew from
many of the federal institutions.
However, the situation calmed by year
end, with both RS returning to the
federal institutions and in addition, an
increased commitment was received for
political and economic stability from the
international community, most notably
the European Union, United Kingdom
and the United States of America.
The Company do not consider the
conflict in Ukraine which began in
February 2022 to have a significant
impact on its operations. The conflict
is still ongoing at the date of the annual
report and management will continue to
assess the impact to its operations and
seek to mitigate accordingly.
Mining concessions in
Bosnia & Herzegovina and
Serbia
The laws and regulations on mining
in Bosnia & 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 &
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 &
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 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 are
closely monitored by management and
the Board.
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.
3434
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Company’s Directors and
Senior Managers
The Company will rely heavily on a small
number of key individuals, in particular
the Directors, its senior management
and consultants, including, among
other matters, to develop and
maintain important relationships
with governmental and regulatory
authorities in Bosnia & Herzegovina and
Serbia. The Group’s business may be
negatively affected by the departure
of, any of these individuals, or any of a
number of other key employees and the
failure to attract suitable replacements.
There can be no guarantee that the
Group will be able to continue to attract
and retain required employees. The
Company does however hold key
person insurance in respect of the
Directors.
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.
Vares Project Key
Performance Indicators
The Company measures itself against
a range of key performance indicators
(KPIs) as part of the Company’s overall
risk management strategy. The KPI’s
selected for use in 2022 relate primarily
to the Vares Silver Project development
activities as follows:
• Vares Project delivered on time and
on budget
• Maintaining compliance with permits
received
• Effective integrated Health and
Safety systems and procedures
minimizing recordable injuries
• Growing the mineral resource base
at our projects in Serbia and Bosnia
& Herzegovina
• Ensure compliance with the
Orion Debt Financing covenant
requirements
• Gender diversity in the workplace,
excluding contractors
These KPIs have been incorporated
into the annual, cash based short term
incentive plan for 2022 as described
later in the Remuneration Report.
3535
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION CLEAR AND TIMELY ENGAGEMENT
WITH STAKEHOLDERS
DIRECTORS’ SECTION 172(1) STATEMENT
The Board acknowledges the importance of forming and retaining
constructive relationships with all stakeholder groups.
a) All Investors
b) Institutional 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. Analysis of the share
register commissioned from external
consultants are also periodically
circulated to the Board, together with
significant investment reports from
analysts.
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 Company maintains a regular
dialogue with its 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
major news flow, 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 a Head of Investor
Relations based in London, who deals
with shareholder enquiries and works
in conjunction with the Company’s PR
advisers to facilitate engagement with
its private 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
Managing Director and Chief Executive
Officer together with the Head of
Investor Relations.
The Company publishes on its website
a range of information which helps
current and potential shareholders
to assess 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.
3636
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION The Group recognises that its activities
and forthcoming development of the
Vares 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 a
Public Liaison Committee. Version 7 of
the Company’s Stakeholder Engagement
Plan has been published, incorporating
the feedback received during the ESIA
disclosure period.
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, 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.
g ) 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.
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 proces
e) 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.
Key Stakeholder groups
Reason to engage
Engagement method
Engagement outcome
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.
Access to capital is of vital
importance to the long-term
success of our business and
achieving value for shareholders.
Equity Investors
All substantial shareholders
who own more than 3% of
the Company’s shares are
listed on page 98 within
the Director’s Report.
On 13 October 2021,
the Company completed
a US$102 million equity
raise conducted by the
Company’s joint corporate
brokers: Canaccord Genuity,
RBC Capital Markets and
Stifel Nicholas.
Concurrent with the equity
raise, Sandfire Resources,
sold their entire shareholding
of 16.1% in the Company
via a secondary placing.
At 31 December 2021,
shares held in public hands
(defined as shares not held
by persons associated with
the Company or holding
over 5%) constituted 61.3%
of the total shares in issue
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 36. The CEO
presented at a number
of investor roadshows
and one- to-one
meetings.
The key mechanisms of engagement
included:
Substantial shareholders:
• 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 posts.
• Site visits for existing and
potential cornerstone investors
and equity analysts.
Shareholders with queries are
encouraged to contact Thomas
Horton, the Company’s Head of
Corporate Development & Investor
Relations, at thomas.horton@
adriaticmetals.com
3737
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION DIRECTORS’ SECTION 172(1) STATEMENT - CONTINUED
Key Stakeholder groups
Reason to engage
Engagement method
Engagement outcome
Existing and
potential future debt
providers
The Company has US$20
million of convertible bonds
in place which it issued
to Queens Road Capital
Limited on 1 December
2020.
The Company has a
US$142.5 million debt
financing package with
Orion Resource Partners
(UK) LLP (“Orion”) that was
completed in January 2022.
The Company considers
itself to be fully financed
through to completion of
construction of the Vares
Project, where it expects
to generate self-sustaining
cash flows from operations.
As such, the company does
not consider that it requires
and further debt finance at
the current time.
Particularly during its pre-
production, exploration and
development phases, 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 Project Feasibility
Study, external funding from a
combination of equity and debt
instruments has been raised to
finance the initial up-front capital
requirements to construct the
mine, processing plant and general
Project infrastructure which is
estimated to be US$168.2 million.
The Orion Debt Financing
documentation contains a number
of information reporting obligations
that the Company must comply
with.
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.
During the year one-to-one meetings
with the CEO and/or CFO were
undertaken on a regular basis with a
range of potential debt providers to
provide regular updates on progress of
the Vares Project.
The Company also 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.
Following completion of the debt
financing package, routine operational
and financial performance reporting,
including covenant compliance
certificates, will be provided to Orion
in 2022.
Regular technical team meetings
take place will take place between
the Company and Orion throughout
the construction phase of the Vares
Project.
The CEO and CFO maintain regular
and open communications with both
Orion and QRC on an as needed
basis.
The process to select
debt providers to meet
the upfront capital
requirements of the Vares
Project was successfully
concluded during the
year with the Company
announcing on 13
October 2021that it had
agreed a tern sheet with
Orion Resource Partners
(UK) LLP for a US$142.5
million debt financing
package comprising:
• US$120.0 million
senior secured debt;
and
• US$22.5 million
copper stream
The Orion Debt Financing
was completed in
January 2022. No funds
have yet been drawn
under the facility and
financial close remains
subject to satisfaction
of customary conditions
precedent.
3838
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Key Stakeholder groups Reason to engage
Engagement method
Engagement outcome
Workforce
The Company has 11
UK based employees,
82 employees based in
Bosnia & Herzegovina,
26 based in Serbia.
Of the six Directors two
are UK resident and four
are non-UK resident.
The Chairman is UK-
based, the CEO is based
in Bosnia & Herzegovina
and the CFO is based in
Jersey, Channel Islands.
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.
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:
• Adriatic maintains an open line
of communication between its
employees, senior management
and Board.
• The Group monitors HSE
obligations and reports
performance against these.
• The Group undertook a group-
wide employee survey during
the year.
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
the Audit & Risk 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.
• The CEO relocated to Bosnia &
Herzegovina at the start of 2021
and now resides in the country.
Additionally, senior management
regularly visit the operations
in Bosnia & Herzegovina and
engage with its employees
through one-on-one and staff
meetings, employee events,
Project updates etc.
Serbian employees:
• Serbian HR activities are
managed through the
Bosnian HF Function with
localization assistance from our
administrative team in Belgrade.
• 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.
General Workforce:
The Company maintained an
excellent safety record during
the year. Three lost time injuries
occurred during the year of
which two occurred in contractor
drilling operations.
UK Employees:
The number of UK based
employees increased by four
during the year net, of three
leavers.
Bosnian employees:
The Company attracted a further
29 employees to the workforce
during the year with excellent
staff retention with only one
leaver during the course of 2021.
Serbian employees:
The Company has attracted
a further 5 employees to the
workforce during the year with
excellent staff retention and no
leavers during the year.
Employee Survey outcome
In October 2021 an Employee
Survey was conducted to gauge
the performance of senior
management’s delivery of the
Company’s values and visions.
There was a 68% response rate
to the employee survey indicating
which displays a high level of
employee involvement and
wiliness to participate
Positive trends to build on as
Project construction ramps up
are leadership and safety culture.
Areas identified as requiring
attention relate to respect,
communication and fostering
a safe environment for sharing
ideas.
3939
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION DIRECTORS’ SECTION 172(1) STATEMENT - CONTINUED
Key Stakeholder groups Reason to engage
Engagement method
Engagement outcome
The Company will only be
able to declare commercial
production once it receives
the relevant licenses and
permits from all levels
of government to mine,
process and export
concentrates.
Governmental
bodies
The Company engages
with local (Municipal),
regional (Cantonal)
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 both 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.
Bosnia:
The Company announced on
28 January 2021 that it had
been awarded the Exploitation
Permit for Veovaca (covering
both the historic open pit and the
processing plant location).
On 9 February 2021 the
Company received its
Environmental Permit for Rupice.
The Country Managers report
regularly to the Board on progress
with obtaining licences and
permits.
On 3 June 2021 the Company
announced the issuance of
the Urban Planning Permit for
Rupice.
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
On 19 July 2021 the Company
announced that it had been
awarded the Exploitation Permit
for Rupice.
On 28 October 2021 the
Company was issued a revised
Environmental Permit for
Veovaca, incorporating the
redesigned Tailings Storage
Facility requirement (increase in
LoM tailings after removal of the
barite processing circuit).
Serbia:
The Company was awarded
in December 2021 the 37 km2
Kazenovice license, extending
its exploration activities further to
the East of the existing licenses.
4040
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Key Stakeholder groups Reason to engage
Engagement method
Engagement outcome
Community
Bosnia &
Herzegovina:
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
Kopaonik (which borders
the North-eastern
extremities of the license
area) and the wider
population of both
Southwest 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 license 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 & Herzegovina:
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 (An ESG
consulting group which is part of the
ERM Group of companies) is following
a carefully constructed program of
engagement.
The Company’s ESG Committee
continues, inter alia, to monitor
Adriatic’s engagement with its
stakeholders. The ESG charter and
policy commits the Group to ensuring
sustainable growth, with minimal
adverse impacts.
Bosnia & Herzegovina:
The Company’s Stakeholder
Engagement Plan has been
substantially updated, following
feedback from the ESIA dissemination
events and a Community
Development Plan is under draft to
shape and prepare the near-mine
communities for the economic
changes associated with a producing
asset.
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.
Critical Resource has further been
contracted to conduct a review of
the Company’s 2021 performance in
Bosnia and use that to draft an ESG
narrative to guide operations through
the development stage.
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 were all completed in 2021 in
line with increased operational activity.
In 2022 a Public Liaison Committee
will be established.
Bosnia & Herzegovina:
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.
Visits to the Information
Centre continue at
approximately 100 per
month, from members of
the community, with visits
predominately about job
opportunities and for funding
of local initiatives.
The Public Liaison
Committee, a panel of 28
community volunteers met 4
times during the year and as
well as a Project site visit were
given a detailed presentation
about the findings and
proposed mitigation measures
identified during the ESIA.
Five private land plots were
purchased to support the
development or Rupice
Surface Infrastructure
site. The acquisition of
land was completed in
accordance with EBRD’s
Performance Requirement 5
and followed the guidance
developed in a detailed Land
Acquisition Compensation &
Resettlement Plan. All 5 plots
were purchased under the
“willing buyer, willing seller”
criteria.
Serbia:
The Company, through its
local engagement with the
Raska community has yet to
experience any “spill-over”
from the environmental
campaign that has so publicly
targeting Rio Tinto’s Serbian
operations. As a historic
mining town, the continued
feedback is of a strong desire
for operations to re-start
and provide employment
opportunities that will reverse
the migration of young people
away from Raska to Belgrade
and further afield.
4141
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Key Stakeholder groups Reason to engage
Engagement method
Engagement outcome
The Company’s suppliers
are fundamental to ensuring
that the Company can
construct the Vares Project
on time and on budget.
Using quality suppliers
ensures that the Company
can we meet the highest
standards of performance
and safety across all areas
of the business, including
contractors and sub-
contractors
• The procurement team has
undertaken the pre-qualification
of several engineering and
procurement providers and
mining contractors. Contract
tendering has commenced for
several procurement packages
• One on one meetings between
management and suppliers.
• Contact with procurement
department and accounts
payable.
• Membership of Cantonal
and National Chambers of
Commerce.
• Presentations at National trade
events and forums.
Smaller local vendors continue to
be engaged at a broad level to
better align with the Company’s
objective of increasing local and
regional Project participation.
Smaller companies have entered
into Joint Venture agreements.
National companies have started
to explore options of moving
elements of their business
into the Municipality in order
to support Project delivery
operations more effectively and
efficiently.
Company procurement policies,
procedures and processes
have been introduced and
implemented throughout the
business.
Suppliers
During the construction
phase of the Vares
Project, Adriatic
will engage with
key suppliers under
commercial engineering
and supply contracts
to deliver the mine and
plant equipment, the
majority of which are
internationally recognised
vendors and contractors.
At a local level, the
Company has also
engaged with and
partnered with smaller
companies, some of
which are independent or
family run businesses.
Tenement holdings
The Company’s tenements at 8 March 2022 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.
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.
Global Mineral
Resources
d.o.o.
Raska (Suva Ruda)
87.17
28-Dec-2015
18-Feb-2022*
Kaznovice
37.1
22-Nov-2021
22-Nov-2024
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
Exploration
License
310-02-
1721/2018-02
310-02-
1722/2018-02
310-02-
1114/2015-02
310-02-
00060/2015-02
Exploration
License
310-02-
01670/2021-02
* Raska concession is pending renewal, application for extension has been submitted, the Company is awaiting to receive
confirmation of extension from authorities.
4242
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
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
balancing the needs of different
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. Approval of technical
Information prior to
announcement
After careful consideration, including
internal review procedures as
necessary, the Board approved for
release on 19 August 2021 the Vares
Project Feasibility Study including
Rupice probable ore reserves.
b. Vares Project Construction
Decision
Following the release of the Vares
Project Feasibility Study, the Board
took the decision to proceed with
construction of the Project and to
seek to raise additional funding for the
Company sufficient to meet the initial
capital requirements of US$168.2
million for construction, ongoing
exploration activities and general
working capital requirements.
The Placing and Orion Equity
Subscription were priced at £1.5174
(AU$2.801) per New Ordinary
Share, representing a discount of
approximately 10.7%. to the 10-day
volume weighted average price on the
Australian Securities Exchange (“ASX”)
to 12 October 2021.
d. Environmental & Social Impact
Assessment
Following on from baseline studies
started in 2020, Adriatic have
undertaken an Environmental & Social
Impact Assessment (“ESIA”) in line
with best international practice for the
Vares Project. The Company appointed
Wardell Armstrong International to
develop the ESIA, in order to conform
with the Performance Requirements
set out in the European Bank for
Reconstruction and Development’s
2019 Environmental and Social
Policy. The data from the baseline
studies, and predictive modelling of
the project components and activities,
has informed a comprehensive
suite of Environmental and Social
Management Plans. These will guide
the Company’s activities throughout
the development, exploitation, and
ultimate decommissioning of the Vares
Project to avoid, minimise and manage
impacts.
c. Project Finance Package
Following an extensive process
undertaken by management, the board
approved a Project finance package of
approximately US$244.5 million, before
expenses, for the construction of the
Vares Project which was announced
to the market on 13 October 2021 as
follows:
• Adriatic Metals and Orion Resource
Partners (UK) LLP (“Orion”) have
signed a term sheet for a US$142.5
million Orion Debt Financing
package, comprising of:
– US$120.0 million senior secured
debt; and
– US$22.5 million copper stream.
• In addition to the Orion debt
financing, the Company completed
an equity raise of approximately
US$102.0 million, consisting of:
– a conditional placing of
approximately US$52.0 million (the
“Placing”), conducted through an
accelerated bookbuild process (a
method whereby the offering of
new shares occurs over a short
period).
– a conditional equity subscription
for US$50.0 million by Orion (the
“Orion Equity Subscription”).
• Together, the Orion Debt Financing
of US$142.5 million, the Orion Equity
Subscription of US$52.0 million and
the Placing of US$50.0 million form
the US$244.5 million Project finance
package. Definitive document was
completed post year end for the
Orion Debt Financing on 10 January
2022.
4343
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION DEVELOPING A PIPELINE
OF ASSETS
OUR ASSETS
The Company asset portfolio consists of two polymetallic projects in
southeast Europe, which are both situated on the Tethyan Metalogenic
Belt. Adriatic’s flagship asset is the Vares Project in Bosnia and
Herzegovina, which is currently in construction. The Company also has
an exploration project in Serbia called the Raska Project in Serbia.
16°
18°
20°
22°
Zagreb
S
a
v
a
CROATIA
HUNGARY
D
a
n
u
b
e
Subotica
Tis
a
Novi Sad
Prijedor
a
n
s
o
B
Sava
Banja Luka
Doboj
BOSNIA & HERZEGOVINA
Zenica
Brčko
Bijeljina
Tuzla
Jadar Project
Vares
Olovo Mine
Veliki Majdan Mine
47°
46°
45°
B O S N I A & H E R Z E G O V I N A
A N D S E R B I A
R e g i o n a l M a p
ROMANIA
e
b
u
n
a
D
Pančevo
Belgrade
Timok Area Projects
SERBIA
Timok Area Projects
Majdanpek Mine
Veliki Krivelj Mine
44°
Vares Projects
B
o
s
n
a
Sarajevo
Sase Mine
Drina
Timok Area Projects
Rudnik Mine
Kragujevac
Bor Mine
Kraljevo
Kruševac
Mostar
Celebici Project
Timok Area Projects
Ploce
Towns and Capitals
Proposed Haulage Route to Port
Roads
Railways
Rivers
Polymetallic Tethyan Metallogenic Belt
Cu-Au Tethyan Metallogenic Belt
Suplja Stijena Mine
MONTENEGRO
Podgorica
Belo Brdo
Mine
Niš
Leskovac
Raska Project
Cernac
Mine
Stari Trg
Mine
Pristina
KOSOVO
Artana
Mine
Bar
ALBANIA
NORTH
MACEDONIA
Skopje
43°
42°
BULGARIA
Bosilegrad
Mine
100km
4444
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION OUR ASSETS - CONTINUED
THE VARES PROJECT, BOSNIA
& HERZEGOVINA
The Company’s flagship Vares Project
is located approximately 50 km north of
Sarajevo, in the district of Vares
The Company’s flagship Vares 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 41 km2 Vares Project concession.
The concession area includes the Mineral Resource Estimates of Rupice and Veovaca, as well as a number of prospects and
exploration targets as outlined in the map below.
September 2020, exploration activities
in 2022 are expected to cover these
new areas of Semizova-Ponikva, Brezik
and Vares East.
The concession area expires in 2038,
but can be extended for a further
10 years upon written request. The
Group received the exploitation permit
from the Federal Ministry for Energy,
Mining and Industry for Veovaca (which
includes the Vares Processing Plant
site) and Rupice on 28 January 2021
and 19 July 2021, respectively. The
receipt of the Veovaca exploitation
permit initiates the formal exploitation
period for the Project, which under the
terms of the concession agreement is
up to 30 years. The Rupice exploitation
permit was the last remaining permit
required for the commencement of
construction.
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 shutdown. 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
Estimate at Rupice in July 2019. An
updated Mineral Resource Estimate
was subsequently announced in
September 2020. Over the past 12
months, exploration drilling by Adriatic
has been focused mainly around the
Rupice underground deposit. However,
following the issue of the exploration
permit in June 2021, for the 32 km2 of
additional concession area granted in
4545
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 2021 Feasibility study
confirms robust economics
In August 2021, a Feasibility Study
on the Vares Project was released.
The results from the Feasibility Study
improved on the 2020 Preliminary
Feasibility Study, boasting high-margin
economics with a low up-front capital
expenditure.
concentrate will grade at 55-58% zinc,
and the silver-lead concentrate will
grade at 43-49% lead and on average
2,600g/t silver. Over life of mine, the
Project will produce 511,496 tonnes of
zinc concentrate, and 580,507 tonnes
of silver-lead concentrate. Following
extensive conversations with a number
of smelters and commodities traders,
both concentrates are marketable.
High-grade mineral
resources with strong
potential for exploration
upside
As outlined in the 2020 Mineral
Resource Estimate, the polymetallic
underground deposit of Rupice has
high grades of silver and zinc, with lead,
copper and gold credits. The style of
mineralisation has potential to repeat
along strike, as well as extend at depth.
This suggests a potential for further
discoveries across the concession area.
Existing infrastructure in a
historical mining district
The nearby town of Vares, is located
between the Rupice deposit to the
northwest and the proposed site of
the Vares Processing Plant to the
southeast. The town has a long history
of mining. State-owned iron ore mining
operations and 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.
Marketable concentrate
grades
The Vares Project has two product
streams; a zinc concentrates and a
silver-lead concentrate. Over the first
24 months of production, the zinc
Brownfield processing plant
site, Greenfield underground
mine
The location of the new Vares
Processing Plan will be on the site of
an abandoned processing facility last
used in the late 1980s. The abandoned
site, circa 4km from the town of Vares,
has been demolished and prepared
ready for construction to commence.
A large administrative building that
has already been fully renovated and
repurposed as the Company’s main
office. The concrete foundations of
the abandoned processing plant site
have been geotechnically tested and
will be repurposed for the new Vares
Processing Plant.
The Rupice deposit is a greenfield
site located 11km as the crow
flies from the Vares Processing
Plant site. Construction activities
have commenced for the surface
infrastructure.
Mineral Resources
The Vares Project comprises the Rupice
and Veovaca deposits.
The Mineral Resource Estimate has
not changed since 1 September 2020,
where the Company announced an
updated Indicated and Inferred Mineral
Resource estimate for the Rupice
deposit.
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
• Prepared by CSA Global Pty Ltd in Perth in September 2020
• Mineral Resources are based on JORC Code definitions.
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
• A cut-off grade of 50g/t silver equivalent has been applied.
• AgEq – Silver equivalent is 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 is: 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.
4646
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION OUR ASSETS - CONTINUED
The Veovaca Indicated and Inferred Mineral Resource estimate was unchanged during the period and stands at:
Veovaca Mineral Resources (Note 2)
At 30 June 2020 and 31 December 2020
JORC Classification
Indicated
Inferred
Total
Note 2:
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 is 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 is: 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’
Statement
The information relating to the Mineral
Resources estimates in this Annual
Report are based on and fairly
represents information and supporting
information compiled by Mr. Dmitry
Pertel. Mr. Pertel is a full-time employee
of CSA Global and is a Member of the
Australian Institute of Geoscientists. Mr.
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). Mr.
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.
4747
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
The Rupice Probable Ore Reserves was calculated for the Vares Project Feasibility Study and currently stands at:
In-situ Rupice Ore
Reserves (Note 3)
JORC
Classification
Tonnes
(mt)
Proved
Grades
Ag
g/t
Zn
%
Pb
%
Probable
7.29
202
5.7
3.6
1.9
0.6
Total
7.29
202
5.7
3.6
1.9
0.6
Note 3:
Au
g/t
0.2
0.2
At July 2021
Contained metal
Cu
%
Sb
%
BaSO4
Ag
%
Moz
Zn
kt
Pb
kt
Au
Cu
Sb
BaSO4
koz
kt
kt
kt
32.4
32.4
47
47
417
262 441
417
262 441
44
44
16
16
236
236
• Ore Reserves are based on JORC Code definitions.
• Rows and columns may not add up exactly due to rounding.
• FS metal prices, payabilities and recoveries have been applied.
The information in this report that relates to Ore Reserves is based on information compiled by Mr. John Battista and Mr.
Simon Grimbeek, both of whom are Competent Persons and Members of the Australasian Institute of Mining and Metallurgy.
Both Mr. Battista and Mr. Grimbeek are currently employed by Mining Plus. Mr. Battista and Mr. Grimbeek both have sufficient
experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are
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)”. Mr.Battista and Mr. Grimbeek consent to the
disclosure of information in this report in the form and context in which it appears.
4848
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION OUR ASSETS - CONTINUED
THE RASKA PROJECT, SERBIA
The Raska Zinc-Silver Project in Serbia was
attained though the acquisition of Tethyan
Resource Corp. (Tethyan), which was
completed in October 2020.
Tethyan were exploring a highly prospective 130km2 land package in southern Serbia, focused primarily around two historic
open pit mining operations called Sastavci and Kizevak, which both closed in the late 1990s. The Sastavci and Kizevak
deposits, like those in the Vares Project, sit on the Polymetallic Tethyan Metallogenic Belt and thus also contain zinc, silver and
lead mineralisation.
Since the acquisition of the Raska Project, the Company has been conducting exploration activities, including resource
definition drilling with diamond core drill rigs operating at each key target. Drilling has been continuing, and to date at Kizevak
has intercepted various zones of silver, zinc and lead mineralization, while at Sastavci drilling has 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.
4949
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION ON TRACK FOR Q2 2023
PRODUCTION AT THE
VARES PROJECT
CEO STATEMENT
2021 was another transformational year in the Company’s
somewhat short history.
The team has worked tirelessly to
deliver major milestones for the
Company. The Vares Project is now fully
permitted, fully funded, in construction
and underpinned by the economics of a
world-class Feasibility Study.
The Vares Project will not only be
Europe’s next operating mine, but it will
be one of the first new mining projects
to be built in Bosnia & Herzegovina
for more than a generation. I would
like to express my appreciation to the
Bosnian regulatory authorities and our
local communities, for their support
and professionalism in providing the
required regulatory approvals. Without
these regulatory approvals, the
financing and recent commencement
of construction would not have been
possible.
The impact that Adriatic Metals will
be making to Bosnia & Herzegovina
cannot be understated. This year,
Adriatic’s investment in the construction
of the Vares Projection will represent
over 25% of Foreign Direct investment
into Bosnia & Herzegovina. Once in
production, the operations will account
for over 1.5% of Bosnian GDP and
during the first 6 years of production the
Company is expected to be Bosnia &
Herzegovina’s largest exporter.
Having moved to Sarajevo over a year
ago, I have witnessed first-hand the
positive impact we are making and the
community support we have created
for the project. In addition to building
the mining operations, it is important
that we also create sustainable socio-
economic benefits for the communities
around the Project. I am incredibly
proud of the ESIA that we have
produced for the Vares Project. It was
the first ever ESIA to be completed
by a private company in Bosnia &
Herzegovina. What’s more, we ensured
that it conformed to the highest
international standards, those set by
the EBRD and IFC.
It is these high standards that ensure
the Company will be a sustainable
creator of shared prosperity, which I
am confident in turn will ensure long
term local stakeholder support. It
is this approach to developing the
Vares Project which has received
international endorsement from multiple
stakeholders, including EBRD.
Building on the theme of shares
prosperity, last year we established
a charitable trust called the Adriatic
Foundation. The Foundation is
capable of being a long-term engine
for development of the communities
surrounding Vares, guided by the
priorities of its local people. It has been
seed funded and will have ongoing
funding from Eastern Mining’s profits.
It is also capable of attracting
investment from a variety of
government and non-government
agencies to coinvest in initiatives that
provide a positive long-term legacy.
We hope too that the development
of our work will also facilitate the
development of complementary
industries such as tourism and
renewable energy generation.
Paul Cronin
Managing Director and
Chief Executive Officer
5050
ADRIATIC METALS PLC
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION The Company aspires to be a multi-
asset European-focused mining
company. While our primary focus
will be the on-time and on-budget
delivery of Vares Project, where value-
accretive to the Company, we will
expand our pipe-line of projects through
opportunistic acquisitions. However,
it is important that any potential new
projects are aligned to our values of
good stewardship and therefore comply
with our strong ESG principles.
I am very excited for 2022 as we move
through the construction phases of
the Vares Project. It will be yet another
transformable year. Concurrently, we will
be continuing our exploration activities,
as well as extend our concession area
boundaries along strike to broaden the
strategic land package.
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
Managing Director and
Chief Executive Officer
5151
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION ADVANCING TOWARDS
PRODUCTION
OPERATIONAL REVIEW
CORPORATE STRUCTURE
The corporate structure of the Group as at 29 March 2022 is as follows:
Adriatic Metals PLC
England & Wales
Company Number: 10599833
Adriatic Metals Jersey Limited
Jersey
Company Number: 138204
Ras Metals d.o.o.
Serbia
Company Number: 21609021
Adriatic Metals Holdings BIH Limited
England & Wales
Company Number: 13430806
Adriatik Metali d.o.o.
Bosnia & Herzegovina
Company Number: 61-01-0023-21
Adriatic Metals Services (UK) Limited
England & Wales
Company Number: 03781581
Eastern Mining d.o.o.
Bosnia & Herzegovina
Company Number: 43-01-0404-13
Adriatic Metals Trading & Finance B.V.
Netherlands
Company Number: 863359577
Tethyan Resources Jersey Ltd
Jersey
Company Number: 106154
Taor d.o.o.
Serbia
Company Number: 20975393
Tethyan Resources d.o.o.
Serbia
Company Number: 21185531
Global Mineral Resources d.o.o.
Serbia
Company Number: 21164429
KEY
All shareholdings 100% unless otherwise stated
Holding Company
Operating Company
Adriatic Metals PLC is a public limited
company incorporated in England and
Wales on 3 February 2017.
The Company’s principal assets are its
investment, via Adriatic Metals Holdings
BIH Limited, in the group’s wholly
owned subsidiary Eastern Mining d.o.o.
and its direct holding in Adriatic Metals
Jersey Limited the subsidiaries of which
comprise the Raska Project in Serbia.
Eastern Mining d.o.o. was registered in
Bosnia & Herzegovina on 19 May 2008.
Eastern Mining is the main operating
entity of the Group and holds the Vares
Project concession which comprises the
Rupice and Veovaca deposits.
Adriatic Metals Jersey Limited (formerly
Tethyan Resource Corp.) and its wholly
owned subsidiaries were acquired on
8 October 2020. The acquisition of the
remaining share capital of Ras Metals
d.o.o. occurred on 22 February 2021.
Adriatic Metals Holdings BIH Limited
was incorporated on 1 June 2021 and
acquired the whole share capital of
Eastern Mining d.o.o. from Adriatic Metals
plc on 30 September 2021 as part of the
Group’s preparation for entering into the
Orion Project Finance package.
Adriatic Metals PLC is a public limited
company incorporated in England and
Wales on 3 February 2017.
The Company’s principal assets are its
investment, via Adriatic Metals Holdings
BIH Limited, in the group’s wholly
owned subsidiary Eastern Mining d.o.o.
and its direct holding in Adriatic Metals
Jersey Limited the subsidiaries of which
comprise the Raska Project in Serbia.
Eastern Mining d.o.o. was registered in
Bosnia & Herzegovina on 19 May 2008.
Eastern Mining is the main operating
entity of the Group and holds the Vares
Project concession which comprises the
Rupice and Veovaca deposits.
Adriatic Metals Jersey Limited (formerly
Tethyan Resource Corp.) and its wholly
owned subsidiaries were acquired on
8 October 2020. The acquisition of the
remaining share capital of Ras Metals
d.o.o. occurred on 22 February 2021.
Adriatic Metals Holdings BIH Limited
was incorporated on 1 June 2021
and acquired the whole share capital
of Eastern Mining d.o.o. from Adriatic
Metals plc on 30 September 2021 as part
of the Group’s preparation for entering
into the Orion Project Finance package.
Adriatic Metals Trading & Finance B.V.
was incorporated on 14 December 2021
to act as a trading and finance company
for the Group and is the borrower under
the Orion Project Finance package.
Adriatik Metali d.o.o. was incorporated on
8 April 2021 and is currently dormant as
at 31 December 2021.
This structure reflects the liquidation of
Kosovo Resource Company LLC and
Tethyan Resources Bulgaria EOOD on
28 October 2021 and 22 February 2022
respectively.
5252
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION VARES PROJECT DEVELOPMENTS
On 19 August 2021, the Company announced the results of the Feasibility Study for the Vares Project in Bosnia & Herzegovina,
which had been completed by a number of international consultants and coordinated by Ausenco Pty Ltd (“Ausenco”).
Highlights
Simplified process design de-risks Project execution:
• Veovaca open pit removed from scope of study
• Reduction of concentrate products from four to two; recovery of barite and
sulphide (pyrite) concentrates deferred.
• Veovaca open pit, barite recovery and sulphide (pyrite) recovery to be
considered in a future development phase
48% of
revenues from
payable silver
and gold
Completion of Feasibility
Study paves the way for
Adriatic to be the first
publicly listed mining
company in Bosnia &
Herzegovina
Metallurgical and geo-
metallurgical test work
ongoing post- Feasibility
Study, targeting continuing
improvement in recoveries
Concentrate offtake
work streams well
advanced and
progressing in line
with the Company’s
expectations
Key Metrics Feasibility Study vs 2020 PFS
KEY METRIC
Post-tax NPV (8%)1
Post-tax Internal Rate of Return1
Project Payback from First Production1
Initial Capital Costs
Total Mined Tonnes to Plant
Life of Operation
Cash Cost1,2
All-in Sustaining Cost (AISC) 1,3
Average Annual AgEq Production Years 1-5
Underground Mining Costs (mined)
Underground Mining Costs (milled)
Processing Costs
G&A Costs
Refining & Freight Costs
Revenue1
Average Annual EBITDA Years 1-51
UNIT
US$ million
%
years
US$ million
Mt
years
US$/AgEq ounce
US$/AgEq ounce
koz/year
US$/t mined
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$ million
Profitability Index1
(Post-Tax NPV8/CAPEX)
FS
2020 PFS
1,062
134%
0.7
168.2
7.3
10
7.0
7.3
1,040
113%
1.2
173
11.1
14
9.5
9.7
14,975
15,302
24.1
30.0
30.3
7.7
35.7
376.9
281.1
6.3
27.6
31.9
31.5
4.8
52.1
296.1
251.0
6.0
1. Silver Price US$25/oz, Zinc Price US$3,000/t, Lead Price US$2,300/t, Copper Price US$9,500/t, Gold Price US$1,800/oz, Antimony
Price $2,300/t. Consistent set of commodity prices set for 2020 PFS released in October 2020 used for Feasibility Study.
2. Cash costs are inclusive of mining costs (US$/t milled), processing costs, site G&A, refining & freight and concession fees (3.90 BAM
per mt of Run of Mine)
3. AISC are inclusive of cash costs plus sustaining capital, closure cost, salvage value
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
iv) Removal of the sulphide
(pyrite) concentrate circuit
The sulphide (pyrite) concentrate was
developed and introduced as a process
to remove sulphide minerals from the
barite concentrate to improve the
quality of the barite. It was a preceding
flotation stage to the barite flotation,
and it followed the silver-lead and
zinc flotation stages. The sulphide
(pyrite) concentrate produced was
found to contain reasonable quantities
of gold and silver and the marketing
team found potential buyers. Further
validation of the detailed market during
the Feasibility Study, resulted in a lack
of confidence in the marketability of the
sulphide (pyrite) concentrate. Therefore,
the Company took the decision to
remove the sulphide (pyrite) concentrate
from the Feasibility Study taking into
account that the barite was also not
going to be included at this time.
v) Optimised comminution
design
The process flowsheet was optimised
with the introduction of a three-stage
crushing plant processing ore for
the Vares Processing Plant, as well
as waste rock for aggregates for the
backfill plant. This eliminated the need
for the Semi-autogenous Grinding Mill
in the Vares Processing Plant saving
US$1.8 million and further reducing
Project execution risk.
Permitting
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.
OPERATIONAL REVIEW - CONTINUED
The principal considerations at the
outset of the Feasibility Study were;
• Optimise the mine plan to maintain
consistent high-grade feed for as
long as possible
• Take into consideration the prevailing
market conditions
• Maximise revenue received from
concentrate sales
• Optimise operational efficiency and
reduce costs
An additional third decline will be built,
replacing the previously considered
raisebore, dedicated solely for
ventilation. Use of a ventilation decline
rather than the vent-raisebore removes
the risks associated in the near-surface
ground conditions and provides an
improved emergency egress. The third
decline can also provide additional
access for ore-haulage later in the mine
life by relocating the ventilation fans.
• Reduce potentially adverse
ii) Removal of Veovaca open pit
environmental, social, and economic
impacts; and
• Minimise Project execution risks
The resulting simplified process design
de-risks the Project execution. This has
included the removal of the Veovaca
open pit from scope of study; the
reduction of concentrate products from
four to two, with the recovery of barite
and sulphide (pyrite) concentrates
deferred. The Veovaca open pit,
barite recovery and sulphide (pyrite)
recovery to be considered in a future
development phase.
i) Modified underground mine
Plan
The Feasibility Study mine plan is
focused on mining the high-grade
sections of the Rupice deposit as
early as possible and delivering
consistent high-grade feed to the
Vares Processing Plant for as long as
possible. As a result, the mine plan was
modified to accommodate new lower
(ingress) and upper (egress) declines for
optimised access, which also improves
operational flexibility and safety.
The Ore Reserve tonnage of Rupice
has decreased from 8.4 Mt to 7.3 Mt,
while the Ore Reserve grade increased
from 463g/t AgEq to 485g/t AgEq. This
was due to the application of updated
Net Smelter Return cut-offs by ore type
determined during geo-metallurgical
domaining and metallurgical testwork.
The average dilution factor increased
from 10% to 13%, taking into account
the potential spalling of backfill from
adjacent primary stopes when mining
secondary stopes.
from the mine plan
The Vares Processing Plant has been
designed around the ore from the
Rupice Underground Mine, as this is
the highest value ore. Processing of
ore from the Veovaca open pit, without
modifying this process design, is
anticipated to produce concentrates
with marginal Project economics.
Further metallurgical test work and
engineering will be undertaken to
better understand how a higher
value concentrate can be produced.
Therefore, it was decided to defer the
Veovaca open pit from the Feasibility
Study mine plan until further work has
been completed.
As the Feasibility Study does not
include the mining of the Veovaca open
pit, this reduces the tonnage of tailings
that will require storage in the TSF by
1.91 Mt over life of mine. Additionally,
mining the Veovaca open pit would
have also required stripping waste rock
to access the ore, which would also
require a dump area with a capacity
to store 8.64 Mt of waste rock. Total
tailings and waste from mining Veovaca
would have been 10.6 Mt.
iii) Removal of the barite
concentrate circuit
Market research conducted by an
independent barite marketing expert
concluded that, while the barite
concentrate produced by the Vares
Processing Plant had a suitable end-
market, the current weak demand
for and prices of barite and the high
shipping rates negatively affected its
contribution to the Project. The price
for barite is correlated in oil and gas
exploration activity, due to its primary
use as a drilling mud.
By not recovering the barite
concentrate, reduces the Project
execution risk by removing 200kt of
concentrate movement in the first
year of Commercial Production and in
excess of 1.1Mt over first 5 years.
5454
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION RASKA PROJECT
DEVELOPMENTS
On 23 February 2021, the Company
completed the acquisition of the
remaining 90% of the shares in Ras
Metals d.o.o. that the Company did not
already hold for € 1,365,000, plus the
allotment of 166,000 Ordinary shares
of 0.013355p each in the Company.
Additional deferred consideration
comprises € 500,000 which remains
payable on 14 May 2022 and 332,000
Ordinary shares in the Company remain
to be allotted to be allotted in two equal
tranches on or around, 22 February
2022 and 22 August 2022, having
allotted 166,000 of Ordinary shares on
22 August 2021 during the period.
Ras Metals d.o.o. holds the Kizevak
and Sastavci exploration licenses
relating to the Raska Project.
Exploration has continued at Raska
with on average 3 diamond core drilling
rigs, drilling on the key prospects of
Kizevak and Sastavci, with additional
drilling at Rudnica and Karadak.
In total over 22,000m of diamond
core drilling has been completed for
the year. Adriatic plans to continue
exploration and resource definition
works at Kizevak and Sastavci, as well
as focussing on more greenfields and
brownfields exploration works on the
great Raska Project area.
At the Kizevak prospect, drilling
continued, and to date various zones
of Ag-Zn-Pb mineralisation have been
encountered. This has demonstrated
continuity and expansion of the defined
historic resources. Drilling at Kizevak
has also 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,
and continues to yield thick zones
of polymetallic mineralisation, which
remains open.
Drilling at Sastavci 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.
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 good continuity of
polymetallic grades from surface in a
much wider zone of mineralisation than
historically reported, and also expanded
on the extents of the previously known
mineralised system.
Other targets across the Raska Project
including Rudnica and Karadak in the
Southwest of the Raska licence area
have been explored during the year with
drill and geophysical testing conducted.
The Company plans to follow up
on the initial results during the 2022
exploration campaign.
5555
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION FUNDING SECURED FOR
VARES PROJECT CONSTRUCTION
FINANCIAL REVIEW
The Group made an operating loss of £9,528,132 for the year ended
31 December 2021 (year) compared with an operating loss of
£5,176,158 in the six months ended 31 December 2020 (Prior Period).
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 Project in
Bosnia & Herzegovina.
As the Group is in the pre-production phase on both the Vares and Raska Projects,
this financial review is focused on expenditure and balance sheet movements
during the Year.
INCOME STATEMENT REVIEW
General and administrative
expenses
General and administrative costs
incurred in the year were £5,427,727
(Prior Period: £2,115,707) increasing
due to increased headcount as Vares
Project moves towards construction
phase as well as current period
being 12 months versus 6 month
comparative. Share-based payment
expenses of £1,434,574 (Prior Period:
£2,267,239) due to lower value of share
options vesting in the Year compared
with the Prior Period.
Wages and salaries in the year were
£2,020,765, an increase compared
to Prior Period (£616,278) due to
increased headcount, average number
of employees were 109 in the year
(Prior period: 73).
Amortisation in the year of £86,675
increasing compared to Prior Period
(£27,017) due to several lease
agreements entered into Bosnia &
Herzegovina and Serbia.
Professional fees in the year of
£921,017 increasing compared to Prior
Period (£313,760) due to the financing
activity during the year. Stock exchange
fees of £174,539 (Prior Period:
£136,166) were in aggregate broadly
equivalent on a pro-rata basis in the
Year compared to the Prior Period.
Exploration costs
The Group incurred £2,880,700 of
exploration costs in the year relating to
pre-JORC resource stage exploration
activities in Serbia (Prior Period:
£798,028).
Finance costs
The finance expense in the year was
£2,076,846 (Prior Period: £197,039)
increasing primarily as a result of a
full year of QRC interest expense
£1,235,780 (Prior period: £105,515)
as well as foreign exchange loss in
the year of £801,849 (Prior Period:
£103,772) predominately from
revaluation of cash holdings in Euro
and US Dollar.
Geoff Eyre
Chief Financial Officer and Joint
Company Secretary
5656
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Revaluation of fair value liabilities
The Group issued US$ 20 million
8.5% Convertible bonds to Queens
Road Capital on 30 November 2020
which may be converted into equity
securities of the Company at the
option of the bondholder at any time
up until 30 November 2024. The
conversion feature of the bonds has
been accounted for as a derivative
liability. The Black Scholes model
was chosen as the most appropriate
pricing model to value the company
call options, valuation was updated
as at 31 December 2021, resulting in
a £1,195,251 gain in the year to 31
December 2021 (Prior Period: Nil).
In the Prior Period, 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.
On 23 February 2021, the Company
completed the acquisition of the entire
issued share capital of Ras Metals
d.o.o. making payment of €1,365k to
the sellers and issuing the first 166,000
shares. On the 24 August 2021 the
second tranche of 166,000 shares were
issued in line with the agreement. The
remaining deferred consideration was
estimated as at the balance sheet date
resulting in a £20,834 revaluation gain
through profit and loss in the year to 31
December 2021 (Prior Period: Nil)
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
Year ended
31 December 2021
Six months ended
31 December 2020
(7,537,225)
(10,119,598)
71,335,056
53,698,233
(2,307,208)
(3,552,249)
25,817,089
19,957,632
Net cash used in operating activities
during the year was £7,537,255
compared to £2,307,208 in the Prior
Period.
Investing activities included cash
outflows for the purchase of property
plant and equipment during the year
of £7,264,352 (Prior Period: £90,684)
reflecting the significant ramp up in
activities following completion of the
Feasibility Study for the Vares Project.
Financing activity cash flows in the
Prior Period also include the issue of
US$20 million in convertible debentures
to Queens Road Capital with an 8.5%
coupon in December 2020.
The equity financing and project finance
facility secured during the year provide
the Company with sufficient financial
resources to commence commercial
production at the Vares Project in
Q2 2023 and undertake extensive
exploration activities in both Bosnia &
Herzegovina and Serbia during 2022.
Net cash inflows from financing
activities increased substantially in the
year with £74,442,048 inflow from
issue of share capital with transaction
costs of £3,277,759 incurred following
the completion of an equity placement
as part of Project finance package,
total equity issued US$102 million,
which included a US$50 million
subscription from Orion Resource
Partners. The Prior Period included
£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 year also
increased to £1,138,151 compared to
£1,261,913 in the Prior Period.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION FINANCIAL REVIEW - CONTINUED
Cash Flow and Balance Sheet Review - Continued
Working capital
Capital expenditure
At 31
December
2021
At 31
December
2020
Change
(In GBP)
At 31
December
2021
At 31
December
2020
Change
Exploration and
evaluation assets
Property, plant and
equipment
Total non-current
assets (excluding
right of use assets)
24,456,506
36,479,724
(12,023,218)
22,079,729
969,464
21,110,265
46,536,235
37,449,188
9,087,047
Exploration and evaluation asset recognised in respect of the
Vares Project were transferred to Mine under Construction
at the completion of the Feasibility Study during August
2021. Total non-current assets (excluding right of use
assets) increased to £46,536,235 at 31 December 2021 (31
December 2020: £37,449,188) primarily due to preparatory
works to commence the construction stage of the Vares
Project.
VARES PROJECT FUNDING
DEVELOPMENTS
The Company secured US$244.5 million project finance
package which provides the Group with sufficient funding
through to the production of the Vares Project. The package
consists of:
• US$142.5 million project finance debt package from Orion
Resource Partners, comprising US$120 million in senior
secured debt, and a US$22.5 million copper stream; and,
• An equity raise of US$102 million, which included a US$50
million subscription from Orion Resource Partners, and
issuing 49.4 million new ordinary shares in total
The Company had a cash balance at 31 December 2021
of US$112 million (£83.2 million) and, subject to satisfaction
of customary conditions precedent to financial close, an
undrawn debt facility of US$142.5 million.
Geoff Eyre
Chief Financial Officer and Joint Company Secretary
(In GBP)
Other receivables
and prepayments
Accounts payable
and accrued
liabilities
Cash and cash
equivalents
1,640,650
654,514
986,136
(3,192,638)
(1,900,436)
(1,292,202)
83,170,040
29,580,538 53,589,502
Working capital
81,618,052
28,334,616 78,783,436
The Groups working capital position at 31 December 2021
was (£1,841,088), a decrease of £595,166 compared to 31
December 2020, primarily as a result of accrued liabilities
in respect of 2021 STIP payments and the debt financing
completed shortly after 31 December 2021.
Net cash position
(In GBP)
Cash and cash
equivalents
Short-term
borrowings
Long-term
borrowings
(including
embedded
derivative liability)
Net cash
position
At 31
December
2021
At 31
December
2020
Change
83,170,040
29,580,538 53,589,502
-
(105,515)
(105,515)
(13,730,790)
(14,635,385)
(904,595)
69,439,250
14,839,638 54,599,612
The cash balance at 31 December 2021 was £83,170,040,
an increase of £53,589,502 compared to 31 December 2020.
Combined short term and long-term borrowings at 31
December 2021 totaled £13,730,790 (31 December 2020:
£14,635,385) which relates to 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 2021 was
£69,439,250, an increase of £54,599,612 compared to 31
December 2020, primarily as a result of cash inflows from
financing activities as noted in the cash flow commentary.
5858
ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION The strategic report of Adriatic Metals PLC on the preceding pages was approved and authorised for
publication by the Board of Directors on 29 March 2021 and was signed on its behalf by:
Michael Rawlinson
Chairman of the Board
5959
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION STRONG CORPORATE
GOVERNANCE PRACTICES
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE CODE – QCA DISCLOSURE STATEMENT
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.
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 and a
full description of our compliance
with the QCA code can be found on
our website:
https://www.adriaticmetals.com/
corporate-governance/
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.
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.
60606060
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION a) Board Composition
As at 31 December 2021, the
Board comprised a Non-Executive
Chairman, a Managing Director and
Chief Executive Officer, and four
other independent 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.
b) Board Performance Effectiveness Review
The interviews were structured to seek the Directors’ views on
a number of subject areas including those outlined below.
• 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 and interpersonal dynamics
• Focus on leadership and corporate culture. Including
succession planning.
• A review of strategic oversight and direction
• Discussion on the provision of information – focus,
relevance and quantity
• Views on governance and the composition and the
workings of the main Board Committees was evaluated.
Discussion around risk management including evaluation and
reporting.
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
1
2
0
2
r
e
b
m
e
v
o
N
1
2
0
2
r
e
b
m
e
c
e
D
Board discussion of findings and
action plan for implementation
The most recent board performance effectiveness
review was undertaken internally during November
and December 2021 through one-to-one interviews
conducted by Michael Rawlinson following his
appointment as Chairman and supported by the
Company Secretaries.
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CORPORATE GOVERNANCE REPORT - CONTINUED
As part of the board’s performance evaluation and within the remit of the Nominations Committee, the Adriatic Board undertook
a skills self-assessment matrix review. The skills categories chosen were all discussed and noted would be required as Adriatic
moves from its development phase into a construction phase and ultimately production/steady state. The outcome of the self-
assessment was as follows:
Adriatic Board Skills Matrix Self Assessment Dec-21
M&A
Social & Community Management
Environmental Management
Corporate Governance
International/Balkan experience
Capital Management & Legal
Stakeholder Relations
Information Technology
Commodity Markets & Hedging
Treasury & FX Hedging
Risk Management
Financial Reporting
Project Development & Operations
Project Evaluation & Feasibility Studies
Exploration
Strategy
0
1
2
3
4
5
6
Expert - Deep knowledge / formal qualification or experience over many years
Moderate - Moderate skills / experience – knowledgeable but not highly skilled
Aware - Some knowledge and can follow a discussion
2021 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.
The principal observations and
recommendations arising from the
2021 Board Performance Effectiveness
review process were as follows:
Overview
• During 2021 Adriatic has achieved
all of its major milestones, including
permitting, the Vares Project
Feasibility Study, the ESIA, people
hires, culture setting and funding.
This is a tremendous achievement
in this most difficult of times under
COVID-19.
• There is a strong basis of trust
between the board and the
management team with good
underlying transparency.
• There is high confidence in the
management team. The Board have
been impressed in the quality of the
new hires and team build out.
• There is strong evidence of setting
and promoting a sound and ethical
corporate culture across the
Company.
• The nature of the risks facing
the Company will change as we
continue to transition to being a
developer and producer which will
require greater focus for the board
and management.
Value and role of the Board
There is a sense that the effectiveness
of the board has been hampered during
the year because of COVID-19 and
the associated lack of face-to-face
meetings for board and management
andsite visits by NEDs.
Board members are broadly happy
with the size of the board and the
skills it has. The annual skills matrix
was undertaken and the feeling is that
we the Board has the right number of
directors with the appropriate skills.
There is a strong sense from
management that the Board exercises
its oversight obligations seriously and
is available for input as necessary.
However, it is felt that the Board could
be more effective in mentoring, bringing
unsolicited advice and fostering the
embedding of corporate culture with
periodic physical presence in Bosnia &
Herzegovina and Serbia.
Recommendations:
• Travel restrictions notwithstanding
NEDs to try to get to site in early
2022 and with more frequency
thereafter.
62626262
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Focus on major challenges
There was a strong sense that the
board was spending the appropriate
time and focus on the things that
mattered and general confidence
that we are changing our focus
appropriately. However, with the
Committee specialization certain board
members felt ‘out of the loop’ on
evolving areas of risk.
Recommendations:
• Committee Chairs to explicitly report
to the Board on salient points from
sub-committee meetings.
Strategic insight
The Board supportive of a multi-mine
strategy but it is one which needs
regularly revisiting as we become
a producer to define commodity,
geographic focus and Project scope.
The Board aims to provide more input
to management during 2022 around
potential opportunities.
Recommendations:
• Management to host a strategy
session in Q1 2022 covering
strategic focus with business
development team and advisors.
Insight into the business and
information flows
The members of the Board feel we
have the right level of cadence with
Board meetings. Monthly meetings
are essential at the moment as
the Company goes through the
development phase at the Vares
Project.
Quarterly meetings are to have a more
fulsome agenda and at least two in
person Board meetings should take
place at site each year.
The information in the Board papers
is seen as high quality and detailed.
However, summarised bullet point
executive summaries from Department
Heads covering key areas of focus and
concern would help direct the Board
focus during Board meetings.
Risk discussion
The Board recognises it needs to
keep on top of key risks and that the
nature and scope of risks are evolving
fast as we ramp up development. The
Board is appreciative of the work by
management in maintaining the risk
register and this needs to be maintained
to ensure it is a live document for
consideration on a quarterly basis
highlighting how the risks have
changed. Recent changes in local geo-
politics and the transition to developer
are changing our overall risk profile
and the nature of the key risks we face
significantly.
Culture and behaviours
Culture and values have been a very
clear focus of management during
the year. It was felt that the CEO had
done a super job uniting the culture in
the Company and leading employees
to define and own their vision for a
sustainable Company. Investment in
a values workshop during the year,
signage and ongoing training were
seen as significant and impactful. A
real sense of pride and belonging by
employees locally was noted.
The Board agreed it is something we
need to stay on top of and can be
monitored in management reporting
including the employee survey that was
undertaken in December 2021. The
NEDs can also do more to promote
our values and culture by, for example,
undertaking more frequent visits to site.
Consideration was given to how the
Company can ensure our cultural and
values are adopted by our contractors
and suppliers. Failures on this front
represent a material risk for the
Company and are a key area of focus
for 2022.
People
The Directors recognise that the scaling
up of the workforce has been a real
challenge this year. That said the new
systems and processes around hiring,
job roles and renumeration have been
formalised over the course of the year
which is a real achievement.
It was felt that more could be done
to map out key hire requirements and
succession planning that was initially
undertaken by the Remuneration
& Nominations Committee at the
beginning of the year.
Board dynamics
The Directors are happy with how
Board is running but recognise the need
to summarizing initiatives and issues
raised at the committees to the wider
board.
The Directors desire to meet corporate
governance best practice and ensure
the Company holds two NED-only
meetings each year.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION CORPORATE GOVERNANCE REPORT - CONTINUED
d) Director Commitments
e) Board Meetings
(also see Remuneration &
Nominations 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.
The Board meets formally once per
month, 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-19 restrictions, the entire
Board did not meet physically during
the period, though efforts were made
for those able to travel to congregate
together for meetings where productive
to do so.
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 are 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.
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.
64646464
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION A summary of attendance at Board meetings in the year ended 31 December 2021 is set out below:
Director
Michael Rawlinson
Peter Bilbe
Paul Cronin
Julian Barnes
Sandra Bates
Sanela Karic
John Richards
Independent
Maximum possible
attendance
Actual
attendance
Yes
Yes
No
Yes
Yes
Yes
No
12
12
12
12
12
12
-
12
12
12
12
12
12
-
Supplementary meeting was held during August 2021 attended by all six Board members to approve the Feasibility Study prior
to release.
Supplementary meetings were held during October 2021 during the Capital raise process, which included the following Board
members as set out below:
Director
Michael Rawlinson
Paul Cronin
Sandra Bates
Independent
Actual attendance
Yes
No
Yes
4
2
4
f) Board Committees
g) Audit & Risk Committee
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.
There is currently no internal audit
function, given Adriatic’s modest size,
although the Audit & Risk 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 & Nominations
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.
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. Periodic corporate reports
released to the market that are not
audited by an external auditor are
also reviewed and authorised for
release in advance by the Audit & Risk
Committee. 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.
The Audit & Risk Committee was
chaired during the year by Sandra
Bates. The other members of the
Committee were Michael Rawlinson
and Julian Barnes. 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 & Risk Committee Report
contains more detailed information on
the Committee’s deliberations during
the year.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION CORPORATE GOVERNANCE REPORT - CONTINUED
Committee attendance during the year:
Director
Sandra Bates (Chair)
Michael Rawlinson
Julian Barnes
Independent
Maximum possible
attendance
Actual
attendance
Yes
Yes
Yes
5
5
5
5
5
5
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.
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
are Non-Executives and independent
throughout the Period. The Committee
met six times 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 continued
to provide direct support to the
Committee members during the year,
but are anticipated to standdown
during 2022.
The ESG Committee Report contains
more detailed information on the
Committee’s deliberations during the
year.
Committee attendance during the year:
Director
Sanela Karic (Chair)
Michael Rawlinson
Peter Bilbe
Independent
Maximum possible
attendance
Actual
attendance
Yes
Yes
Yes
6
6
6
6
6
6
i) Remuneration & Nominations Committee
The Remuneration & Nominations
Committee, which comprises three
independent directors, assists the
Board in monitoring and reviewing
any matters of significance affecting
the composition of the Board and the
Executive Team including:
• 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 Remuneration & Nominations
Committee also assumes general
responsibility for assisting the Board
in respect of remuneration policies
for the Company and to review and
66666666
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 other
senior management 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
and at the date of the Annual Report
were Julian Barnes and Sandra Bates.
The Remuneration & Nominations
Committee Report contains more
detailed information on the Committee’s
role and the Directors’ remuneration
and fees.
Committee attendance during the year:
Maximum
possible
attendance
Actual
attendance
Director
Independent
Peter Bilbe (Chair)
Julian Barnes
Sandra Bates
Yes
Yes
Yes
2
2
2
2
2
2
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION j) 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.
k) List of Directors
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.
Michael Rawlinson, Non-Executive Director
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 a Senior Independent Non-Executive Director at Hochschild Mining, an Independent
Non-Executive Director at Capital Limited and an Independent Non-Executive Director at AfriTin Mining
Limited.
Peter Bilbe, Non-Executive Director
Mr. Bilbe is a mining engineer with over 40 years Australian and international mining experience in gold,
base metals and iron ore in operational, CEO and board positions. He is currently a Non-Executive Director
of Horizon Minerals Ltd, an emerging gold producer and until November 2021 was Chair/Non-Executive
Director of IGO Ltd, an ASX100 company.
Paul Cronin, Managing Director and Chief Executive Officer
Mr Cronin is a co-founder and Director of Adriatic and is Executive Director of ASX listed Black Dragon Gold
Corp and a Non-Executive Director of ASX Listed Taruga Minerals Limited. 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
Dr. 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
and development. Dr. 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. She is a
risk assessment specialist and brings extensive experience of guiding clients in the natural resources sector
through complex negotiations often with a cross-cultural element. Ms Bates is a partner at Keystone Law, the
London based law firm, a member of Women in Mining UK and was previously a Non-Executive Director of
LSE listed Pensana plc.
Sanela Karic, Non-Executive Director
Ms Karic, a Bosnian national, has over 15 years’ experience as a lawyer and a career spanning corporate
affairs, mergers and 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 &
Herzegovina’s largest diversified industrial corporation.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ASX ADDITIONAL INFORMATION
CORPORATE GOVERNANCE REPORT - CONTINUED
l) Board Advice During the
Period
m) Internal Advisory Roles
i) Company Secretary
Critical Resource, as subsidiary of
the ERM Group were engaged during
the year to support the work of the
recently formed ESG Committee.
H2Glenfurn were engaged to advise
the Renumeration Committee on its
renumeration policy.
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. A
summary of the findings from the 2021
Board evaluation are set out in section
b above.
68686868
ADRIATIC METALS PLC ADRIATIC METALS PLC
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ASX ADDITIONAL INFORMATION
n) 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. In 2021, Sanela
Karic attended a Non-Executive
Director training course at the University
of Reading.
i) Succession Planning
The Board has an emergency
succession plan for the senior
management team. 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.
69696969
Annual Report for the Year Ended 31 December 2021 EFFECTIVE OVERSIGHT OF RISKS
AND FINANCIAL REPORTING
AUDIT & RISK COMMITTEE REPORT
I am pleased to present this report on the
activities of the Audit & Risk Committee
“the Committee” for the 12 months ended
31 December 2021.
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 2021, five meetings of the Committee
were held during the year, and the following significant issues were considered:
Sandra Bates
Chair of the Audit & Risk Committee
Significant
issue
Summary of Significant Issue
Actions and Conclusion
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.
FS completed with Project NPV of US$1,062 million
and build cost of US$168.2 million
Equity raise successfully closed on 29th October and
Orion debt documents were executed with the aim of
providing the Group with sufficient funds to complete
the Vares mine construction and ongoing owner costs
until production commences in Q2 FY23 and the
business becomes self-sustaining from cash flows from
operations.
Definitive documentation executed for the US$142.5
million Project Finance Debt Package with Orion
announced on 10 January 2021.
Refreshed budget show that substantial headroom
remains based on assumption debt documents are
agreed in line with term sheet on 12 month view as
funding in place to cover the approx. 18 month build.
Analysis regarding sensitivities have been considered
simultaneously as slippage delay to commencement of
production up to 10% increase in build costs.
The Directors therefore considered the going concern
to be appropriate.
70707070
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Significant
issue
Summary of Significant Issue
Actions and Conclusion
Property
plant and
equipment
carrying value
The Group’s total property plant and equipment,
including mine under construction of £22,079,729
(31 December 2020: £969,464) are material to the
Group’s balance sheet.
Property, plant and equipment and intangible
assets with finite lives are reviewed for impairment
if there is an indication that the carrying amount
may not be recoverable.
The value in use of an asset is the expected future cash
flows that the asset in its current condition will produce,
discounted to present value using an appropriate
discount rate.
The sensitivity of the Vares Project to key project inputs
is considered within the Feasibility Study. Post-Tax NPV
8% US$ 1062 million (GBP 785 million) was assessed.
Analysis of sensitivities such as changes to metals
price, operating costs, initial capital cost and head
grade, shows that significant headroom exists over
carrying value of Vares Tangible assets (£22,059,745).
The carrying value of Property, plant and equipment
appears to be supported.
QRC
Convertible
loan
The accounting and disclosure of the convertible
loan note payable of £11,880,828 (31 December
2020: £11,590,172) and its embedded derivative
liability value £1,849,962 (31 December 2020:
£3,045,213) is a complex area because the
embedded derivate liability 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 which was revalued as
at 31 December 2021.
With reference to IFRS 10 an assessment of control has
been performed to determine whether the company
controls the Adriatic Foundation.
The conclusion of this assessment is that whilst the
company has power over the Foundation, it does not
have the ability to use its power to affect the company
returns. The Foundation statute prevents neither
the Company as the founder, nor any other person
associated with the Foundation to directly or indirectly
derive profit or any other material or financial benefit
realized through the purposes and activities of the
Foundation. The Directors have therefore concluded
that the Company does not control the Foundation
and as a result the Foundation is not included in the
consolidated financial statements of the Group.
The Company has the ability to appoint the Board of
Trustees of the Foundation and hence transactions
between the Company and the Foundation have been
classified as related party on the basis of the company
yielding significant influence.
Management undertook specific review procedures to
ensure that all direct costs relating to the Placing and
Orion Equity Subscription were appropriately charged
to the share premium account.
The Adriatic Foundation (the “Foundation”) is a
not-for-profit trust which was created in Bosnia &
Herzegovina with the objective of supporting the
communities around the Vares Project. Adriatic
Metals PLC provided the initial funding required for
the formation of the Foundation.
Consideration needs to be made as whether the
Group controls this entity and if so, at what point
did this control pass to the group.
Adriatic
Foundation
Assessment
of Control
Vares Project
Financing –
Equity Raise
In addition to the Orion Debt Financing, the
Company conducted an equity raise of up to
approximately US$102.0 million (the “Equity
Fundraise”), consisting of:
• a conditional placing to raise gross proceeds
of up to approximately US$52.0 million (the
“Placing”)
• a conditional equity subscription for
US$50.0 million by Orion (the “Orion Equity
Subscription”).
The Placing and Orion Equity subscription were
completed during the year ended 31 December
2021.
These accounting and disclosure of the Equity
raise is considered to be a complex area.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION AUDIT & RISK COMMITTEE REPORT - CONTINUED
Summary of Significant Issue
Actions and Conclusion
Significant
issue
Functional
Currency
Share Based
Payments
Following securing the US$244.5 million Project
finance package which provides the Group with
sufficient funding through to the production of
the flagship Vares Project. The package included
US$142.5 million Project Finance Debt Package
from Orion Resource Partners, comprising
US$120.0 million of senior secured debt, and a
US$22.5 million copper stream both denominated
in USD.
Functional currency of each legal entity needs to be
assessed on an ongoing basis to determine whether
its base currency remains appropriate.
Share based payments expense is stated at fair
value at the time of grant using the Black-Scholes
Option Pricing Model.
Calculation requires a number of inputs, as
detailed in Note 15f including Risk-free interest
rate, expected volatility, expected life, fair value per
option.
Serbia
Business
Carrying
Value
With over 12 months having passed since the
acquisition of the Tethyan Resource Corp group, it
was considered whether there were any indicators
of impairment and whether the carrying value of
the Raska Project £24.4m arising on acquisition
remained appropriate.
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.
Management undertook a review on an entity-by-entity
basis to determine the impact of the anticipated debt
financing as well as commencement of the construction
phase of the Vares Project.
No trigger for functional currency change has occurred in
the year to 31 December 2021.
Consideration by the audit committee will be given
in the subsequent financial year given Orion debt
documentation was finalised on 11 January 2022 as
disclosed in subsequent events note in Group Financials.
Management used inputs from impartial external sources
in order to appropriately calculate share based payments
reserve postings and share based payments expense
during the year.
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.
Further expansion of drilling program is budgeted for
2022 and the Group aims to produce an internal scoping
study.
For further assurance over the value of exploration and
evaluation assets capitalised, management obtained a
resource estimate from Forge International estimate, an
independent third-party organisation. This comprised an
additional stage of preliminary Resource modelling, this
time using both the historical and modern data sets.
The results of which were compared to the market
capitalisation of comparative listed single asset projects
in which the Raska Project valuation did not appear
unreasonable compared similar projects.
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.
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 year 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.
72727272
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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
Annual Report for the Year Ended 31 December 2021
73737373
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION FOCUSING ON ACHIEVING
COMMUNITY EXPECTATIONS
ENVIRONMENTAL, SOCIAL & GOVERNANCE COMMITTEE REPORT
In many ways the operational successes achieved during the year
have validated the Company’s commitment to developing a strong
environmental, social & governance (ESG) framework.
In many ways the operational
successes achieved during the
year have validated the Company’s
commitment to developa strong
environmental, social & governance
(“ESG”) framework. The timely issuance
of exploitation and environmental
permits required community, municipal,
cantonal, federal and wider civil society
support for the project. Further the
completion of the first internationally
compliant natural resources ESIA
was received extremely well by our
host communities and at all levels
of government. During the public
disclosure period the Company
presented the findings of the ESIA
to a wide range of stakeholders.
Constructive comments were received,
particularly during the Vares “town-hall”
meetings and these will be incorporated
into a revised ESIA and its associated
Environmental & Social Action &
Management Plans and which are
scheduled for completion in February
next year.
The COVID-19 pandemic has continued
to present a challenge to both the
Company and our host communities
but with ever increasing experience at
both managing and mitigating these
impacts, life moves on. The impact
of increasing staffing levels at the
Company and the associated uplift of
the local economy is already noticeable,
even ahead of full construction
activity. The employment, and return
to Vares, of a number of members
of the diaspora has been particularly
gratifying.
The Company purchased a number
of land plots in Rupice in the period,
required for the mining surface
infrastructure. The acquisition of land
is often contentious but under the
provisos of EBRD’s Performance
Requirement 5 an independent expert
helped the Company to develop its
Land Acquisition Compensation &
Livelihood Resettlement Plan. The result
being that all land plots required were
acquired under a willing seller, willing
buyer principle.
Since the Autumn we have been
monitoring the environment protests
in Serbia, against Rio Tinto’s Jadar
Lithium Borate project, closely. Whilst
it has been disturbing to see the level
of public disquiet and the fracturing of
the relationship between a development
project, it’s host communities and
government, neither our operations
in Vares or Raska have received
any criticism to date. Transparent,
honest, and open communication
and engagement is working for the
Company, and this will continue.
The Adriatic Foundation, which
strengthens the symbiosis between
the mine and its host communities
was established in the summer.
After a seed capital donation from
the Company and a personal gift of
shares by the Company’s CEO, the
Foundation has to date received over
€500,000 in donations. In addition,
a commitment has been made by
Orion Resources Partners to donate
€100,000 a year during its financing
tenure. We are particularly proud of the
Foundation’s first initiative, the award
of 29 scholarships to high school
children from Vares, Breza and Kakanj
municipalities.
Sanela Karic
Chair of the Environmental, Social &
Governance Committee
74747474
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Looking forward to 2022 there are
many challenges ahead, notably the
translation of best intentions and
policies into the practical reality of
not only retaining but strengthening
our license to operate during project
construction. To do this the Company
must build on the work completed
during the year; focusing on achieving
community expectations of employment
and economic benefit, developing
and adhering to strict contractor
management plans, integrating the
full requirements of the Environmental
& Social Management Plans into its
operations and maintaining its open
and transparent dialogue, and whilst
doing so continue to listen as well, with
its external stakeholders.
A community development plan is
under review, capturing initiatives
such as micro-finance to assist
start-up businesses, encouraging
suppliers to open facilities within the
municipality and the development of
the municipality’s first private health
clinic. This clinic, as well as providing
for the Company’s employees and their
families will offer services not currently
available to the wider community and
by cooperating with the state health
care system it will reduce pressure
on their finite resources and enable
a considerably higher level of service
across the board.
The ESG committee met six times in
the period. Under the external best
practice advisory of Critical Resources,
the Committee is operating effectively,
supporting and where required
challenging the executive management.
Critical Resources’ direct support to the
Committee will end in Spring 2022 and
I am confident that we are ready and
equipped to support the development
stage of the project.
Sanela Karic
Chair of the Environmental, Social &
Governance Committee
Composition of the ESG Committee
Sanela Karic, Non-Executive Director – Chair
Michael Rawlinson, Non-Executive Chairman - Member
Peter Bilbe, Non-Executive Director – Member
Dominic Roberts, Head of Corporate Affairs – Secretary
Edward Bickham, Director Critical Resources – Advisor
Primary ESG Activity & Focuses in 2021
Corporate Vision and Values
The Company ran a “Vision and Values” development programme in June
culminating in a two-day workshop and Company-wide staff consultation exercise.
This resulted in the adoption of a set of Visions and Values that now act as a
core tenet to all the Company’s operations and particularly its attitude towards
engagement with our external stakeholders. At the end of the reporting period
our Vision and Values have permeated throughout all activity, are prominent
both physically in the branding of our offices and subjectively in the actions and
behaviors of our staff.
Public Disclosure of the ESIA
The Project’s ESIA was made published on 27th October 2021. The full ESIA was
made available through both the Company’s websites and EBRD’s. Non-Technical
Summaries (NTS), printed in both Bosnian and English, were widely distributed to
external stakeholders and copies made available in the Info Centre. A programme
of disclosure events was coordinated by the Company’s ES team, allied to a media
campaign that spotlighted the findings of different chapters of the study on a week-
by-week basis. Formal disclosure events included:
• Presentation to the Public Liaison Committee;
• Meeting with representatives of local communities: Pržići, Daštanko, Borovica,
Vareš, Vareš Majdan, Pogar, Dragovići, Mir;
• Distribution of the NTS to near-mine communities at both Rupice and Veovaca;
• Focus group I - Associations for the Protection of Wildlife, Fishing, Hunting and
Beekeeping;
• Focus group II - Scout Association Vareš, Tourist Info Bureau, Vareš Library;
• Focus group III - Religious communities;
• Vareš Municipal Council;
• Vares “town-hall” event; and
• Sarajevo presentation to government, academics and members of the civil
society.
75757575
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION ENVIRONMENTAL, SOCIAL & GOVERNANCE COMMITTEE REPORT - CONTINUED
Health Impact Assessment
Diversity
The Committee has set a target of a 25% female workforce
at senior level. At the time of setting this target, the Company
employed 25% female staff within the Vares workforce, with
33% on its board, 25% senior executives. It is appreciated
that with the engagement of the main mining contractor
and commencement of construction in 2022 this target is
ambitious, but one the Company feels is required.
The Company is in discussion with the international branch of
Women in Mining to open a Balkans “chapter” in the coming
year.
During the ESIA community interviews the Company became
increasingly aware of concerns about both perceptions of
the historic mining operation’s impact on health and the
generally poor provision, particularly of primary healthcare,
within the local municipalities. A Health Impact Assessment
(HIA) was commissioned, concurrent to the ESIA progress.
The findings of the HIA confirmed a number of issues with the
provision of primary healthcare and importantly identified that
the increasing population numbers, allied to the development
of the project, would put strain on current facilities. The
Company has entered an agreement with Eurofarm, Bosnia
& Herzegovina’s leading private healthcare provider to open a
clinic in Vares in 2022.
This clinic will provide primary healthcare to the staff and
families of the Company and the local population will have
the right to elect to use this instead of the state facilities. In so
doing the impact of the project’s population increase will be
mitigated and overall healthcare standards in the municipality
are anticipated to improve.
“As the president of the local community of Borovica,
I sincerely hope and want this company to start
production at full capacity with maximum respect
for environmental protection. This is the only chance
for the prosperity of our Municipality of Vareš. This
project will employ young people, find their places in
this company, form their families and thus improve
the demographic picture of our Municipality of Vareš,
which is currently in poor condition. We as a local
community want a fair and honest cooperation as we
have had so far. I sincerely believe that our requests
presented during public discussion held in August to
be fully met. Our agreements so far have been sincere
and fruitful. The catchphrase says: “Where there is no
communication, complications arise. Bravo!””
Grga Vukanćić,
Transparency
The Company has committed to work with its host
governments in both Bosnia & Herzegovina and Serbia and
encourage them to join the Extractive Industry’s Transparency
Initiative (EITI). In Vares the Company is already paying
minimum concession fees, ahead of full fees once operations
commence in 2023, and the EITI is considered an important
tool to improve transparency of these fees across the wider
population.
76767676
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Contractor Management
Procurement Policies
In preparation for a construction decision there has been
careful consideration of the requirement for strict contractor
management systems and procedures; to ensure that the
Company’s high ESG standards and performance to date is
maintained through any contracted third parties. A number of
external experts, including Critical Resources, were consulted
and the findings have been incorporated into the Company’s
contract management philosophy.
Health & Safety
Pursuant to our overriding commitment to providing and
maintaining a physically and psychologically safe workplace,
Adriatic have substantially progressed work towards
establishing our occupational health and safety management
system. The system is designed on the premise that ‘safety’
is an organisation’s understanding and management of
inherent risks with potential catastrophic consequences and
is the ability to repeatably plan and deliver work with a clear
understanding of the associated hazards and their controls.
The requirements of the safety management system
are designed to be easy to understand, and difficult to
misinterpret. Motivational and skills-based training and
engagement programs will provide our workforce with the
skills and commitment to create safe work. To this end,
Adriatic have partnered with Integral Risk Innovations (IRI) to
support the development of the OHS management system.
IRI are a firm of senior resource sector managers linked to
a network of experienced health, safety environment, risk
and operations support practitioners, with over 100 years
combined experience in global organisations through to
single-site operations.
Development of the system is designed in phases which are
designed to support the operational risk profile as it changes
with construction and commissioning phases.
During the Period the Company’s procurement policies have
been carefully developed to ensure the widest range of
potential suppliers. It is recognized that Bosnia & Herzegovina
is not an established mining jurisdiction and one without many
of the normal dedicated industry suppliers. But it is also clear
that there is the potential to not only utilise a large number of
national suppliers and service providers but also develop their
skills and standards in unison with the Project’s development.
The Company will commit to procuring locally where practical
and encourage all its suppliers to locate facilities near to the
mine and to employ and train local staff. Initiatives under
discussion at the end of the year include utilizing both EU and
EBRD funding to provide ISO accredited training to suppliers
and improving, particularly for SMEs, access to credit. The
Company’s pre-qualification questionnaires have been
specifically tailored to identify gaps in a potential supplier’s
policies and systems and to develop the wherewithal to
correct them ahead of contract award.
Skills Gap
Both Bosnia & Herzegovina and Serbia benefit from well
educated, motivated young workforces, who historically have
often migrated abroad to find employment opportunities.
The Company is clear that in both jurisdictions it can recruit
potential and in time develop that into senior engineering and
management. However, to do this the Company requires
a coherent learning & development programme and must
carefully explain to its host communities the processes
by which the international engineers will eventually make
themselves redundant in favour of local staff.
Co-funded by EBRD’s Private Sector Youth Initiative the
Company has facilitated the commencement in September
of a vocational mining course at Vares High School. Bosnian
students are streamed at 16 to follow either academic
education (the ultimate ambition being university attendance)
or vocational training. Since the end of mining in Vares in
1988 the High School’s vocational programme has been
limited to truck driving & maintenance, physiotherapy and
hairdressing. All skills that will benefit from the Project’s
construction. The Company had the opportunity to work with
the education authorities to develop the two-year course
syllabus and in 2023 this will be extended to an evening-
school format for members of the community to join and re-
skill. The Company has awarded bursaries to the students on
the mining course, and Company engineers provide visiting
lectures to the students.
77777777
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION ENVIRONMENTAL, SOCIAL & GOVERNANCE COMMITTEE REPORT - CONTINUED
Vares Info Centre Visitors 2021
International Staffing Levels
Visit reason
Adriatic Foundation
Job application
Employment information
Donations/Initiatives
Post services
Meetings
Eastern Mining employees
Investors and consultants
Covid testing
Other (PLC, Contractor visits,
Documentation)
Accomodation offers
Grievance/complaint
TOTAL
Visitors number
78
154
85
75
180
78
358
18
27
217
10
2
1,282
“The Vares Information centre was opened in 2019.
Since then I have worked as an Information Centre
Associate and I am also a resident of Vares. I am
content and proud of the way the Company interacts
with the local population, as well as accomplishing
the main objectives and purpose of Information
Centre - developing two-way cooperation with
local community. I’m delighted that I am able to be
at disposal to all stakeholders and to answer their
questions, to hear their feedback, to help them and
ensure that they feel included in the journey and part
of Vares Project”.
Almedina Likić,
Information Centre Associate
The Company is acutely aware of the problems
contemporaries have faced in addressing the balance
of national and international staff. Through regular and
open communication, the Company has advised the local
communities on the requirement and role of its international
staff and highlighted the ambition to reduce these drastically
over time through skills transfer. Where possible the Company
has also targeted the recruitment of mining professionals from
the diaspora. All vacant posts are advertised internally, locally
and nationally before internationally. A media campaign was
undertaken to introduce key international engineers to the
local communities and use this as an opportunity to explain
their role in capacity building.
Raska
The Company is using broadly the same roadmap in Raska
as it has done in Vares, where necessary tailored to the
different setting. Given that Raska is also a community
built on mining, and one that was badly affected when the
Yugoslavian mine, “Suva Ruda”, closed in the 1990s there
are many contextual similarities between the two projects.
The principal differences are the proximity to the Kopaonik
national park, the high levels of seasonal employment
associated with Kopaonik ski-resort and the proximity to the
Serbian/Kosovo border.
Alongside drilling operations, the Company’s ES team
has initiated baseline environmental studies, engages
regularly with the National Park and towards the end of the
period opened an info centre in Raska. Given the level of
environmental campaign against the industry and specifically
Rio Tinto’s Jadar project, the decision to open the info
centre was carefully considered. However, the feedback
from the local community and municipality was such that
the centre was opened successfully in December, with a
high level of attendance from a range of stakeholders and is
appreciated by the local population. Whilst it is anticipated
that the environmental campaign will calm after the general
elections in April, the Company is clear that is must carefully
consider the missed opportunities at other projects and
continue the work required to underpin its license to operate.
In the forthcoming period the Company will establish a
Public Liaison Committee through which it will increase
its engagement, particularly with the near-exploration
communities.
“All the activities undertaken by the Company so far
have been shown in a positive light. We hope that it
will be same in the future. The attitude towards young
people who are given a chance and an opportunity to
find themselves there is especially positive. We hope
that this will be a great economic shift for our local
community as well as for the Company.”
Halima Ahmedović
78787878
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION • Having received investment from the
European Bank for Reconstruction
and Development, Adriatic is
committed to implementing the
Bank’s Performance Requirements,
which constitute environmental
and social best practice. Adriatic’s
adherence to the Performance
Requirements is independently
audited.
• Adriatic engages regularly with its
investors on ESG to communicate
progress, collect feedback and learn
from their experience.
Development Environmental
Social & Governance
Narrative
As the Company moves into the
development phase of the Vares Silver
Project it will implement an increasingly
coordinated and strategic approach
to ESG in conjunction with the
development of Vares.
Adriatic’s Values and
Ambition
• Fundamentally, Adriatic believes
that it is most likely to succeed
when it works in harmony with the
expectations of its host countries
and societies.
• Adriatic is a responsible producer of
metals required for modern society,
including in the energy transition
(e.g. silver and copper).
• It aims to operate in a way that
minimises environmental and social
impacts and shares value with
stakeholders.
• In the communities where it
operates, Adriatic aims to work
respectfully, and in consultation
with, local people to leave a lasting
positive socio-economic legacy.
• The Company commits the
resources and professional expertise
needed to manage the complexity of
our business and relationships with
stakeholders.
• Adriatic is committed to responsible
environmental stewardship and to
the efficient use of resources such as
energy and water.
• It seeks to align its work (and that
of its contractors and suppliers) to
recognised ESG good practices.
• Adriatic’s core values reflect this
approach:
– People: we continuously strive
to ensure the well-being of our
employees and stakeholders
– Integrity: we act honestly and fairly
in all our business dealings.
– Transparency: we are transparent
with stakeholders about our
impacts and hold ourselves
accountable for our decisions.
– Sustainability: we act as
responsible stewards of our
environment.
How ESG fits into Adriatic’s
corporate strategy
• Adriatic believes that a responsible
approach to mining, with value
created for all its stakeholders, is the
foundation of success.
• The company is developing the
Vares Project in a manner that is
consistent with this belief, seeking
to maximise economic benefits for
our communities and nationally
while applying the highest standards
of environmental protection and
corporate integrity and providing
commensurate returns to investors.
• In the medium term, Adriatic believes
this approach is valid in other
countries and communities in Europe
and can underpin the company’s
ambition of becoming a multi-asset,
responsible metals producer.
How Adriatic governs ESG risks
with proper respect for the
expectations of stakeholders
• Responsibility for ESG performance
sits at the highest levels of the
company, with a dedicated Board
Committee providing oversight
and strategic direction and ESG is
integrated into the responsibilities of
Adriatic’s senior managers.
• ESG factors are embedded in to the
remuneration and incentivisation of
all senior managers.
• Adriatic has a rigorous risk
management process that
incorporates ESG factors, which
ensures that risks are captured,
monitored and mitigated, with
regular oversight from the company’s
Board.
• Adriatic has conducted an
Environmental and Social Impact
Assessment for the Vareš
project that conforms to rigorous
international standards, providing a
solid foundation for managing the
project’s impacts.
• Adriatic regularly engages and
works with stakeholders on ESG
issues, in particular in addressing
any concerns from local people.
The company has established
Public Liaison Committees in
the communities where it works
to provide a platform for regular
discussion and feedback.
Annual Report for the Year Ended 31 December 2021
79797979
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION REMUNERATION POLICY ALIGNED
WITH SHAREHOLDER INTERESTS
REMUNERATION & NOMINATIONS COMMITTEE REPORT
PART 1 - SUMMARY STATEMENT FROM THE CHAIRMAN
DEAR SHAREHOLDER
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 &
Nominations Committee Guide for small
and mid-sized quoted companies,
revised in 2018. A summary 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 year
ended 31 December 2021,
reflecting the arrangements in
place during that year.
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.
Prior to 1 January 2021, the approach
to executive remuneration had 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 did not correspond to specific
one- or three-year financial periods.
With effect from 1 January 2021, the
Company implemented a structured
short-term cash-based incentive plan
(STIP) to operate on an annual basis.
The Company also intends to operate a
structured long-term incentive strategy
entailing awards of performance rights
granted annually subject to relative
shareholder return and corporate
targets with the first awards being
granted to eligible 2021 new joiners in
January 2022 and to pre-existing staff,
including the Executive Director/CEO, in
the first quarter of 2023. Further detail
on forward remuneration is set out at
the end of this remuneration report.
Paul Cronin our CEO receives base
remuneration split between Director’s
fees and consultancy fees paid by
the Company and it’s wholly owned
subsidiary Eastern Mining d.o.o.
Mr Cronin also participated in the
Company’s STIP during the year. There
is no pension or benefits. A number
of legacy non-annual KPI cash bonus
targets set for achieving specific targets
were achieved during the year and Mr
Cronin benefitted from the vesting of
Peter Bilbe
Chairman of Remuneration Committee
On behalf of the Board, I am pleased
to present the Remuneration &
Nominations Committee Report, which
sets out the remuneration policy and
the directors’ remuneration for the
year ended 31 December 2021. 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
80808080
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION performance rights during the year that
were granted historically reflecting his
contribution to the development of the
Company when his cash remuneration
was substantially below commercial
levels.
Historically, 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
further 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.
As previously reported the Executive
Director’s base remuneration was
increased with effect from July 2021
and increase the fee levels of the
Chairman and Non-Executive Directors
from 1 January 2022 as reflected later
in this document. No further option
awards will be granted to the Chairman
or Non-Executive directors.
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.
Remuneration & Nominations
Committee
Remuneration & Nominations
Committee meetings are normally held
at least once a year and met twice
during the year ended 31 December
2021. 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.
The Remuneration & Nominations
Committee comprises Peter Bilbe
(Chair), Julian Barnes and Sandra
Bates, all of which have deemed by the
Board to be independent.
Context within which
Remuneration managed
As detailed elsewhere in this annual
report, during the year the Company
achieved considerable progress
towards our main objective of
developing the Vares 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 year
The principal decisions in respect of
remuneration taken during the year
were:
• Awards of performance rights to the
following senior staff during the year,
Head of Corporate Development
& Investor Relations and Project
Director neither of whom are
Directors;
• 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 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.
• Approving the vesting of
performance rights held by the CFO,
COO and Head of Corporate Affairs,
none of whom are directors, in
December 2021.
• Approving the payment for two non-
annual cash KPI bonus to the CEO.
• Reviewing the outcomes from the
annual board effectiveness review
and making recommendations to the
Board.
• Approval of the CEO’s base salary
increase from £218,570 to £268,241
with effect from 1 July 2021.
Principal actions and
decisions after the year end
The Remuneration & Nominations
Committee approved the Annual STIP
bonus outcomes and associated
bonus payments to the CEO and senior
management, as well as setting the
KPI targets for the 2022 Annual STIP
bonus.
Determining the level and performance
condition attached to LTIP and ad-hoc
performance rights awards made to
staff in February 2022, none of whom
were directors.
AGM
At our AGM held on 20 May 2021,
the annual advisory resolution to
approve the binding resolution on our
Remuneration Policy contained in our
31 December 2021 Annual Report was
approved with the support of 97.7%.
The Directors are not aware of the
reason for the modest vote against.
Since there were no changes made
to the existing remuneration policy
(that was approved at the AGM on
6 November 2020), there was no
requirement for its approval at the
AGM held on 20 May 2021. The
remuneration policy is required to be
put to shareholders every three years
unless there are changes.
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
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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 Managing Director
and 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.
Up to January 2021, the approach
to remuneration was 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 & Nominations
Committee (Remcom) and
reviewed annually. 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
None.
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.
None.
82828282
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Element
Bonus
Purpose and link to
remuneration policy
Rewards and
incentivise the
achievement of
annual objectives
which are aligned
with key strategic
goals and supports
the enhancement of
shareholder value.
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
Non-
Executive
share
awards
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.
To help recruit,
retain and motivate
appropriately skilled
Non-Executive
Directors and
align them with
shareholders.
Applicable performance
measures
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.
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.
Key features and operation
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.
Bonuses may be paid in shares
at the Committee’s discretion.
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.
Maximum
opportunity
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.
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
and/or new strategic
periods, market value at
award may be up to 300%
of salary.
Existing arrangements are
set out in the annual report
section below.
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.
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. Beyond
this, only modest awards,
with a market value up to
£50,000 may be made to
the Chairperson or Non-
Executive Directors.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION REMUNERATION & NOMINATIONS COMMITTEE REPORT - CONTINUED
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.
Since there were no changes made to
the existing remuneration policy there
was no requirement for its approval at
the AGM held on 20 May 2021.
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.
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.
Malus and claw back
Prior to 2021, 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. Bonus
and long-term incentive awards from
2021 onwards will have malus and claw
back provisions attached in line with UK
governance best practice.
POLICY PROVISIONS RELATING TO
EXECUTIVE DIRECTOR’S REMUNERATION
Illustration of application of remuneration policy
An illustration of the application of the
remuneration policy for 2022 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.
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
£0
£100,000
£200,000
£300,000
£400,000
£500,000
£600,000
MINIMUM
BASE SALARY
£259,500
FY22 TOTAL: £259,500
ON TARGET
BASE SALARY
£259,500
2022 ANNUAL STIP
£194,625
FY22 TOTAL: £454,125
MAXIMUM BASE SALARY
£259,500
2022 ANNUAL STIP
£259,500
FY22 TOTAL: £519,000
The charts provide estimates of the
potential future reward opportunities
for the Executive Director for the
year ending 31 December 2022,
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 achievable STIP
bonus being 100% of base salary.
Under the policy LTIP programme
awards to the CEO will recommence
from 1 January 2023 onwards and will
not for part of the CEO’s remuneration
in 2022.
The illustration does not include the
5,000,000 vested options held by Mr
Cronin and expiring on 1 July 2023
which were granted to founders of the
Company in April 2018 at the time of
the Adriatic’s listing on the ASX.
There are presently no other Executive
Directors.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
How employee pay is taken
into consideration
Approach to remuneration
on recruitment
Executive Director’s service
contracts
When determining remuneration
policy and arrangements for Executive
Directors, the Remuneration &
Nominations 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 &
Nominations Committee did not consult
with its employees in formulating this
policy.
Shareholder views on
remuneration
The Chair of the Remuneration &
Nominations 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 & Nominations
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.
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 & Nominations
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 & Nominations
Committee would generally seek to
align the remuneration package offered
with the Company’s remuneration policy
outlined in the table above. However,
the Remuneration & Nominations
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.
Prior to 1 January 2021, the services
of the CEO and Managing Director had
been provided under a service contract
between the Company and Swellcap
Limited with a commencement date of
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.
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.
The contract is not of a fixed duration
and is terminable by either party giving
six months’ written notice. Contracts
entered into with Executive Directors
have a notice period not exceeding 12
months.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION REMUNERATION & NOMINATIONS COMMITTEE REPORT - CONTINUED
POLICY PROVISIONS RELATING TO EXECUTIVE DIRECTOR’S REMUNERATION - CONTINUED
Policy for payments for loss of office - 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 &
Nominations 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 &
Nominations 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 &
Nominations 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 &
Nominations 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 & Nominations
Committee believes it is in the best
interests of the Company.
The Remuneration & Nominations
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 & Nominations
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
An 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
& Nominations 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 & Nominations
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 &
Nominations 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
& Nominations 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 & Nominations
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
& Nominations 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.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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.
Non-Executive Director
Appointment date
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates
Sanela Karic
4 March 2019
16 February 2018
16 February 2018
11 November 2019
3 August 2020
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
& Nominations 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 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.
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 terms and conditions of
appointment and letters of appointment
of Non-Executive Directors and
all the Directors’ service contracts
are available for inspection at the
Company’s registered office.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION REMUNERATION & NOMINATIONS COMMITTEE REPORT - CONTINUED
PART 3 – REMUNERATION REPORT (AUDITED)
The Group paid the following remuneration to each Director:
(In GBP)
Year ended 31 December 2021
Executive Directors
Paul Cronin(5)
Non-Executive Directors
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates(1)
Sanela Karic(2)(4)
Total Salaries
and fees (A)
Cash
bonus (C)
Share awards
vesting in year (C)
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
243,406
167,437
1,088,550
1,499,393
243,406
1,255,987
50,000
29,465
30,000
30,000
18,844
-
-
-
-
-
-
-
-
-
-
50,000
29,465
30,000
30,000
18,844
50,000
29,465
30,000
30,000
18,844
-
-
-
-
Total Directors’ Remuneration
401,715
167,437
1,088,550
1,657,702
401,715
1,255,987
(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(5)
Non-Executive Directors
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates(1)
John Richards(3)
Sanela Karic(2)
106,859
23,333
16,642
15,000
15,000
642
78,533
Total Directors’ Remuneration
256,009
Notes:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
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. The Share awards which vested during the year were market value options and as such their entire value was attributable to share
price appreciation.
B. There were no taxable benefits in either the current year or prior period.
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.
Paul Cronin had Option Vesting during year, amount of award attributable to share price appreciation as follows:
Grant
Date
Number of
shares
Strike
Price
Share Price at
Grant Date
Value of
award above
market value
Vesting
Date
Share Price
at Vesting
Date
Value on
Vesting
Value
attributable
to share price
appreciation
29/11/2019
750,000
£0.013355
A$1.315
£506,927
09/12/2021
A$2.71
£1,088,550
£581,623
Award vested on completion of a JORC compliant definitive feasibility study. No discretion was exercised in determining whether the LTIP
vested.
Cash bonus for Paul Cronin comprised of £70,000 bonus paid during year (6 months to 31 December 2020; nil) and £97,437 of accrued STIP
bonus (6 months to 31 December 2020; nil), of which £48,718 was paid in January 2022, £48,718 payable in January 2023.
D. There were no pension related benefits in either the current year or prior period.
88888888
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
1 ) Appointed 11 November
2 ) Appointed 3 August 2020
3 ) Appointed 11 November
2019
2019, resigned 8 July 2020
4 ) Ms. Karic voluntarily chose to waive her 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 requested that the Company instead donates the equivalent
amount to the Adriatic Foundation . As a result Sanela Karic waived £9,477 of fees (equivalent to four months worth) which were paid over
to the Adriatic Foundation during the year.
5 ) Paul Cronin donated 250,000 of his personal shares in Adriatic Metals to the Foundation during the year.
No payments for loss of office were made in the current year or in the prior period.
Directors’ fees are paid monthly in arrears.
Paul Cronin was appointed CEO and Managing Director on 18 September 2019. His total remuneration during the year ended
31 December 2021 was £1,499,393 (six month period ended 31 December 2020: £106,859).
The 750,000 Performance Rights exercised by Mr. Cronin during the current year were granted on 29 November 2019 following
shareholder approval and vested on the test date of 9 December 2021 because the performance criteria of (a) completion of a
JORC compliant Feasibility Study; 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 2021 had been met.
Gains on the exercise of performance rights by Directors during the year ending 31 December 2021 were as follows:
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
9 December 2021
£0.013355
750,000
A$2.71
£1,088,550
There were no gains on the exercise of performance rights by Directors during the six-month period ended 31 December 2020.
Gains on the exercise of share options by Directors during the year ending 31 December 2021 were as follows:
Date of
Grant
Vesting
date
Date of
exercise
Exercise
price
Number of
performance
rights exercised
Share price on
date of exercise
Gain on
exercise
Peter Bilbe
Julian
Barnes
27 April
2018
27 April
2018
1 April
2019
1 April
2019
8 June 2021
A$0.30
900,000
A$2.75
£1,205,584
8 June 2021
A$0.30
1,000,000
A$2.75
£1,339,538
Gains on the exercise of share options by Directors during the six-month period ending 31 December 2020 were as follows:
Date of
Grant
Vesting
date
Date of
exercise
Exercise
price
Number of
performance
rights exercised
Share price on
date of exercise
Gain on
exercise
Peter Bilbe
27 April
2018
1 April
2019
20 November
2020
A$0.30
600,000
A$2.23
£641,782
The exercise price is calculated based on the share price at date of the agreement being entered into between the Company
and the Director and may not be the same as the share price on the date of grant due to timing differences arising as a result of
the ASX requirement for shareholders to approve all options and share awards to Directors.
The monetary value of vested share awards granted to each Non-Executive Director without performance measures or targets
included in total salaries and fees was as follows:
(In GBP)
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates
John Richards
Sanela Karic
Year ended
31 December 2021
6 months ended
31 December 2020
-
-
-
-
-
-
-
-
-
-
-
-
66,244
66,244
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
REMUNERATION & NOMINATIONS COMMITTEE REPORT - CONTINUED
PART 3 – REMUNERATION REPORT (AUDITED) - CONTINUED
Equity incentives
There were no grant of options to Directors of the Company during the year ended 31 December 2021.
The following options were granted to Directors of the Company during the six-month period ending 31 December 2020.
The options granted to Non-Executive Directors do not have performance conditions, vest immediately on the date of grant and
lapse three years from the date of grant:
Sanela Karic
6 November 2020
2.20
1,000,000
1,000,000
Date of grant
Exercise price (A$) 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 2021 that served during the
Period is set out below:
Paul Cronin
Peter Bilbe
Michael Rawlinson
Julian Barnes
Sandra Bates
Sanela Karic
Number of
Ordinary Shares
Percentage
of Issued
Share Capital
15,101,332
1,510,000
40,000
1,000,000
-
-
17,651,332
5.68%
0.57%
0.02%
0.38%
-
-
-
Number
of Options
5,000,000
900,000
1,000,000
1,000,000
1,000,000
1,000,000
8,000,000
Number of
Performance
Rights
-
-
-
-
-
-
-
In issue at 31 December 2021
266,073,240
12,212,480
990,000
Percentage held by directors that
served during the year
6.63%
65.51%
0.00%
As at 31 December 2021, all options in the table above held by Directors had vested.
90909090
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Remuneration of the Executive Director
The Company had a single Executive Director during the year and all comparative periods presented being those arising since
the Company listed on the London Stock Exchange in 12 December 2019. The Executive Director undertakes the role of
Managing Director and Chief Executive Officer (“CEO”).
The total monetary value of remuneration to the CEO was as follows:
(In GBP)
Cash remuneration:
Fixed base salary
Variable - Annual STIP bonus
Variable – Non-annual KPI bonus
Value of share awards vested:
Non-LTIP
LTIP
(In GBP)
Cash remuneration:
Variable - Annual STIP bonus(1)
Variable – Non-annual KPI bonus
Value of share awards vested:
Non-LTIP
LTIP(2)
(In GBP)
Cash remuneration:
Variable - Annual STIP bonus(1)
Variable – Non-annual KPI bonus
Value of share awards vested:
Non-LTIP
LTIP(2)
Notes:
Year ended
31 December 2021
6 months ended
31 December 2020
Year ended
30 June 2020
243,406
97,437
70,000
1,088,550
-
1,499,393
106,859
-
-
-
-
106,859
208,158
-
30,000
620,731
-
858,889
Maximum opportunity as a percentage of base salary
Year ended
31 December 2021
6 months ended
31 December 2020
Year ended
30 June 2020
50%
28.6%
447.2%
-
-
-
-
-
-
14.4%
298.2%
-
On-target performance bonus as a percentage of base salary
Year ended
31 December 2021
6 months ended
31 December 2020
Year ended
30 June 2020
37.5%
28.6%
447.2%
-
-
-
-
-
-
14.4%
298.2%
-
1. STIP programme commenced 1 January 2021
2. LTIP programme CEO awards to commenced from 1 January 2023
91919191
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION REMUNERATION & NOMINATIONS COMMITTEE REPORT - CONTINUED
PART 3 – REMUNERATION REPORT (AUDITED) - CONTINUED
Annual STIP bonus in respect of 2021 performance
In recognition of the Executive Director’s pre-existing 750,000 unvested performance rights and outstanding cash bonus targets
at 1 January 2021, as disclosed earlier in this report, the performance and vesting conditions of which were expected to be
achieved during 2021 if the company achieved its stated objectives, Mr. Cronin’s maximum opportunity under the STIP was set
as 50% of base salary for 2021.
Objectives for the 2021 STIP bonus were set by the Remuneration and Nominations Committee at the beginning of the year
and assessment of performance during the year was undertaken at the January 2022 Committee meeting.
Details of the bonus paid to the CEO for 2021, including the specific performance metrics, weightings and performance against
each of the metrics, are provided in the table below:
Targets
2021 Assessment
Threshold
Target
Maximum
Objective
KPI
Target
Weighting
25%
75%
100%
2021 Result
2021
Bonus
Score
Global
Resource
Growth
FS NPV8
Exploitation
Permit
OH&S
Construction
Start
Project
Finance
Staff
Satisfaction
Diversity
25,000m drilling
and Raska Maiden
Resource of at least
10Mt. Excludes
acquisitions
FS NPV8 relative to
PFS NPV8
Rupice Exploitation
Permit Issued in a
timely manner
Refer to Quantity x
Severity Matrix
Date of
Commencement of
Plant Construction
Implemented with
>60% Debt and
Cost of Capital
Targets including
Arrangement Fees
over Loan Life
The results of
a general staff
satisfaction survey on
a scale of 1-10
Ensure that at least
20% of all staff and
20% of EL1 and EL2
combined Grading
Categories are female
15.0%
RMRE <
11MT
RMRE <
12MT
RMRE >
12MT
Maximum
15.0%
17.5%
<=5% lower
<5% - 0%
lower
Higher
than PFS
Maximum
17.5%
15.0%
Pre 30/9/21
Pre 31/7/21
Pre
30/6/21
Target
11.25%
12.5%
<=30
<=20
<=10
Threshold
3.125%
10.0%
1/11/2021 -
31/12/2021
1/9/2021 -
01/11/2021
Pre
1/9/2021
Threshold
2.5%
15.0%
>13%
<13%
>11%
<11%
Target
11.25%
10.0%
<7
>7 <8.0
>8
Maximum
10.0%
5.0%
>20%
>22%
=>25%
Maximum
5.0%
Bonus payable (as a percentage of the maximum opportunity)
75.6%
The determination of the bonus pay out is at the discretion of the Remuneration and Nominations Committee, taking into
account performance during the year against the above scorecard. Each objective in the scorecard has a ‘threshold’, ‘target’
and ‘maximum’ performance target, achievement of which translates into a score for each objective. The bonus scores for each
objective are summed which translates into a percentage which is applied to the maximum bonus opportunity.
In 2021, the CEO’s on-target and maximum potential STIP bonus was 37.5% and 50% of base salary respectively. The
Remuneration and Nominations Committee’s actual assessment of the CEO’s performance resulted in a STIP bonus of 37.8%
of base salary (£97,437) being achieved of which 50% was paid in January 2022 and the remainder deferred until January 2023
to serve as a retention mechanism.
92929292
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Non-annual KPI bonuses
Prior to the implementation of the Company’s STIP on 1 January 2021, the Board had set the following KPIs, and
accompanying bonus amounts, for Mr. Cronin as follows:
KPI Target
(In GBP)
Admission of the Company to the
London Stock Exchange
Issue of an exploitation permit for
Veovaca
Issue of an exploitation permit for
Rupice.
Potential
Bonus
Amount
Year ended
31 December 2021
Paid during
six months ended
31 December 2020
30,000
35,000
35,000
100,000
-
35,000
35,000
70,000
-
-
-
-
Year ended
30 June 2020
30,000
-
-
30,000
All non-annual KPI bonuses set historically for the CEO have now been achieved and paid. The Company does not intend to set
any further non-annual KPI bonus targets for the CEO following the implementation of the Company’s annual STIP.
UK performance graph against CEO remuneration
The Directors have considered the requirement for a UK performance graph comparing the Company’s relative 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
50%
40%
30%
20%
10%
0%
-10%
-20%
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Managing Director and Chief Executive Officer
VALUE OF SHARES AWARDS VESTED
CASH REMUNERATION
)
P
B
G
n
I
(
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
£1,499,393
£858,889
£106,859
Period ended
31 Dec 2021
Period ended
31 Dec 2020
Year ended
30 June 2020
Cash remuneration for the CEO role increased in 2021 by 92% compared to the annualized six months ended 31 December
2020 and the total monetary value of all remuneration to the CEO increased by 602% compared to the annualized six months
ended 31 December 2020.
93939393
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
REMUNERATION & NOMINATIONS COMMITTEE REPORT - CONTINUED
PART 3 – REMUNERATION REPORT (AUDITED) - CONTINUED
Percentage change in remuneration of the Director undertaking the role of CEO
The table below outlines the increase in salary, other pay and benefits and annual bonus for the year ended 31 December 2021
and annualized 6 months ended 31 December 2020 compared to the preceding period for the CEO in comparison to the wider
workforce.
Two comparator groups were chosen as the most appropriate comparators as follows:
A. Staff engaged via the Group’s UK or Jersey entities only includes representing senior management and international
employees including all other Directors and key management personnel.
B. All employees of the group including all other Directors, key management personnel.
Average remuneration of the two comparator groups compared to that of the CEO in the current year and previous period were
as follows:
Comparator group A
- Senior management and
international employees (excluding
CEO)
Comparator Group B
- All employees of the Group
(excluding CEO)
CEO
2021(1)
%
2020(2)
%
2021(1)
%
2020(2)
%
2021(1)
%
2020(2)
%
(29.0%)
(17.9%)
(33.2%)
(13.1%)
13.9%
N/A
N/A
2.7%
N/A
N/A
(100%)
(100.0%)
N/A
N/A
N/A
N/A
N/A
N/A
Change in
average
remuneration
Cash remuneration:
Fixed base
salary
Variable - Annual
STIP bonus(3)
Variable –
Non-annual KPI
bonus
Value of share awards vested:
Non-LTIP(2)
Total
Note:
N/A
601.6%
(100%)
(75.1%)
(94.5%)
(75.8%)
11.6%
4.7%
(94.9%)
(71.3%)
(15.2%)
(14.6%)
1 ) Year ended 31 December 2021 compared to the annualised 6 months ended 31 December 2020
2 ) Annualised 6 months ended 31 December 2020 compared to the year ended 30 June 2020
3 ) Variable - Annual STIP bonus increases / decreases not available because the STIP programme commenced 1 January
2021
4 ) LTIP increases / decreases not available because LTIP programme CEO awards to commenced from 1 January 2023
Prior to 2021, the Company’s remuneration policy was differentiated from how UK-listed companies normally operate
remuneration with a significant proportion of the potential remuneration of the Executive Director being variable and therefore
performance related. Performance related pay was not awarded or operated according to a fixed annual or longer period or
with fixed parameters applied. This was changed 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 that commenced on 1
January 2022. As a result, the historic year on year percentage increase or decrease in remuneration is volatile. Average fixed
base salary remuneration decreased in both 2021 and 2020 for both comparator groups following an increase in headcount
during those periods with new staff being generally less senior than preexisting staff which had the effect of reducing average
remuneration.
94949494
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION CEO Remuneration versus Comparator Group
Period ended
31 Dec 2021
CEO
Comparator Group
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
1,200,000
1,400,000 1,600,000
(In GBP)
CASH REMUNERATION
MONETARY VALUE OF NON-CASH REMUNERATION
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 alongside the total group general and administration expenses
and capex:
(In GBP)
Cash remuneration
Monetary value of vested share awards
Total remuneration
Average number of employees
G&A expenses*
Exploration expenses*
Property, plant and equipment additions
Exploration & evaluation capitalised*
Total group general and administration
expenses and capex
Year ended
31 December 2021
6 months ended
31 December 2020
Year ended
30 June 2021
2,814,084
1,451,400
4,265,484
109
2,269,428
2,880,770
7,264,352
2,252,017
1,030,131
748,834
1,778,965
73
1,299,362
973,351
2,272,713
39
1,088,511
2,288,959
798,028
91,022
2,568,360
-
237,543
4,775,836
14,666,497
4,488,792
7,302,338
Grand total
18,931,981
6,267,757
7,302,338
Remuneration as a percentage of G&A
expenses and capex
* Adjusted to excluding remuneration
22.5%
28.4%
31.1%
95959595
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION REMUNERATION & NOMINATIONS COMMITTEE REPORT - CONTINUED
REMUNERATION & NOMINATIONS COMMITTEE REPORT - CONTINUED
PART 3 – REMUNERATION REPORT (AUDITED) - CONTINUED
11.9%
22.5%
Relative Spend
by type for the Year Ended
31 DEC 2021
15.2%
38.4%
28.4%
23.7%
41.0%
Relative Spend
by type for the Year Ended
31 DEC 2020
49.9%
Relative Spend
by type for the Year Ended
30 JUNE 2020
12.7%
23.9%
12.0%
16.5%
1.5%
2.5%
TOTAL MONETARY VALUE OF GROUP REMUNERATION
EXPLORATION ACTIVITIES EXPENSES
G&A EXPENSES
PROPERTY, PLANT AND EQUIPMENT ADDITIONS
EXPLORATION & EVALUATION ADDITIONS
Advice on remuneration
During the year, h2glenfern Remuneration Advisory provided limited advice to the company in relation to its remuneration report
disclosures. Fees of £3,200 exclusive of VAT were paid. h2glenfern Remuneration Advisory is a member of the Remuneration
Consultants Group and, as such, voluntarily adheres to its Code of Conduct. The Committee considers the advice that it
receives from h2glenfern to be independent.
Other disclosures on remuneration for the year ended 31 December 2021
No payments were made for loss of office during the year. There were no payments during the year to past directors.
REMUNERATION POLICY
IN 2022
Following consideration of the remuneration policy
review report produced by h2glenfern Remuneration
Advisory during 2020, the Company made a number
of changes to remuneration for 2021 and subsequent
years within the Policy approved in November 2020
which are set out below.
Executive Director’s Fixed Remuneration
The fixed remuneration of the Managing Director and
Chief Executive Officer at 31 December 2021 was
£259,500 p.a. and is expected to remain at that level
throughout 2022.
96969696
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Short Term Incentive Plan (STIP) and 2022 KPIs
Company operates a structured annual, cash based short term incentive plan for the Executive Director, Executive
Management, Senior Managers and other eligible staff within the Group. Corporate and personal objectives (KPIs) are 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 maximum STIP bonus opportunity for the Managing Director and Chief Executive Officer will be 100% of salary.
The STIP KPI 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 is aligned to key value adding milestones. The target areas for 2022 and their weightings within the
bonus are:
Target Area
Vares Project delivered on time and on budget
Maintaining compliance with permits received
Effective integrated Health and Safety systems and procedures minimizing recordable injuries
Growing the mineral resource base at our projects in Serbia and Bosnia & Herzegovina
Ensure compliance with the Orion Debt Financing covenant requirements
Gender diversity in the workplace (excluding contractors)
Vares Project Staff satisfaction
Weighting
40.0%
10.0%
25.0%
10.0%
5.0%
5.0%
5.0%
Further details of the target thresholds are commercially sensitive and will be disclosed together with information on actual
performance in each area in our 2022 remuneration report.
The potential maximum percentage of base salary achievable as a bonus under the STIP for the Executive Director, Executive
Management, Senior Managers and the split of corporate versus personal objectives as is as follows:
Level
Managing Director and Chief Executive Officer
Executive Management
Senior Managers
Maximum Percentage of
Base salary achievable
Corporate
Objectives
Personal
Objectives
100%
70%
30%
100%
70%
50%
-
30%
50%
2022 STIP bonuses earned are expected to be paid in cash during January 2023.
Long Term Incentive Plan (LTIP)
The Company operates a structured
equity based long term incentive plan
for the Executive Director, Executive
Management, Senior Managers and
Managers of the Group. The first grant
of performance rights under the LTIP
to the Executive Director is expected
to occur during the first quarter of
2023, 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 relative
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.
Peter Bilbe
Chairman of Remuneration Committee
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
GROWTH PROSPECTS
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 12-month
financial period ended 31 December
2021. 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)
Peter Bilbe*
(Non-Executive Director)
Paul Cronin
(Managing Director and CEO)
Julian Barnes*
(Non-Executive Director)
Sandra Bates*
(Non-Executive Director)
Sanela Karic*
(Non-Executive Director)
* Determined by the board to be
independent in accordance with the
Quoted Company Alliance’s Corporate
Governance Code (QCA Code).
The company secretaries are Geoff Eyre
and Gabriel Chiappini (joint).
Results and dividends
The Group results for the year ended
31 December 2021 are set out in the
Financial Review on page 56.
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 Project,
no interim dividend was paid and no
final dividend is recommended for the
year ended 31 December 2021.
Share capital
The Company was granted authority
at the 2021 AGM to allot shares
in the capital of the Company up
to a maximum nominal amount of
£931,329, (equivalent to 69,736,353
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.
Auditor
BDO LLP (Chartered Accountants)
have been Auditors of Adriatic Metals
PLC since 2020 and will be proposed
for re-appointment at the 2022 Annual
General Meeting.
Directors’ interests
Information on share ownership,
options and performance rights held
by Directors can be found in this report
and in the Remuneration & Nominations
Committee Report.
Substantial shareholdings
The Company’s issued share capital
as of 31 December 2021 was
266,073,240 ordinary shares and at 29
March 2022 was 266,379,240 ordinary
shares with each share carrying the
right to one vote. No shares are held in
treasury.
At 31 December 2021, 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.
98989898
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Shareholder
Helikon Investments
Orion Asset Management
Paul Cronin
Milos Bosnjakovic
FIL investment
RBC Wealth Management
Datt Capital
Private Clients of Interactive Brokers
Additional disclosures
Number of
ordinary shares
Percentage of
issued share capital
29,435,614
24,191,000
15,101,332
14,300,000
15,806,555
10,236,711
8,786,101
8,155,892
11.06
9.09
5.68
5.37
5.90
3.85
3.30
3.07
126,013,205
47.32
As at 15 March 2022, 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 15 March 2022 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/.
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
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)(a)
(10)(b)
(11)
(12)
(13)
(14)
Interest Capitalised
Publication of unaudited financial information
Details of long-term incentive scheme
Waiver of emoluments by a Director
Waiver of future emoluments by a Director
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
Contract of significance in which a Director is interested
Contract of significance with controlling shareholder
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreement with controlling shareholder
Location
Not applicable
Not applicable
Remuneration Committee Report page 80
Not applicable
Remuneration Committee Report page 80
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
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 the financial
instruments, can be found in Note 13 of
the Consolidated Financial Statements,
the Corporate Governance, Risk
Management and Internal Control
sections on page 26.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION DIRECTORS’ REPORT - CONTINUED
TCFD Climate Disclosure
Adriatic Metals PLC recognizes that
climate change represents one of the
most significant challenges facing
the world today and supports the
goals of the Paris Agreement. Our
aim is to minimize our contribution to
greenhouse gas emissions, to consider
and plan for the physical risks of climate
change on our operations and to work
with our host communities to build their
understanding of their resilience to the
physical impacts of climate change.
Compliance with the Task Force on
Climate-Related Financial Disclosures
(TCFD) is required for periods ended
31 December 2022. In the current year,
Adriatic Metals PLC has voluntarily
aligned the climate disclosures in this
Strategic Report to the four TCFD
recommendations as follows:
TCFD Area
TCFD Consideration
Adriatic Metals PLC
Board’s oversight of climate
risk and opportunities
GOVERNANCE
Management’s role in
assessing and managing
climate-related risks and
opportunities
STRATEGY
Climate-related risks
and opportunities the
organization has identified
over the short, medium,
and long run
The ESG Committee of the Board have implemented a Climate
Change Policy and monitor the content, effectiveness and
implementation of this Policy on a regular basis.
Material breaches of this Climate Change Policy will be reported to the
Company’s Board of Directors (Board) and the ESG Committee of the
Board.
Responsibility for the application of this Policy rests with, but is not
limited to, all Company employees and contractors engaged in
relevant activities under the Company’s operational control.
The Company’s managers are responsible for promoting and ensuring
compliance with this Policy and any related individual site-level policies
and practices.
On the Vares Project, Stakeholder Engagement is well advanced with
the implementation of a Stakeholder Engagement Plan (SEP). Several
activities, including the establishment of a Public Liaison Committee,
provide an invaluable platform for information dissemination.
Assessment has been to consider the way in which the climate is
expected to vary over the Life of the Mine based on local projections
for Bosnia &Herzegovina. The projections have been used to help
undertake a vulnerability assessment as to potential risks to the
Project itself from changing climatic patterns.
The most significant potential climate vulnerabilities are considered
to relate to increased temperature and increased snowfall. Increased
peak temperatures could adversely affect the workforce (through
dehydration, heat stroke etc.) and cause plant and machinery to
overheat. Since most of the project area is surrounded by forestry,
increased temperatures may result in increased risk of forest fires.
Consideration will be needed to ensure explosive stores and fuel
stores are safely maintained at higher temperatures and fire risk will
need to be routinely monitored, with active steps to remove possible
fuel and ignition sources, particularly during intense periods of dry
weather.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION TCFD Area
TCFD Consideration
Adriatic Metals PLC
Impact of climate-related
risks and opportunities on
businesses, strategy, and
financial planning
STRATEGY
The main sources of Green House Gas (GHG) emissions have been
associated with the Project, namely due to fuel combustion and
electricity usage. GHG emissions have already been reduced through
the design of the Project as follows:
• Minimising the land clearance for project facilities;
• Adopt mitigation strategies for preserving integrity of soil stockpiles
• Minimise tree felling (only trees needing to be removed for safety
reasons above the haul road will be felled)
• Providing improved building fabrics for buildings to minimise heat
losses as well as reducing noise impacts;
• The use of modern, energy, efficient electrical equipment, and
mobile plant with fuel-efficient engines; and
•
In 2021 we installed a 23kW solar facility on the roof of the Tisovci
administration building for direct use to our existing electricity
usage.
GHG mitigation opportunities are also being explored further as the
Project design is advanced and operational activities are further
developed. These include:
• Although haulage works are likely to be undertaken by contractors,
consideration will be given to the choice of vehicles used for both
the mine fleet and the haulage fleet. Where possible fuel efficiency
will be a factor in the selection of vehicles as this will not only
reduce GHG emissions but also reduce operating costs. There is
currently considered to be limited potential for the use of biodiesel
to help reduce emissions however the Project will continue to
monitor potential options;
•
In addition to the efficiency of the fleet itself, opportunities will
be sought for improving the use of the vehicles. Scheduling of
excavation and haulage activities to optimise activities and avoid
double handling, where this is operationally practical. As the mine
logistic and scheduling are progressed, consideration will be
given to the optimisation of vehicle and equipment movements to
improve efficiency and reduce overall CO2 emissions; and
• The upgrading of energy-intensive machinery over time will be used
to improve efficiency and reduce CO2 emissions compared to plant
that has been removed. Further energy efficiency opportunities will
also be investigated.
Resilience of strategy,
taking into consideration
different climate-related
scenarios, including a 2°C
or lower scenario.
Although overall precipitation rates are expected to decrease, higher
intensity events may occur and increased temperatures in winter mean
that snowfall melts more quickly than was previously the case and this,
in turn, could increase the risk of flooding. The design of both Rupice
and Vares Processing Plant allows for accommodating drainage and
storage from intense stormwater events. However, the haul road may
be at increased risk of surface damage, wash outs and landslides.
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TCFD Climate Disclosure - Continue
TCFD Area
TCFD Consideration
Adriatic Metals PLC
RISK
MANAGEMENT
Processes for identifying
and assessing climate-
related risks.
The Environmental and Social Impact Assessment (ESIA) for the Vares
Project commissioned by the Group and completed with international
consultants Wardell Armstrong.
The impact assessment considered the Vares Project baseline
and identifies potential sources of impact from across the mine
life (construction, operation and closure). An assessment of the
magnitude of impact is then made and methods of avoidance,
mitigation and management and determined to limit the environmental
and social impacts arising as a result of the Vares Project
development.
Climate change impacts are considered from two environmental
perspectives, the impact of the Vares Project on the climate and the
effect of global change on the Project.
On the Raska Project, a programme of exploration work is ongoing,
identifying and assessing climate related risks will be undertaken as
part of the future Scoping Study stage of the Project.
Processes for managing
climate-related risks.
An Environmental and Social Management System (ESMS),
which guides the implementation management and monitoring of
the mitigation and management methods identified in the ESIA,
have been developed by Eastern Mining. The ESMS comprises
of corporate policies, the ESIA, and environmental and social
management plans and action plans.
Processes for identifying,
assessing, and managing
climate-related risks are
integrated into the overall
risk management.
The ESIA has been developed alongside and in close collaboration
with the Feasibility Study for the Project. This means that
environmental and social aspects have been integrated into the
overall design, avoiding many potential significant adverse impacts.
See table below for environmental risks identified and the mitigating
steps taken.
Wardell Armstrong Impact Assessment – Environmental Aspect
Adriatic Metals PLC
Over the next 20 years, precipitation
rates are expected to vary slightly, and
temperatures are expected to rise 1-2°C
throughout every month of the year. This
could have significant consequences in
terms of increasing rainfall runoff in winter
(rather than snowfall), increasing flooding
events from snow melt, increasing risk of
landslides, and increasing the chances of
heatwaves and fire risks during summer.
The soils impact assessment considers
both natural soils and contaminated soils
within the Project area. Contamination
is prevalent within the site of the Vares
Processing Plant, attributable to the
previous period of mining and required
specific handling and disposal procedures.
Elsewhere stripping and stockpiling of soils
will be required for the development of
infrastructure.
Review procedures will be in place to assess the risks
associated with these changes across the life of the
mine, ensuring they are actively managed. The design
of both Rupice and VPP allows for accommodating
drainage and storage from intense rainfall (stormwater
events)
To reduce soil degradation, including loss of bulk soil
reserves and loss of soil structure, all works involving
the extraction, handling, moving and storage will
be undertaken following appropriate soil handling
guidance. To address those Soil, Contaminated Land
and Erosion Control Management Plan is developed.
GLOBAL
WARMING
SOIL
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Adriatic Metals PLC
BIODIVERSITY
Biodiversity desk-based and field based
studies were undertaken by Zenica
Institute, BiH, in accordance with EBRD
PR6. There are no protected areas within
the Project area or anticipated to be
impacted by the Project. Work has been
undertaken to ensure the Project avoids
critical habitat as far as feasibly possible
including the re-routing of the Project
haul route to avoid Nardus stricta rich
grassland. Several habitats have been
identified within the Project affected area,
namely Acidophilic spruce forests of hilly
to mountainous belt (Vaccino-Piceetea),
Alpine river and their ligneous vegetation
with Salix elaegnos, water courses from
plateaux to the mountainous belt with
Ranunculion fluitantis and Callitricho-
Batrachion vegetation, Mountain hay
meadows, and Hydrophilous tall herb
fringe communities of plains and of the
montane alpine levels. These habitats are
deemed Priority Biodiversity Features, as
per EBRD’s PR6 on Biodiversity and thus
some offset is required in order achieve
no-net-loss.
Several species were identified in the Project area
triggering the presence of Critical Habitat, as per
EBRD PR6. The EU Annex IV yellow bellied toad,
Greek frog, green toad and agile frog were found
in several water course in the region. The Zagarski
steam, along the route of the planned haul road
contains some of these species and will be directly
impacted by road construction. Adriatic Metals have
committed to transplanting the amphibian species to
newly installed ponds, as well as to remediate and
manage an appropriate stretch of degraded river as
an offset.
A Biodiversity Action Plan (BAP) has been developed
defining the management, mitigation and offsets
required for Project development. Adriatic Metals
are committed to implement the BAP and assign
the agreement with the Vares forestry commission
to determine the implementation of the BAP.
Other authoritative bodies will be included in
implementation.
AIR QUALITY
Ambient air quality in the region is
compromised with multiple high readings
either close to or exceeding national
and World Health Organisation (WHO)
standards, for dust and SO2. Exceedances
are largely due to the prevalence of wood
burning for domestic heating and cooking
as well as the operation of industrial
sawmills in the region. Metal concentrates
in dust are high and exceed the national
standards.
To minimise additional impacts to the ambient air
quality, measure will be in place during Project
construction, operation and closure. Good
International Industry practices (GIIP) will be followed
and dust suppression will take place through spraying
of water at key source of emission (crushing circuit
and on haul route in dry periods). An Air Quality and
GHG Management Plan has been developed, defining
the potential risks to air quality, which are related
to project activities, and to consider and determine
protection measures that would prevent or mitigate
negative impacts.
NOISE AND
VIBRATIONS
The rural nature of the region means
that ambient noise in the Project area is
extremely low and, for the most part, far
below applicable standards.
Noise modelling was undertaken early in the
Feasibility Study and ESIA process to ensure that
noise impacts were avoided as far as possible within
the Project Design. Most notably, this focussed on
the Vares Processing Plant site and resulted in the
movement of the primary crushing circuit from this
site to Rupice, where these are minimal receptors.
Further mitigation has been incorporated into the
Project design, both at the Plant Site and along the
haul route, and ongoing monitoring, mitigation and
management is defined in a Noise and Vibration
Management Plan.
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TCFD Climate Disclosure - Continue
Wardell Armstrong Impact Assessment – Environmental Aspect
Adriatic Metals PLC
REACTIVITY
Reactivity domains were characterised
from the geochemical baseline to identify
materials that are likely to be potentially
acid generating or potentially neutralising
across the life of mine.
Results of various testing have shown that the
prevalence of dolomite and other carbonate rock
in the area, together with the limited and spatially
understood occurrence of potentially acid generating
(PAG) material, it is unlikely that ARD will be a
significant risk for the Project and can be managed.
WATER
Several watercourses are found adjacent
to or within Project activity areas at Rupice,
Vares Processing Plant and along the haul
route. A baseline collection programme
was designed to assess hydrological and
hydrogeological conditions within the
Rupice and VPP concessions.
Mitigation has largely been incorporated into the
Project design to avoid impacts where possible. To
address potential adverse effects in regard to water
the following has been implemented: no discharge
effluent from Vares Processing Plant; site wide
drainage and settlement ponds where required, active
treatment of contact water contaminated by acid rock
drainage (ARD); and the implementation of a Water
and Wastewater management Plan. Residual impacts
to surface water and groundwater are not expected
to be significant with these measures in place.
TCFD Area
TCFD Consideration
Adriatic Metals PLC
METRICS AND
TARGETS
Metrics used by the
organization to assess
climate related risks
and opportunities in line
with its strategy and risk
management process
The predicted scope 1 and scope 2 emissions for the Project are
estimated AT 556,862 tCO2e equating to only 2.67% of the embodied
Scope 1, 2 & 3 emissions that would be expected for this quantity of
metal production , were it to be produced elsewhere from a typical
source. It is concluded that, although emissions are significant in
absolute terms, in relative term per unit of metal recovered they are not
considered significant. Adriatic Metals have integrated several methods
of improving energy efficiency into the overall design and operation of
the Vares Project.
Scope 1, Scope 2
greenhouse gas (GHG)
emissions, and the
related risks
Adriatic Metals is committed to developing systems during mine
construction and commissioning to measure and report our scope 1
and 2 greenhouse gas emissions, see below for disclosure of emissions
during the twelve months ending 31 December 2021.
Targets used by to
managed climate-related
risks and opportunities
and performance against
targets.
Total GHG Emissions during the Life of Mine have been estimated
shown in table below as presented in ESIA Report.
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TCFD Climate Disclosure - Continue
Summary of Total GHG Emissions during the Life of Mine
Scope 1
Tree Felling at Rupice & TSF
Rupice Underground
Rupice Surface
VPP Operations
Ore haulage
Tailings haulage
Container transport to Rail
Explosives
Staff Bus Service
Scope 2
Rupice Electric Load
VPP Electric Load
Total Scope 1 & Scope 2
CO2
tonnes
CH4
tonnes
N2O
tonnes
CO2e(ii)
tonnes
N/A
40,861.86
46,857.10
6,149.97
7,490.96
6,448.74
18,830.31
N/A
N/A
N/A
N/A
N/A
2.29
2.62
0.34
0.42
0.36
1.05
N/A
N/A
N/A
N/A
N/A
15.77
18.09
2.37
2.89
2.49
7.27
N/A
N/A
N/A
N/A
18,494.93
45,105.31
51,723.16
6,788.63
8,268.88
7,118.43
20,785.81
1,104.32
9,403.06
85,884.59
320,680.09
575,357.22
Notes:
i. CO2, CH4, N20, emissions have been estimated based on IPCC National Inventory Methodology, Volume 2, Chapter 1 and IFC’s Carbon
Emissions tool
(CO2e emissions were estimated based on a global warming potential of 1, 28 and 265 for CO2, CH4 and N2O, respectively (IPCC AR5,
2015).
ii.
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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 comparative 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 year ending 31st December 2021 are as follows:
Year ending 31 December 2021
Year ending 31 December 2020
Emissions
- kg CO2('e)
Scope 1
Scope 2
Total
UK
-
1,815
1,815
Non UK
119,654
161,146
280,800
Per headcount (average 12m)
Average Headcount
Total
119,654
162,961
282,615
2,593
109
UK
-
2,028
2,028
Non UK
45,025
50,677
95,702
Total
45,025
52,705
97,730
1,278
77
The equivalent energy consumption in kWh for the above emissions for the twelve months ending 31st December 2021 are as
follows:
Year ending 31 December 2021
Year ending 31 December 2020–
Energy
Consumption
- kWh
Energy
consumption
UK
Non UK
Total
UK
Non UK
Total
8,550
738,388
746,938
8,700
266,020
274,720
The Group have installed solar panels on the roof of the Vares offices in Bosnia & Herzegovina to offset its energy consumption,
energy generation for the twelve months ending 31st December 2021 is as follows:
Year ending 31 December 2021
Year ending 31 December 2020–
Energy
Consumption
- kWh
Energy
generated
UK
-
Non UK
Total
16,010
16,010
UK
-
Non UK
Total
-
-
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.
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.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Going concern
The Group incurred a loss in the period of £10,388,893 (31 December 2020 -
£5,694,503). However, the Group also had a net asset position at the balance sheet
date of £113,540,984 (31 December 2020 - £46,512,225).
The Vares Feasibility Study as completed in August 2021 with Project NPV of
US$1.1 billion and build cost of US$168.2 million. Equity raise successfully closed
on 29th October 2021 and Orion debt documents were executed with the aim of
providing the Group with sufficient funds to complete the Vares mine construction
and ongoing owner costs until production commences in Q2 FY23 and the
business becomes self-sustaining from cash flows from operations.
Definitive documentation executed for the US$142.5 million Project Finance Debt
Package with Orion announced on 10 January 2021, currently undrawn.
Debt-Service Coverage Ratio (DSCR) covenant is included in the finance package
and will apply commencing 3 months post the first repayment date, required to be
above 1.25x level and tested on a quarterly basis.
Refreshed budget show that substantial headroom remains based on assumption
debt documents are agreed in line with term sheet on 12-month view as funding
in place to cover the approximately 18 month build and bring the Vares project
into production. Longer term substantial headroom exists over the 1.25x DSCR
covenant, forecasted DSCR as follows:
Sep-23 Dec-23 Mar-24
Jun-24
Sep-24 Dec-24 Dec-25
DSCR
3.9
5.0
4.9
4.8
4.7
4.6
5.8
Analysis regarding sensitivities have been considered simultaneously as slippage
delay to commencement of production up to 10% increase in build costs.
Cash flow forecasts prepared 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 after 31 December 2021.
Likely future developments
Project development is accelerating,
having recently commenced
construction activities. The company
is in negotiations with off-takers for
the sale of our silver-lead and zinc
concentrates.
Annual General Meeting
(AGM)
The date and location of the 2022
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.
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DIRECTORS’ REPORT - CONTINUED
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
Voting rights
A copy of the 2021 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
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.
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 2022 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. All substantive resolutions
at a meeting of security holders are
decided by poll rather than by a show
of hands.
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.
Additional information relating to
holders of shares in the Company in the
form of CHESS Depositary Instruments
(CDIs) can be found in the Additional
Information section of the Annual
Report.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION By order of the Board
Geoff Eyre
Chief Financial Officer and Joint
Company Secretary
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 they are aware, there is
no relevant audit information of
which the Company’s Auditors are
unaware.
• 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 s418 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 29 March 2022.
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FINANCIAL REPORTING
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable
law and regulations.
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 UK adopted international
accounting standards 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.
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 prepared in accordance
with UK adopted international
accounting standards. 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 UK
adopted international accounting
standards; and
• prepare the Financial Statements on
the going concern basis unless it is
inappropriate to presume that the
company will continue in business.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX 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
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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 2021 and of the Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance with UK adopted international accounting
standards;
• the Parent Company financial statements have been properly prepared in accordance with UK adopted international
accounting standards 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
We have audited the financial statements of Adriatic Metals Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for
the year ended 31 December 2021 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 UK adopted international accounting standards 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 and risk committee.
Independence
Following the recommendation of the audit and risk committee, we were appointed by the Board of Directors on 28 May 2020
to audit the financial statements for the period ending 30 June 2020 and subsequent financial periods. The period of total
uninterrupted engagement including retenders and reappointments is 2 years, covering the period ended 30 June 2020 and
year ended 31 December 2021. 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.
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 included:
• We agreed the opening cash position used in the cash flow forecast to the audited position at 31 December 2021. This
cashflow forecast started from March 2022, and covered more than 12 months from the date of these financial statements.
• We performed an accuracy check on the mechanics of the cash flow forecast.
• We assessed the Directors 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
development expenditure relating to the Vares Project, commitments on the exploration assets and any potential impact of
macro-economic factors, including inflation and supply chain issues, on the financial position of the Parent Company and
Group over the going concern review period.
• We corroborated the Directors’ assessment of future committed expenditure on the Vares development asset to
construction costs noted within the DFS and to open purchase orders and key construction contracts. For all other
exploration assets, we have corroborated committed expenditure to the terms of the licenses. We have 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 the Directors’ 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 have also
challenged management over any substantive terms or clauses preventing potential drawdowns on existing financing
arrangements. We have sought and obtained management representation in this regard.
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 doubt on the Group and the Parent Company’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.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
Overview
Coverage1
99% (2020: 99%) of Group loss before tax
97% (2020: 90%) of Group total assets
Key audit matters
Carrying value and impairment of exploration and evaluation assets, and license compliance
Going concern
Acquisition of the Tethyan Group
Valuation of subsidiary investment balances in the Parent Company accounts
2021
2020
Yes
No
No
Yes
Yes
Yes
Yes
No
Going concern is no longer considered to be a key audit matter because there was a successful equity raise within the year as
disclosed in Note 2c. The Group is now fully funded to production from the Vares Silver Project therefore going concern has not been
raised as a key audit matter for the current financial year.
Acquisition of the Tethyan Group is no longer considered to be a key audit matter as the the acquisition took place in the prior year. As
such the key estimates and judgments related to this transaction were resolved in the prior period.
1. These are areas which have been subject to a full scope audit by the group engagement team
Materiality
Group financial statements as a whole
£900,000 (2020: £900,000) based on 1.5% (2020: 1.5%) of adjusted 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 & Herzegovina 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 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 with the Group audit team also performing specific procedures on all significant risk areas.
The financial information of the remaining non-significant components were subject to analytical review procedures, performed
by the Group auditors.
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 remotely with the component auditor and detailed group reporting instructions for the testing of
the significant areas were sent to them. The group reporting instructions also included specific reference to required ISA (UK)
procedures covering fraud and irregularities, and also detailed the materiality to which Group reporting procedures were to be
performed to. We visited the component auditor offices and held a face to face meeting with the audit partner discussing the
results of procedures over key risk areas, any issues encountered as part of the audit, and any control or governance best
practice findings arising as a result of the local fieldwork. We also reviewed the audit files remotely and discussed the findings
with the component audit team and component management
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.
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THE MEMBERS OF ADRIATIC METALS PLC - CONTINUED
Key audit matter
Carrying value and
impairment of development,
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 2021,
£24,456,506 (31 December
2020: £36,479,724) of costs
had been capitalised in relation
to exploration activity. A further
£21,022,514 (31 December
2020: £nil) was capitalized and
reclassified as a development
asset at the point of completion
of the Definitive Feasibility
Study.
Management and the Board
are required to assess whether
there are any potential
impairment triggers which
would indicate that the carrying
value of the assets at 31
December 2021 may not be
recoverable.
Specifcially Management has
determined that commercial
feasibility with the Vares project
was reached on successful
publication of a Definitive
Feasibility Study and raising
sufficient funding to move into
construction. In line with the
Group’s accounting policy the
asset has been moved into
Property, Plant and Equipment,
Management are required to
test the assets for impairment
in accordance with IAS 36.
Management’s impairment
assessment is underpinned by
the DFS.
Additionally, with regards to the
Group’s other Exploration and
Evaluation assets adhering
to the specified terms of the
Group’s exploration licences
in Bosnia & Herzegovina 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
development assets and E&E
assets in the context of the
Group’s statement of financial
position, and the significant
judgement involved in making
the impairment assessments ,
we have considered this to be a
key audit matter.
How the scope of our audit addressed
the key audit matter
Our specific audit testing in regard to this included:
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 the independent competent persons
reports compiled on both the Vares, Rupice and
Veovaca projects.
Holding discussions with the Group’s aforementioned
independent expert to understand and challenge
the key estimates and judgements that support
the DFS and underpin management’s assessment
of commercial viability, as well as assessing their
competence, objectivity and independence.
Reviewing and challenging inputs to and
assertions made in management’s and the Board’s
impairment model for Vares project development
assets, underpinned by the DFS prepared by the
aforementioned independent expert.
Inspecting approved budget forecasts and minutes of
board meetings to confirm whether or not the Group
intended to continue to explore the project areas,
and ensuring short term spend commitments and
intentions were consistent with the going concern
forecast used in management’s assessment.
Reviewing and challenging inputs to and
assertions made in management’s and the Board’s
impairment model for Vares project development
assets, underpinned by the DFS prepared by the
aforementioned independent expert.
Visiting the Vares project to enhance our
understanding and corroborate explanations provided
during the audit of the key estimates and judgements
applied to the impairment assessment.
Verifying the licence status, through review of key
terms in the licenses to confirm legal title and terms of
use, inquiring with key local management personnel
regarding compliance with the license terms and also
considering evidence obtained during our site visit.
Verifying a sample of additions to E&E assets to
supporting documentation and checking those
expenses and items capitalized meet the relevant
capitalization criteria in line with the applicable
accounting standards.
Reviewing exploration activity undertaken on the
Group’s other assets, to assess whether there was
any evidence from exploration results to date which
would indicate a potential impairment.
Key observation
Based on the procedures performed, we
found the judgement and estimates made by
management with regards to the carrying value
and impairment of development and exploration
and evaluation assets, and with regards to the
compliance with license terms, to be reasonable.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Key audit matter
Valuation of subsidiary investment
balance in the Parent Company
accounts
The total carrying value of investments
is £42,217,078 including an investment
in the Tethyan Resource Corp group
of £22,678,884 and Adriatic Metals
Holdings BiH Limited of £19,536,008.
Judgement is required in determining
whether the investments are
recoverable.
The recoverability of the investments
are intrinsically linked to the successful
development of the underlying
development and exploration assets
as the main assets held in the
subsidiaries’ investments is that of the
development and exploration licence.
For early stage projects where the
technical feasibility and viability are
being assessed, Management are
required to consider a number of non-
financial elements in deciding whether
an indicator of impairment exists.
In this scenario, the assets
underpinning the investments are
pre-production and therefore there
are continued risks pertaining to
the successful development of the
Vares project which has entered its
development stage following the
determination of commercial viability
in line with the DFS, as well as the
assessment of the commercial viability
of the Group’s other exploration assets.
How the scope of our audit addressed
the key audit matter
Our specific audit testing in regard to
this included:
Reviewing Management’s impairment
indicator assessment of the underlying
development and exploration assets.
Please refer to the KAM above for
further details.
Reviewing the terms and conditions of
the signed shareholder agreement in
place, and confirming that the Parent
Company still holds the shares in the
subsidiary.
Comparing current market
capitalization to the carrying value of
the company’s Statement of financial
position , noting that the former is
significantly greater than the latter.
Key observation
Based on the procedures
performed, we found the
judgement and estimates made by
management in their valuation of the
investments held in subsidiaries are
reasonable.
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INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF ADRIATIC METALS PLC - CONTINUED
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
Materiality
2021 £
900,000
2020 £
900,000
2021 £
2020 £
360,000
310,000
Basis for determining
materiality
1.5% of total assets, adjusted for
amounts received as part of the
equity raise in the current year
not yet utilised.
1.5% of total assets
40% of group
materiality
35% of group
materiality
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. Total assets
was adjusted to remove the
one off effect of equity amounts
raised during the current year.
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 40% (2020: 35%) of Group
materiality given the assessment of the
components aggregation risk.
580,000
580,000
230,000
200,000
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.
Rationale for the
benchmark applied
Performance
materiality
Basis for
determining
performance
materiality
Component materiality
We set materiality for each component of the Group based on a percentage of between 40% and 60% of Group materiality
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from £360,000 to £540,000. 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 and Risk Committee that we would report to them all individual audit differences in excess of £18,000
(2020: £18,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative
grounds.
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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 year 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.
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:
Matters on which
we are required to
report by
exception
• 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.
Responsibilities of Directors
As explained more fully in the statement of Directors’ 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.
117117
117117
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF ADRIATIC METALS PLC - CONTINUED
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 and risk committee to understand the laws and regulations relevant
to the Group and its components. We considered the significant laws and regulations to be the elements of the financial
reporting framework, tax legislation, mining laws, LSE listing rules and ASX listing rules, QCA corporate governance code
and environmental regulations. We have engaged with relevant auditor and management experts where required to assess
compliance with these laws and regulations;
• Communicating and subsequently reviewing specific procedures performed by the component auditors to address the risk
of irregularities and fraud as well as potential non-compliance with applicable laws and regulations;
• Holding discussions with management and the audit and risk committee regarding their knowledge of any known or
suspected instances of non-compliance with laws and regulations or fraud;
• Reviewing minutes from board meetings of those charges with governance and RNS announcements to identify any
instances of non-compliance with laws and regulations;
We assessed the susceptibility of the financial statements to material misstatement, including fraud and considered the fraud
risk areas to be the inappropriate capitalization of expenses into exploration and evaluation assets, and management override
of controls.
Our procedures in addressing these risks included:
• Testing appropriateness of journal entries made throughout the period which met a specific risk based criteria to supporting
documentation;
• 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;
• Performing a detailed review of the Group’s year end adjusting entries and investigating any that appear unusual as to nature
or amount to supporting documentation; and
• In respect of the the inappropriate capitalization of expenses into development assets and exploration and evaluation assets,
the procedures set out in the key audit matter section above.
We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
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
London, United Kingdom
29 March 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
118118
118
118
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
(In GBP)
Assets
Current assets
Cash and cash equivalents
Other receivables and prepayments
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
Deferred Consideration
Borrowings
Total current liabilities
Non-current liabilities
Lease liability
Borrowings
Derivative liability
Total non-current liabilities
Note
31 December 2021
(Restated)
31 December 2020
5
8
12
9, 10
11
12
7, 13
6
12
6
6
83,171,040
1,640,650
84,811,690
22,079,729
542,034
24,456,506
47,078,269
131,889,959
3,192,638
104,725
858,489
-
4,155,852
462,333
11,880,828
1,849,962
14,193,123
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
Total liabilities
18,348,975
19,412,076
Capital and reserves attributable to shareholders of the parent
Share capital
Share premium
Merger Reserve
Share-based payment reserve
Warrants reserve
Other equity
Foreign currency translation reserve
Retained deficit
Non-controlling interest
Total equity
Total equity and liabilities
15
15
15
15
15
10
15
15
10
3,553,408
107,708,429
17,709,847
4,467,621
2,155,882
-
(199,263)
(21,854,940)
113,540,984
-
113,540,984
131,889,959
2,772,186
34,519,259
17,256,579
5,756,069
2,797,086
(2,515,399)
225,580
(14,299,135)
46,512,225
1,996,288
48,508,513
67,920,589
The accompanying notes on pages 124 - 160 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 29 March 2022 and were signed on its behalf by:
Paul Cronin
Managing Director & Chief Executive Officer
Geoff Eyre
Chief Financial Officer & Joint Company Secretary
119119
119119
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
(In GBP)
Note
Year Ended 31
December 2021
Six Months Ended
31 December 2020
Exploration costs
General and administrative expenses
Share-based payment expense
Other income
Operating loss
Finance expense
Revaluation of fair value asset
Revaluation of derivative liability
Revaluation of deferred consideration
Loss before taxation
Tax charge
17
18
20
21
19
10
6
7
16
(2,880,700)
(5,274,727)
(1,434,574)
61,869
(9,528,132)
(2,076,846)
-
1,195,251
20,834
(798,028)
(2,115,707)
(2,267,239)
4,816
(5,176,158)
(197,039)
(322,987)
-
-
(10,388,893)
(5,696,184)
-
1,681
Loss for the period
(10,388,893)
(5,694,503)
Other comprehensive income that might be reclassified to profit or loss in subsequent periods:
Exchange (loss)/gain arising on translation of foreign Oerations
(424,843)
(424,843)
5,775
5,775
Total comprehensive loss for the period
(10,813,736)
(5,688,728)
Loss for the period attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive loss attributable to:
Owners of the parent
Non-controlling interest
(10,194,509)
(194,384)
(10,388,893)
(10,619,352)
(194,384)
(10,813,736)
(5,175,392)
(519,111)
(5,694,503)
(5,169,617)
(519,111)
(5,688,728)
Net loss per share
Basic and diluted (pence)
15g
(4.72)
(2.99)
See note 25 for details of the restatement of the prior year comparatives.
The accompanying notes on pages 124 - 160 are an integral part of these Consolidated Financial Statements.
120120
120
120
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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121121
121121
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
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The accompanying notes on pages 124 - 160 are an integral part of these Consolidated Financial Statements.
122122
122
122
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
(In GBP)
Cash flows from operating activities
Loss for the period
Adjustments for:
(Gain)/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 expense
Revaluation of fair value assets
Revaluation of derivative liabilities
Revaluation of deferred consideration
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
Net cash used in investing activities
Cash flows from financing activities
Gross proceeds from the issue of ordinary shares
Gross proceeds from loans and borrowings
Transaction costs arising from equity financing
Settlement of Deferred Consideration
Interest paid on loans and borrowings
Interest paid on leases
Note
Year Ended
31 December 2021
Six Months Ended
31 December 2020
(10,388,893)
(5,694,503)
8
9
12
20
19
10
6
7
10
8
9
10
15i
7
15i
7
6
12
(166)
88,544
28,889
57,786
1,434,574
2,076,846
-
(1,195,251)
(20,834)
(984,574)
1,365,854
1,106
36,157
11,469
15,549
2,267,239
197,039
322,987
-
-
(151,833)
687,582
(7,537,225)
(2,307,208)
-
(7,264,352)
(2,857,010)
1,764
-
311,964
(90,864)
(3,052,019)
1,970
(723,300)
(10,119,598)
(3,552,249)
77,243,716
-
(3,277,759)
(1,188,706)
(1,351,266)
(70,929)
12,317,964
14,956,849
(1,447,201)
-
(10,523)
Net cash flows from financing activities
71,355,056
25,817,089
Net increase in cash and cash equivalents
53,698,233
19,957,632
Exchange losses on cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
(107,731)
29,580,538
83,171,040
(319,823)
9,942,729
29,580,538
The accompanying notes on pages 124 - 160 are an integral part of these Consolidated Financial Statements
123123
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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 2021. 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 Vares
Project in Bosnia & Herzegovina and the Raska Project in 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.
2. Basis of preparation
a. Statement of compliance
These consolidated financial statements have been prepared in accordance with UK adopted international accounting
standards. 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 29 March 2022.
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 pounds sterling (“GBP”). This is also the functional currency of the
Company.
The Company’s year end previously ran to 30 June 2020. The year end was changed to align the financial periods of all
subsidiaries to 31 December 2020, hence the comparative period is a 6 month period. The current financial year encompasses
the 12 month period to December 2021.
c. Going Concern
The Group incurred a loss in the period of £10,388,893 (31 December 2020 - £5,694,503). However, the Group also had a net
asset position at the balance sheet date of £113,540,984 (31 December 2020 - £46,512,225).
The Vares Feasibility Study as completed in August 2021 with Project NPV of US$1.1 billion and build cost of US$168.2 million.
Equity raise successfully closed on 29th October 2021 and Orion debt documents were executed with the aim of providing the
Group with sufficient funds to complete the Vares mine construction and ongoing owner costs until production commences in
Q2 FY23 and the business becomes self-sustaining from cash flows from operations.
Definitive documentation executed for the US$142.5 million Project Finance Debt Package with Orion announced on 10
January 2021 currently undrawn. Debt-Service Coverage Ratio (DSCR) covenant is included in the finance package and will
apply commencing 3 months post the first repayment date, required to be above 1.25x level and tested on a quarterly basis.
Refreshed budget show that substantial headroom remains based on assumption debt documents are agreed in line with
term sheet on 12-month view as funding in place to cover the approximately 18 month build and bring the Vares project into
production. Longer term substantial headroom exists over the 1.25x DSCR covenant, forecasted DSCR as follows:
Sep-23
Dec-23
Mar-24
Jun-24
Sep-24
Dec-24
Dec-25
DSCR
3.9
5.0
4.9
4.8
4.7
4.6
5.8
Analysis regarding sensitivities have been considered simultaneously as slippage delay to commencement of production up to
10% increase in build costs.
Cash flow forecasts prepared 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.
124124
124
124
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
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.
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; and
• 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 parent company and following subsidiaries at 31
December 2021:
Name of subsidiary
Eastern Mining d.o.o.
Adriatik Metali d.o.o
Adriatic Metals Jersey Ltd
(formerly Tethyan Resource Corp)
Adriatic Metals Services (UK)
Limited (formerly Tethyan
Resources Limited)
Country of
incorporation
Shareholding
on 31 Dec. 2021
Shareholding
on 31 Dec. 2020
Nature of
business
Bosnia &
Herzegovina
Bosnia &
Herzegovina
Jersey
(formerly
Canada)
England &
Wales
100%
100%
Mineral exploration & development
100%
0%
Mineral exploration & development
(incorporated during year to 31 December
2021)
100%
100%
Holding company - financing mining
exploration of subsidiary
100%
100%
Holding company - financing mining
exploration of subsidiary
Adriatic Metals Trading & Finance
B.V.
The
Netherlands
Adriatic Metals Holdings BIH
Limited
England &
Wales
Tethyan Resources Jersey Ltd
Jersey
Taor d.o.o.
Tethyan Resources d.o.o.
Global Mineral Resources d.o.o.
Tethyan Resources Bulgaria
EOOD (liquidated post year end)
Kosovo Resource Company
(liquidated during year to 31
December 2021)
Serbia
Serbia
Serbia
Bulgaria
100%
100%
100%
100%
100%
100%
100%
0%
0%
100%
100%
100%
100%
100%
Trading & Finance Company (incorporated
during year to 31 December 2021)
Holding company - financing mining
exploration of subsidiary (incorporated
during year to 31 December 2021)
Holding company - financing mining
exploration of subsidiary
Mineral exploration and development
Mineral exploration and development
Mineral exploration and development
Mineral exploration and development
Kosovo
0%
100%
Mineral exploration and development
Ras Metals d.o.o.
Serbia
100%
10%*
Mineral exploration and development
* The Group held 10% of the equity in Ras Metals d.o.o. at 31 December 2020. The Group had substantive control of Ras Metals d.o.o.
at 31 December 2020 and consolidated the net assets into the Group financial statements. The group activated the option to acquire
remaining 90% during the period to 31 December 2021. See Section 4 for more details on critical accounting judgements.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Entities in which the Group held 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
0%
10%*
Mineral exploration and development
The Group owned 10% of the equity in EFPP d.o.o. at 31 December 2020 with an option to acquire the remaining 90%.
However, the Group did not have substantive control over this entity and has not consolidated the net assets into the Group
financial statements. The 10% of equity in EFPP d.o.o. was disposed of during the period to 31 December 2021 for nominal
consideration of €2.
See Section 4 for more details on critical accounting judgements including conclusion regarding the Group not controlling Deep
Research or the Adriatic Foundation and as a result there entities are not included in the consolidated financial statements of
the Group.
b. Standards, amendments and interpretations adopted
During the period, there was no material impact on the Group’s financial statements resulting from the adoption of new
standards and amendments.
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
Detail
IAS 37
IAS 16
IFRS 1, IFRS 9,
IFRS 16 and IAS 41
Onerous Contracts – Cost of Fulfilling a Contract
Property, Plant and Equipment: Proceeds before Intended Use
Annual Improvements to IFRS Standards 2018-2020
IFRS 3
References to Conceptual Framework
Effective date
1 January 2022
1 January 2022
1 January 2022
1 January 2022
IAS 1
IAS 1
IAS 8
IAS 12
Amendment – regarding the classification of liabilities as Current or Non-current
1 January 2023
Amendment – Disclosure of Accounting Policies
Amendment – Definition of Accounting Estimates
Income Taxes Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
1 January 2023
1 January 2023
1 January 2023
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 Standards or Interpretations 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.
126126
126
126
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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.
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 initially amortised over
the term of the permit, unless the licence forms part of JORC-compliant reserves where development is sanctioned, at that
point, licence costs are transferred to ’Mines under construction’, amortisation of licence costs ceases and is instead amortised
over the life of the mine when it becomes operational.
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 ’Exploration expenses’ and ‘Other operating expenses’ in the statement of
profit or loss and other comprehensive income.
Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that economic benefits
will be realised), the Group capitalises any further evaluation expenditure incurred for the 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. 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’ within Property
Plant and Equipment and will be subsequently amortised in line with the useful economic life of the mine or 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 determined to be part of a mine plan. We assess the balance of Mine under Construction for
impairment on transfer from Exploration and Evaluation assets.
127127
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 or rate of depletion of
resources once the mine enters into production. Land is not depreciated during the exploration and evaluation phase and is
considered to have an indefinite life until determined 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 ) Mine under Construction
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 or rate of depletion of resources once the mine enters
into production. The exact method of amortisation will be determined taking into account all relevant factors at the point at
which the mine enters into production.
Expenditure which is necessarily incurred whilst commissioning the mine under construction, in the period prior to being
capable of operating in the manner intended by management, are capitalised. Development costs incurred after the
commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.
iv ) Depreciation and amortisation
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
Assets under construction
Not depreciated
Shorter of 10% or lease term
15% - 33%
Depreciation commences when put into service
Mine properties
Amortised in line with useful economic life of mine or rate of depletion of resources
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted
prospectively if appropriate.
i. Leases
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.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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 Group has a number of right of use asset being administrative premises in Bosnia & Herzegovina, Serbia and the UK. 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 assets, 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 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.
Regarding construction to date, whilst access road construction commenced in November 2021 at the Rupice Surface
Infrastructure site, construction activities have not progressed to the point to which management believe a rehabilitation
provision is currently necessary. Rehabilitation costs were estimated as part of the feasibility study and construction progress
will be assessed in future periods with recognition of the estimated outstanding continuous rehabilitation work at each balance
sheet date accordingly.
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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 comprised of the convertible option contained within the loan between the
Company and Tethyan Resource Corp. Following the acquisition this convertible option was extinguished and previously held
value released through the profit and loss, the Group currently has no assets held at fair value through profit and loss.
ii ) Financial liabilities
Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for financial liabilities
designated at fair value through profit or loss, that are carried subsequently at fair value with gains and losses recognised in the
profit and loss statement.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where appropriate, a shorter period. Where the movement in fair value is
due to a change in the entity’s credit risk, such gain/loss is recognised in Other Comprehensive Income statement.
The Group’s financial liabilities initially measured at fair value and subsequently recognised at amortised cost include accounts
payables and accrued liabilities, deferred consideration 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 as
appropriate conditions were met.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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
Exploration and evaluation assets relates to the Raska Project, with value based on consideration paid for the combined
Tethyan group.
The carrying values of capitalised evaluation expenditure for undeveloped mining projects (projects for which the decision
to mine has been not yet been deemed commercially viable and development not yet been authorised) are reviewed at
each reporting date for indicators of impairment in accordance with IFRS 6, and when indicators are identified are tested in
accordance with IAS 36 Impairment of Assets.
Property, plant and equipment and intangible assets with finite lives are reviewed for impairment if there is an indication that the
carrying amount may not be recoverable.
The Vares Project is considered to be a cash generating unit, previously capitalised exploration and evaluation assets in relation
to the Vares Project were transferred to Mines under Construction following the completion of the Feasibility Study in August
2021.
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is an indication that the assets are impaired. If any such indication exists, the recoverable amount of the asset
is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate largely independent
cash inflows, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. A cash-
generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
The recoverable amount is the higher of fair value less costs to sell, and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of
the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the
profit and loss statement. All assets are subsequently reassessed for indications that an impairment loss previously recognised
may no longer exist. Where an impairment loss is subsequently reversed, the carrying amount of the asset (or cash-generating
unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior
periods. A reversal of an impairment loss is recognised in the profit and loss statement.
n. Income taxes
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.
Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets and liabilities
and their tax bases. However, deferred tax is not recognised on the initial recognition of goodwill, on the initial recognition of
assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or
loss at the time of the transaction, 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.
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Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax
liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable
entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities and assets are expected to
be settled or recovered.
The Group has not recognised any deferred tax assets or liabilities.
o. Earnings/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 Capital, Share Premium & Merger reserve
Ordinary shares are classified as Share Capital. Share premium represents the excess of proceeds received over the nominal
value of new shares issued.
Incremental costs directly attributable to the issuance of new shares are shown in share premium as a deduction, net of tax,
from the proceeds.
Merger reserve represents the difference between the value of shares issued by the Company in exchange for the value of
shares acquired in respect of the acquisition of subsidiaries.
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.
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. Non market performance vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of the options that will eventually vest. Market performance vesting
conditions are incorporated into the fair value of the equity instrument at the grant date.
Where equity-settled transactions are entered into with non-employees and some or all of the goods or services received by
the entity as consideration cannot be specifically identified, they are measured at the fair value of the equity instruments issued.
Otherwise, 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.
The Group utilises the Black-Scholes Option Pricing Model to estimate the fair value of share options and performance rights
granted to Directors, Officers and employees. The use of this model requires management to make various estimates and
assumptions that impact the value assigned to the share options and performance rights including the forecast future volatility
of the share price, the risk-free interest rate, dividend yield, the expected life of the share options and performance rights and
the expected number of share which will vest. See note 15 for further details regarding these inputs.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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.
On the creation of a non-controlling interest, the group recognise an Other Equity account for the deferred consideration
payable under any option agreements.
s. Other Reserve Accounts
Foreign currency translation reserve include gains/losses arising on retranslating the net assets of entities from their functional
currencies into the Group presentational currency GBP.
Retained Earnings include all other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere
t. 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.
In the comparative period 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 & Herzegovina (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.
u. Adriatic Foundation
The Adriatic Foundation (the “Foundation”) is a not-for-profit trust which was created in Bosnia & Herzegovina with the objective
of supporting the communities around the Vares Project. Adriatic Metals PLC provided the initial funding required for the
formation of the Foundation.
The Company has the ability to appoint the Board of Trustees of the Foundation and hence transactions between the Company
and the Foundation have been classified as related party on the basis of the company yielding significant influence.
With reference to IFRS 10 an assessment of control has been performed to determine whether the company controls the
Adriatic Foundation. The conclusion of this assessment is that whilst the company has power over the Foundation, it does
not have the ability to use its power to affect the company returns. The Foundation statute prevents neither the Company as
the founder, nor any other person associated with the Foundation to directly or indirectly derive profit or any other material or
financial benefit realized through the purposes and activities of the Foundation. The Directors have therefore concluded that
the Company does not control the Foundation and as a result the Foundation is not included in the consolidated financial
statements of the Group.
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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.
Exploration and evaluation assets at 31 December 2021 comprised the Raska Project £24,456,506, with value based on
consideration paid for the combined Tethyan group.
No indicators of impairment were identified during managements review of potential indicators, further expansion of drilling
program is budgeted for 2022 and the Group aims to produce an internal scoping study.
For further assurance over the value of exploration and evaluation assets capitalised, management obtained a resource
estimate from Forge International estimate, an independent third-party organisation. This comprised an additional stage of
preliminary Resource modelling, this time using both the historical and modern data sets. The results of which were compared
to the market capitalisation of comparative listed single asset projects in which the Raska Project valuation did not appear
unreasonable compared similar projects.
b. Mine under Construction impairment testing
Mine under construction is in respect of the Vares Project concession, located in Bosnia & Herzegovina. The balance of
Exploration and Evaluation asset were transferred to Mine under Construction at the completion of the Feasibility Study. We
assess the balance of Mine under Construction on transfer from Exploration and Evaluation assets and subsequently at each
balance sheet date, no impairment was required at the date of the transfer or at the 31 December 2021.
Property, plant and equipment and intangible assets with finite lives are reviewed for impairment if there is an indication that the
carrying amount may not be recoverable.
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 Feasibility study indicate an
NPV8 of US$1,062 million and IRR of 134%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the Project into
the development phase and through to production.
c. Deferred Consideration
The Group accounts for deferred consideration within financial liabilities section at fair value through profit and loss.
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. See Note 10 for details.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION At any time within 12 months of the first closing, the Company was able to acquire the remaining 90% ownership stake in Ras
Metals by:
• making a payment of €1,365k 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 €0.5m 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 originally estimated at £2,515,399 at 31 December 2020.
On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras making payment of
€1,365k to the sellers and issuing the first 166,000 shares reducing the deferred consideration balance. On the 24 August 2021
the second tranche of 166,000 shares were issued in line with the agreement reducing the deferred consideration balance
further. The remaining deferred consideration was estimated as at the balance sheet date to be £858,489. See Note 7 for
further details.
d. 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
embedded within this agreement. The option is recognised as a derivative liability in the Group and company accounts and
required a separate fair valuation. This option was revalued as at the balance sheet date.
See note 6 for further details regarding these inputs.
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.
Adriatik Metali d.o.o
Adriatic Metals Jersey Ltd
(previously Tethyan Resource Corp)
Adriatic Metals Services (UK) Limited
(previously Tethyan Resources Limited)
Adriatic Metals Trading & Finance BV
Adriatic Metals Holdings BIH Limited
Tethyan Resources Jersey Ltd
Taor d.o.o.
Tethyan Resources d.o.o.
Global Mineral Resources d.o.o.
Tethyan Resources Bulgaria EOOD (liquidated post year end)
Kosovo Resource Company (liquidated during year to 31 December 2021)
Country of
Incorporation
Functional
Currency
England & Wales
Bosnia & Herzegovina
Bosnia & Herzegovina
England & Wales
Jersey
Serbia
England & Wales
Netherlands
England & Wales
Serbia
Serbia
Serbia
Serbia
Bulgaria
Kosovo
GBP
BAM
BAM
GBP
CAD
RSD*
US$
US$
GBP
RSD
RSD
RSD
RSD
€
€
135135
135135
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
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 license as exploration and
evaluation assets up to the point when a JORC-compliant reserve is established. There is an element of judgement involved
by management as to which costs are directly attributable to increasing the value of the Project, broadly activities in relation
to scoping, exploration and development are deemed directly attributable, whilst activities in relation to supporting and
administrative duties are deemed not to be directly attributable.
c. 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 under an agreement with
commercially acceptable terms, to acquire the remaining equity interest in Ras. Hence the Group had control over Ras, rights
to variable returns from its involvement with Ras, and the ability to use its power over Ras to affect the amount of the Group’s
returns. 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 10.
The Group assessed whether the option agreement gave access to the returns associated with an ownership interest. In
such circumstances, the proportion allocated to the parent and non-controlling interests in preparing consolidated financial
statements is determined by taking into account the eventual exercise of those potential voting rights and other derivatives that
currently give the entity access to the returns.
The consideration paid to exercise the right to purchase the remaining equity contained both fixed and variable elements. As a
result of the additional consideration payable which remained variable at year end, the Group did not have access to present
returns in Ras at 31 December 2020 and has therefore recognised a non-controlling interest until the Company completed the
acquisition of the entire issued share capital of Ras further details of which are provided in note 10.
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. The Group no longer have any holding in this entity following
this disposal.
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.
136136
136
136
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 5. Other receivables and prepayments
(In GBP)
Other receivables
Prepayments and deposits
Debt issuance costs
Taxes receivable
Total
31 December 2021
31 December 2020
4,286
443,450
435,069
757,845
1,640,650
8,729
138,088
-
507,698
654,514
All receivables are due within one year.
Debt issuance costs are in relation to Orion Financing package which was agreed post year end and will be netted against the
debt liability when draw down occurs, and amortised over the life of the obligation.
The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia.
The split of other receivables and prepayments is as follows as at 31 December 2021:
Other receivables
Prepayments and deposits
Debt issurance costs
Taxes receivable
Total
Bosnia &
Herzegovina
Serbia
Corporate
865
332,834
-
538,618
872,317
1,716
28,004
-
82,350
112,070
1,705
92,613
435,069
136,876
666,263
The split of other receivables and prepayments is as follows as at 31 December 2020:
Other receivables
Prepayments and deposits
Taxes receivable
Total
Bosnia &
Herzegovina
Serbia
Corporate
829
29,475
300,426
330,730
7,900
38,196
109,200
155,296
-
70,416
98,072
168,488
Total
4,286
443,451
435,069
757,844
1,640,650
Total
8,729
138,088
507,698
654,514
137137
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
6. Borrowings and Derivative Liability
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 A$ 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 the embedded option at fair value in the profit
and loss, and loan liability at amortised cost.
138138
138
138
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Valuation Model
The Black Scholes model was chosen as the most appropriate pricing model to value the company call options, valuation was
updated at 31 December 2021. The main assumptions and inputs used in the options pricing model at each year end 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 A$ 2.7976 per ordinary share
• Expected term – Judgement applied to assign probability to the various redemption and put options in the contract. The
Group has agreed a financing package to progress the Vares Project (see Note 25), redemption is contingent on the
successful draw down of the facility. Expected term of redemption calculated as 1.08 years from the valuation date.
• Expected volatility – Weekly volatility over the 1.08 years (56 weeks) was calculated as 46.72% 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 A$ 2.45 on the valuation date on the ASX
Using the assumptions set out above, Black Scholes value of call option in hands of Bondholder is £1,849,962.
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.
Change in volatility of Company’s share price
20%
(Unchanged (46.72%)
50%
26 Weeks
£1.67m Decrease
£0.8m Decrease
£0.69m Decrease
Unchanged (56 weeks)
£1.39m Decrease
-
£0.18m Increase
91 Weeks
£1.2m Decrease
£0.46m Increase
£0.67m Increase
QRC Loan Payable
Fair Value Option
Change in
expected term
(In GBP)
At 30 June 2020
Additions
Interest accruing
Foreign Exchange gain
Recognition of fair value embedded option
At 31 December 2020
Additions
Interest accruing
Foreign Exchange gain
Recognition of fair value embedded option
At 31 December 2021
-
(14,956,849)
(105,515)
321,464
3,045,213
(11,695,687)
(1,235,780)
1,351,266
(300,627)
-
(11,880,828)
-
-
-
-
(3,045,213)
(3,045,213)
-
-
-
1,195,251
(1,849,962)
Short term borrowings at 31 December 2021 are £nil (31 December 2020: £105,515). Long term borrowings at 31 December
2021 are £11,880,828 (31 December 2020: £11,590,172). Derivative liabilities at 31 December 2021 are £1,849,962 (31
December 2020: £3,045,213).
139139
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
7. Deferred Consideration
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. See Note 10 for details.
At any time within 12 months of the first closing, the Company was able to acquire the remaining 90% ownership stake in Ras
Metals by:
• making a payment of €1,365k 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 €0.5m 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 originally estimated at £2,515,399 at 31 December 2020.
On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras making payment of
€1,365k to the sellers and issuing the first 166,000 shares. On the 24 August 2021 the second tranche of 166,000 shares were
issued in line with the agreement. The remaining deferred consideration was estimated as at the balance sheet date.
Cost (In GBP)
At 30 June 2020
Additions
At 31 December 2020
Payments made to sellers
Value of shares issued to sellers
Revaluation of fair value liability through profit and loss
At 31 December 2021
Remaining deferred consideration payable as follows:
Deferred Consideration
-
2,515,399
2,515,399
(1,188,706)
(447,370)
(20,834)
858,489
Remaining 332,000 Shares to be issued
in two equal tranches every six months
commencing on second closing; and
€500,000 payment on the two-year
anniversary of the first closing
31 December 2021
Basis for valuation
£438,240
LSE ADT1 Share price 31 December 2021 = £1.32
£420,249
€:GBP 31 December 2021 = 1: 0.84050
2% NSR over the licenses
£nil
Can’t be reliably estimated at this stage
prior to feasibility study
At 31 December 2021
858,489
On the Raska Project, the Company have not been able to model the 2% NSR over the licenses as we have not yet conducted
a definitive feasibility study, nor have we defined a JORC compliant resource.
140140
140
140
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
8. Property, plant and equipment
Cost (In GBP)
30 June 2020
Acquisition Assets
Additions
Disposals
Foreign exchange difference
Transfer from Exploration and
Evaluation Asset
Additions
Disposals
Foreign exchange difference
31 December 2021
Depreciation
30 June 2020
Acquisition Assets
Charge for the period
Disposals
Foreign exchange difference
31 December 2020
Transfer from Exploration and
Evaluation Asset
Charge for the period
Disposals
Foreign exchange difference
31 December 2021
Net Book Value
30 June 2020
31 December 2020
31 December 2021
Land &
Buildings
736,954
-
29,037
-
(10,500)
108,209
-
(43,145)
820,555
14,549
-
6,769
-
(342)
20,976
15,614
-
(1,153)
35,437
722,405
734,516
785,118
Plant &
Machinery
Mine under
Construction
246,191
87,648
61,827
(9,378)
(2,649)
265,193
(4,751)
(13,869)
630,212
57,676
70,004
29,388
(6,054)
(2,323)
148,691
72,930
(2,546)
(3,479)
215,596
188,515
234,948
414,616
-
-
-
-
-
Total
983,145
87,648
90,864
(9,378)
(13,465)
14,477,144
14,477,144
6,890,950
-
(345,580)
7,264,352
(4,751)
(402,864)
21,022,244
22,473,011
-
-
-
-
-
-
133,872
-
-
8,377
142,249
-
-
72,225
70,004
36,157
(6,054)
(2,665)
169,667
133,872
88,544
(2,546)
3,745
393,282
910,920
969,464
20,879,995
22,079,729
Mine under construction is in respect of the Vares Project concession, located in Bosnia & Herzegovina. The balance of
Exploration and Evaluation asset were transferred to Mine under Construction at the completion of the Feasibility Study. 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. The concession is 100% owned
by Eastern Mining d.o.o.
From 25 May 2020, the Vares 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 amortization were charged over the life
of the concession granted, until they were transferred to Mines under Construction, upon which amortisation ceased are not
amortised until beginning of the production phase.
141141
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia.
The split of land and buildings net book value is as follows:
30 June 2020
31 December 2020
31 December 2021
Bosnia & Herzegovina
Serbia
Corporate
705,951
718,939
771,284
N/A
-
-
16,454
15,577
13,834
The split of property plant and equipment assets net book value is as follows:
Bosnia & Herzegovina
Serbia
Corporate
30 June 2020
31 December 2020
31 December 2021
157,840
185,129
339,711
N/A
24,317
54,362
30,675
25,502
20,543
Total
722,405
734,516
785,118
Total
188,515
234,948
414,616
The split of mines under construction net book value is as follows:
Bosnia & Herzegovina
Serbia
Corporate
Total
30 June 2020
31 December 2020
31 December 2021
-
-
20,879,995
N/A
-
-
-
-
-
-
-
20,879,995
The sensitivity of the Vares Project to key project inputs is considered within the Feasibility Study. Summary of sensitivities chart
of Post-Tax NPV 8% US$ 1062 million (GBP 785 million) to inputs is as follows:
$1,600
$1,400
$1,200
$1,000
$800
$600
)
M
$
S
U
(
%
8
V
P
N
x
a
T
-
t
s
o
P
(20%)
(10%)
0%
10%
20%
Metals Price (+/-%)
Discount Rate (+/-%)
Operating Cost (+/-%)
Initial CAPEX (+/-%)
Head Grade (+/-%)
Analysis of sensitivities shows that significant headroom exists over carrying value of Vares Tangible assets (£22,059,745),
headroom shown in table below.
GBP (millions)
-20%
-10%
Metals Price (+/-%)
Operating Cost (+/-%)
Initial Capital Cost (+/-%)
Head Grade (+/-%)
513
807
784
515
638
784
773
637
0%
763
763
763
763
+10%
887
741
752
888
+20%
1,012
719
741
1,013
142142
142
142
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
9. Exploration and evaluation assets
Vares Project in Bosnia
& Herzegovina
Raska Project
in Serbia
Exploration &
Evaluation Assets
Cost (In GBP)
30 June 2020
Acquisition (note 10)
Additions
Foreign exchange difference
31 December 2020
Additions
Foreign exchange difference
9,154,042
-
-
24,456,506
3,052,019
(63,870)
12,142,191
2,857,010
(522,057)
-
24,456,506
-
-
-
Transfer to Mines under Construction
(14,477,144)
31 December 2021
-
24,456,506
Amortisation
30 June 2020
Charge for the period
Foreign exchange difference
31 December 2020
Charge for the period
Foreign exchange difference
Transfer to Mines under Construction
31 December 2021
Net Book Value
30 June 2020
31 December 2020
31 December 2021
108,873
11,469
(1,369)
118,973
28,889
(13,990)
(133,872)
-
9,045,169
12,023,218
-
-
-
-
-
-
-
-
-
-
24,456,506
24,456,506
9,154,042
24,456,506
3,052,019
(63,870)
36,598,697
2,857,010
(522,057)
(14,477,144)
24,456,506
108,873
11,469
(1,369)
118,973
28,889
(13,990)
(133,872)
-
9,045,169
36,479,724
24,456,506
Exploration and evaluation assets include amount of £24,456,506 added in the comparative 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 were in respect of the Vares Project concession, located
in Bosnia & Herzegovina which were then transferred to Mines under Construction following the completion of the Feasibility
Study in August 2021.
10. Acquisition note
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 (Ras Option Agreement) held by Adriatic Metals Jersey Ltd (formerly Tethyan Resource Corp), a wholly
owned subsidiary of the Company. The consideration paid on 23 February 2021 for the remaining 90% of the shares in Ras that
the Company did not already hold was €1,365,000 in cash plus the allotment of 166,000 Ordinary shares of £0.013355 each in
the Company.
Second tranche of shares was issues for 166,000 ordinary shares on 22 August 2021. Additionally, deferred consideration
still to be paid at 31 December 2021 of €500,000 in cash, is payable on 14 May 2022, and 332,000 Ordinary shares in the
Company that will be allotted in two equal tranches on or around, 22 February 2022 and 22 August 2022.
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 the Ras Option Agreement was originally estimated at £2,515,399 as at 31 December
2020, subsequent movements are detailed in Note 7.
The Group had initially recognised a 90% non-controlling interest in Ras Metals d.o.o. as part of the acquisition of the Tethyan
Resource Corp. group which finalised on 8 October 2020. Upon the acquisition of the remaining 90% of the shares in Ras
that the Company did not already on 23 February 2021 the balance of the non-controlling interest was transferred to Retained
Earnings.
143143
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
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 license was 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 cash
plus 12,000,000 shares issued in Tethyan, equating to £1,587,934. The net liability 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 liabilities £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 at 31 December 2020.
(In GBP)
Total Fair Value of Consideration to be paid
Exploration assets included within the net assets of Tethyan 100% owned entities
Total exploration and evaluation asset value
22,868,571
1,587,934
24,456,505
As part of the agreement to acquire Tethyan Group, the Company provided a convertible loan facility to Tethyan and had
advanced €1.8 million under the facility to the date of acquisition on 8th October 2020 including £723,300 in the 6 month
period to 31 December 2020. Effective the same date this loan was amended removing the convertible option from the loan
and the conversion value £322,987 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.
The fair value of the remaining consideration to be paid of £2,515,399 has been recognised as deferred consideration, which
reduces as amounts are settled and any difference arising from changes in the fair value of the deferred consideration is
recognised in the profit & loss.
Asset acquisition
The net cash used in the acquisition of subsidiaries and the book value of assets acquired and liabilities assumed on the
acquisition date is detailed below:
(In GBP)
Cash and cash equivalents
Other receivables and prepayments
Property, plant and equipment
Exploration & evaluation asset
Accounts payable and accrued liabilities
Related party borrowings
Total Assets acquired
Book Value
311,964
56,349
17,644
1,587,934
(522,740)
(1,640,838)
(189,687)
144144
144
144
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Management determined there was no present access to returns in Ras Metals d.o.o. owing to the variable consideration
included in the exercise price as at 31 December 2020. As such the Group recognised 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 loss attributable to non-controlling interest post 8 October 2020 acquisition in the period to 31 December 2020 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.
Further losses of (£194,384) were incurred by Ras Metals under the option agreement bringing the non-controlling interest to
£1,801,904, which upon the acquisition of the remaining share capital on 23 February 2021 the balance of the non-controlling
interest was transferred to Retained Earnings.
11. Accounts payable and accrued liabilities
(In GBP)
Trade payables
Accrued liabilities
Other payables
31 December 2021
31 December 2020
389,213
1,222,012
2,047,360
756,065
3,192,638
639,743
38,682
1,900,437
Other payables includes amounts payable in relation to cash settled STIP.
12. Right of use asset and lease liabilities
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
(In GBP)
30 June 2020
Amortisation
31 December 2020
Additions
Foreign Exchange Difference
Amortisation
31 December 2021
Land & buildings
251,898
(15,549)
236,349
363,220
251
(57,786)
542,034
145145
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The right of use asset relates to the lease on several administrative buildings and coresheds for the Group. 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 2020
Interest expense
Payments
31 December 2020
Additions
Interest expense
Foreign Exchange difference
Payments
31 December 2021
265,621
10,523
(20,803)
255,341
362,452
24,317
(4,123)
(70,929)
567,058
Of this amount, £104,725 is recognised as a current liability and the remainder £462,333 is shown within non-current liabilities.
The following are the amounts recognised in profit or loss:
Cost (In GBP)
31 December 2021
31 December 2020
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Total amount recognised in profit or loss
13. Financial instruments
57,786
24,317
82,103
15,549
10,523
26,072
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).
146146
146
146
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
See note referenced for further detail on inputs to fair value for each financial instrument.
As at 31 December 2021 (In GBP)
Note
At
amortised
cost
At fair value
through profit
or loss
Total
Fair Value
Hierarchy
Financial assets
Cash and cash equivalents
Total financial assets
Financial liabilities
83,170,672
83,170,672
Accounts payable and accrued liabilities
11
3,192,638
Borrowings
Borrowings – derivative liability
Deferred Consideration
Lease liabilities
Total financial liabilities
Net financial assets
-
-
-
83,170,672
83,170,672
3,192,638
11,880,828
1,849,962
1,849,962
858,489
858,489
567,058
N/A
-
N/A
Level 3
Level 3
Level 3
Level 3
6
6
7
12
11,880,828
-
-
567,058
15,640,524
2,708,451
18,348,975
67,530,148
(2,708,451)
64,821,697
As at 31 December 2020 (In GBP)
Note
At
amortised
cost
At fair value
through profit
or loss
Total
Fair Value
Hierarchy
Financial assets
Cash and cash equivalents
29,580,538
Other receivables and prepayments
5
146,816
Total financial assets
Financial liabilities
29,727,354
Accounts payable and accrued liabilities
11
1,900,437
-
-
-
29,580,538
146,816
29,727,354
1,900,437
11,695,687
Borrowings
Borrowings – derivative liability
Deferred Consideration
Lease liabilities
Total financial liabilities
Net financial assets
6
6
7
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
N/A
N/A
-
N/A
Level 3
Level 3
Level 3
Level 3
147147
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 and other receivables 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
& Herzegovina. 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 du’. 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 2021 (In GBP)
Within 30 days
Accounts payable and accrued liabilities
3,034,385
Borrowings
Derivative liability
FV Option Liability on acquisition
Lease liabilities
-
-
-
-
30 days to
6 months
6 to 12
months
–
-
-
–
-
-
Over 12
months
158,253
11,880,828
1,849,962
639,369
219,120
-
52,363
52,362
462,333
3,034,385
691,732
271,482
14,351,376
As at 31 December 2020 (In GBP)
Within 30 days
Accounts payable and accrued liabilities
2,172,496
Borrowings
Derivative liability
FV Option Liability on acquisition
Lease liabilities
-
-
-
30 days to
6 months
6 to 12
months
Over
12 months
–
105,515
-
–
-
-
1,412,391
223,685
17,805
17,805
–
11,590,172
3,045,213
879,323
219,731
2,172,496
1,440,711
241,490
16,613,762
148148
148
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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 & Herzegovina. 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 2021, 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 £0.4 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.
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 2021
was £113,540,984 (31 December 2020: £46,512,225).
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.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 2020
Issue of share capital
Shares issued on acquisition of subsidiary
Settlement placement
Share issue costs
Shares issued on exercise of options and
performance rights
31 December 2020
Issue of share capital
Shares issued on acquisition of subsidiary
Settlement placement
Share Issue costs
Shares issued on exercise of options and
performance rights
Shares
Share Capital
(In GBP)
(Restated)
Share Premium
In GBP)
(Restated)
Merger Reserve
(In GBP)
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
4,791,547
-
-
(1,598,603)
4,350,000
58,093
203,817
-
17,256,579
207,576,675
2,772,186
34,519,259
17,256,579
49,350,000
659,069
73,782,979
-
332,000
1,287,236
-
4,434
17,191
846,948
-
(3,277,759)
-
453,268
6,542,958
87,382
711,997
-
-
-
-
-
-
-
-
-
Shares issued on exercise of warrants
984,371
13,146
1,125,005
31 December 2021
266,073,240
3,553,408
107,708,429
17,709,847
The average price paid for shares issued in the period was £1.33 per share (31 December 2020: £1.06 per share).
Settlement placement refers to the following: 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 dispute as announced on 31 July 2020. Sandfire
has chosen to exercise its ongoing anti-dilution right in respect of subsequent issues of equity by the Company since the
settlement, up to the point of the Orion Equity raise, as per the results of placing announced on 13 October 2021, Sandfire sold
its entire holding in the Company and at which point no longer held an ongoing anti-dilution right.
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 year ended 31
December 2021.
Weighted average
exercise price of
options (A$)
Number of
options
Number of
performance rights
Total options and
performance rights
30 June 2020
Issued
Acquired Tethyan Acquisition
Exercised
Expired
31 December 2020
Issued
Exercised
Expired
0.46
2.20
0.66
0.61
-
0.53
0.01
0.38
0.42
19,600,000
1,000,000
469,779
(3,700,000)
-
17,369,779
-
(3,140,699)
(2,016,600)
31 December 2021
0.53
12,212,480
150150
150
150
3,810,000
2,575,000
-
(650,000)
(2,000,000)
3,735,000
1,657,259
(3,402,259)
(1,000,000)
990,000
23,410,000
3,575,000
469,779
(4,350,000)
(2,000,000)
21,104,779
1,657,259
(6,542,958)
(3,016,600)
13,202,480
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
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).
As at 31 December 2021
Grant date
Options
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
27 April 2018
9,000,000
29 November 2019
1,000,000
29 November 2019
1,000,000
8 October 2020
8 October 2020
8 October 2020
8 October 2020
8 October 2020
41,500
29,880
91,300
24,900
24,900
A$0.20
A$1.00
A$1.25
£1.06
£1.06
£1.80
£2.22
£1.20
6 November 2020
1,000,000
A$2.20
12,212,480
1.5
0.9
0.9
0.9
1.0
2.2
2.2
2.6
1.9
Options
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
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
A$0.20
A$0.30
A$0.40
A$0.40
A$1.00
A$1.25
8 October 2020
182,600
GBP £0.88
8 October 2020
8 October 2020
8 October 2020
8 October 2020
8 October 2020
8 October 2020
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
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
28 November 2022
1,000,000
28 November 2022
1,000,000
5 December 2022
3 January 2023
28 February 2024
7 March 2024
19 August 2024
41,500
29,880
50,630
7,470
7,470
7 November 2023
1,000,000
12,136,950
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
151151
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
As at 30 June 2021
Grant date
29 November 2019
6 August 2020
18 November 2020
30 June 2021
30 June 2021
30 June 2021
01 July 2021
As at 31 December 2020
Grant date
29 November 2019
12 June 2020
6 August 2020
6 August 2020
18 November 2020
Performance rights
outstanding
Weighted average remaining
contractual life (Years)
50,000
500,000
40,000
100,000
50,000
100,000
150,000
990,000
0.9
3.0
1.0
1.0
1.2
2.2
1.5
Expiry date
28 November 2022
31 December 2024
31 December 2022
31 December 2022
31 March 2023
31 March 2024
30 June 2023
Number
exercisable
50,000
-
40,000
100,000
-
-
-
190,000
Performance rights
outstanding
Weighted average remaining
contractual life (Years)
Expiry date
Number
exercisable
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
28 November 2022
410,000
6 January 2025
31 December 2023
31 December 2024
31 December 2022
-
-
-
-
410,000
d. Warrants reserve
Warrants were issued as part of Tethyan Resource Corp acquisition.
The following table presents changes in the Group’s warrants reserve during the year ended 31 December 2021:
(In GBP)
30 June 2020
Issue of Warrants on acquisition of Tethyan
31 December 2020
Exercise of warrants
Expired warrants
31 December 2021
Warrants reserve
-
2,797,086
2,797,086
(473,332)
(167,872)
2,155,882
152152
152
152
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION As at 31 December 2021
Grant date
Warrants
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
Expiry date
8 October 2020
2,651,020
A$0.88
3.1
30 January 2024
2,651,020
Number
exercisable
2,651,020
2,651,020
e. Share-based payment reserve
The following table presents changes in the Group’s share-based payment reserve during the year ended 31 December 2021:
(In GBP)
30 June 2020
Exercise of share options
Acquisition of subsidiary
Issue of options
31 December 2020
Exercise of share options
Issue of options
Cancellation of share options
31 December 2021
Share-based payment reserve
4,426,185
(1,173,926)
236,571
2,267,239
5,756,069
(2,723,021)
2,098,430
(663,857)
4,467,621
f. Share-based payment expense
During the year ended 31 December 2021; the Group recognised £2,098,430 (31 December 2020: £2,267,239) 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 2021
31 December 2020
0.01%
0.01%
44.14% - 44.21%
63.65% - 97.76%
1.5 – 2.75
£1.33 - £1.35
0.85 – 4.41
£0.55 - £1.29
1. Expected volatility is derived from the Company’s historical share price volatility.
With the exception of options granted to Non-Executive directors during the comparative period (31 December 2020:
1,000,000) 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 & Nominations Committee Report.
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
g. Per share amounts
Loss for the period attributable to owners of equity (In GBP)
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
Year ended
31 December 2021
6 months ended
31 December 2020
10,813,736
220,323,937
5,694,503
190,619,399
245,652,425
213,827,441
Basic and diluted loss per share (pence)
(4.72)
(2.99)
Total of 990,000 (31 December 2020: 3,375,000) 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
2021.
Basic and diluted loss per share are the same whilst the Group is loss making in the pre production phase.
h. Foreign Currency Translation Reserve
(in GBP)
30 June 2020
Other comprehensive income
31 December 2020
Other comprehensive income
31 December 2021
Foreign Currency Translation Reserve
219,805
5,775
225,580
(424,843)
(199,263)
i. Cash flow from financing activities
Net cash flow proceeds from the issue of ordinary shares in the period was £77,243,716 (31 December 2020: £12,317,964).
Transaction costs arising from financing activities totals £3,265,212 (31 December 2021: £1,447,201).
154154
154
154
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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
Year ended
31 December 2021
6 months ended
31 December 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 a– 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
b. Deferred tax
Year ended
31 December 2021
6 months ended
31 December 2020
10,388,893
1,974,400
(151,783)
(521,219)
(1,301,398)
-
-
5,696,184
1,082,275
19,384
(46,601)
(1,055,058)
(1,681)
(1,681)
The Group has no recognised deferred tax balance or gain/loss for the year ended 31 December 2021 or period ending 31
December 2020 or 30 June 2020 because of uncertainty regarding future taxable profits. As at 31 December 2021, the Group
has, for tax purposes, non-capital losses available to carry forward to future years as follows:
(In GBP)
UK
Bosnia & Herzegovina
Serbia
Canada
31 December 2021
31 December 2020
Expiry Date
14,937,988
2,146,313
6,546,899
-
23,631,200
12,323,011
Not applicable
1,417,043
3,073,548
960,972
17,774,574
5 years
5 years
20 years
The expiry of non-capital losses available to carry forward in Bosnia & Herzegovina and Serbia is as follows:
31 December 2021
(In GBP)
Within one year
1-2 years
2-3 years
3-4 years
Within 5 years
Serbia
49,436
653,104
722,580
1,253,821
3,867,958
6,546,899
Bosnia & Herzegovina
205,596
220,180
392,646
490,144
837,747
2,146,313
As a result of the Tethyan acquisition, Tethyan Resource Corp (incorporated in Canada), subsequently corporate migration
occurred and no longer operating in Canada. As such no longer showing any losses available to carry forward to future years.
155155
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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)
Year ended
31 December 2021
6 months ended
31 December 2020
Exploration activities expensed
2,880,700
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
Non audit services
Marketing
Stock exchange fees
Other costs
19. Finance income and expense
(In GBP)
Finance income
(In GBP)
Interest Expense
Interest expense on lease liabilities
Foreign exchange loss
Finance expense
Year ended
31 December 2021
6 months ended
31 December 2020
2,020,765
984,534
3,005,299
921,017
86,675
88,544
83,765
25,000
250,379
174,539
639,509
616,278
468,047
1,084,325
313,760
27,017
36,157
100,175
-
75,250
136,166
342,857
5,274,727
2,115,707
Year ended
31 December 2021
6 months ended
31 December 2020
-
-
Year ended
31 December 2021
6 months ended
31 December 2020
1,250,667
24,330
801,849
2,076,846
82,749
10,518
103,772
197,039
156156
156
156
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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
Year ended 31 December 2021
Six months ended 31 December 2020
Bosnia &
Herzegovina
Serbia
Corporate
Total
Bosnia &
Herzegovina
Serbia
Corporate
Total
(439)
(2,880,261)
-
(2,880,700)
(5,015)
(793,013)
-
(798,028)
(882,106)
(651,361)
(3,741,260)
(5,274,727)
(249,932)
(425,935)
(1,440,840)
(2,115,707)
(In GBP)
Exploration activities
expenses
General and
administrative
expenses
Share-based
payment expense
-
-
(1,434,574)
(1,434,574)
Other Income
52,098
9,771
61,869
-
-
-
-
(2,267,239)
(2,267,239)
4,816
4,816
Operating Loss
(830,447)
(3,531,622)
(5,166,063)
(9,528,132)
(254,947)
(1,217,948)
(3,703,263)
(5,176,158)
Finance income
Finance expense
Revaluation of fair
value asset
Revaluation of
derivative liability
Revaluation of fair
value liability
-
-
-
-
-
-
-
-
-
-
-
-
(2,076,846)
(2,076,846)
-
-
1,195,251
1,195,251
20,834
20,834
-
-
-
-
-
-
-
-
-
-
-
-
(197,039)
(197,039)
(322,987)
(322,987)
-
-
-
-
Loss before tax
(830,447)
(3,531,622)
(6,026,824)
(10,388,893)
(254,947)
(1,217,948)
(4,223,289)
(5,696,184)
Tax charge
-
-
-
-
-
-
1,681
1,681
Loss after tax
(830,447)
(3,531,622)
(6,026,824)
(10,388,893)
(254,947)
(1,217,948)
(4,221,608)
(5,694,503)
Exploration and
evaluation
assets additions
capitalised
Mine under
construction
additions capitalised
2,857,010
6,890,950
-
-
-
-
2,857,010
3,052,019 24,456,506
- 27,456,506
6,890,950
-
-
-
-
157157
157157
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
21. Other Income
(In GBP)
Miscellaneous income
Recharge of corporate office facilities and services
Year ended
31 December 2021
6 months ended
31 December 2020
47,282
14,587
61,869
-
4,816
4,816
Miscellaneous income in year ended 31 December 2021 relates to the sale of scrap metal as part of preparatory works at the
Vares processing plant (6 months ended 31 December 2020; nil). Recharge of corporate office facilities and services relates to
shared facilities of registered UK office address, see related party disclosures for more details.
22. Related party disclosures
a. Related party transactions
The Group’s related parties include key management personnel, companies which have directors in common and their
subsidiaries and any entities which the Company may exert significant influence over. The Company has identified the following
related parties:
• Swellcap Limited, an entity controlled by Paul Cronin
• Blackdragon Gold Corp, an entity of which Paul Cronin is the CEO and Managing Director
• The Adriatic Foundation
Transactions and balances with these related parties were as follows:
Year ended
31 December 2021
6 months ended
31 December 2020
Related Party
(In GBP)
(Payments to)/
received from
Balance (owed
to)/due from
(Payments to)/
received from
Balance (owed
to)/due from
Nature of transactions
Swellcap Limited
(13,899)
-
(258)
(13,899)
Blackdragon
Gold Corp
8,097
1,674
Adriatic Foundation
(5,410)
Adriatic Foundation
(9,477)
Adriatic Foundation
(85,955)
-
-
-
-
-
-
-
-
-
-
-
Corporate office
facilities and services
Corporate office
facilities and services
Initial establishment
costs
S Karic’s waived board
fees
Donation of €100,000.
During the period Paul Cronin gifted 250,000 ordinary shares held in the Company to the Foundation for nil consideration
fulfilling the initial funding commitments made to the Foundation at the time of its launch. Additionally, the Company also
announced on 9th June 2021 that it intends to donate 0.25% of the future profits from its operations in Bosnia & Herzegovina to
the Foundation.
Transactions with key management personnel are disclosed below.
158158
158
158
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
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 Managing Director
and Chief Executive Officer and the Chief Financial Officer, their remuneration is presented below:
(In GBP)
Board fees
Consultancy fees
Cash bonus paid
Accrued cash bonus
Cash remuneration in respect of qualifying services
Share based payments expense
Social security costs
Year ended
31 December 2021
6 months ended
31 December 2020
158,309
415,072
70,000
196,133
839,514
243,971
28,262
104,766
172,991
-
-
277,757
736,715
15,030
1,111,747
1,029,503
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 parties or companies controlled by key management
personnel:
12 months ended
31 December 2021
6 months ended
31 December 2020
Related Party
(In GBP)
Controlling
Party
(Payments to)/
received from
Balance (owed
to)/due from
(Payments to)/
received from
Balance (owed
to)/due from
Swellcap Limited
Paul Cronin
Paul Cronin
Not applicable
GPE Consulting Limited
Geoff Eyre
-
313,406
171,667
-
97,437
98,696
84,999
-
87,992
-
-
-
The balance due to related parties is in respect of the Company’s annual STIP. Of this amount, 50% was paid in January 2022
and the remained will be paid in January 2023 provided that the individuals remain in the service of the Company at that time.
23. 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
Year ended
31 December 2021
6 months ended
31 December 2020
1,994,662
819,422
2,814,084
447,001
9,231
1,434,574
4,704,890
109
724,217
305,914
1,030,131
80,813
2,306
2,267,239
3,380,489
73
Average number of employees has increased to 109 in the period (30 June 2020 – 73 employees) due to increasing staff
numbers as the Vares Project progresses as well as full year of headcount included in year ended 31 December 2021 relating
to the Raska Project.
159159
159159
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
Directors’ remuneration totalled the following:
(In GBP)
Board fees
Consultancy fees
Cash bonus paid
Accrued cash bonus
Cash remuneration in respect of qualifying services
Average number of Directors
Year ended
31 December 2021
6 months ended
31 December 2020
158,309
243,406
70,000
97,437
569,152
6
104,767
84,999
-
-
189,766
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
£1,088,550 (31 December 2020: £66,244) of which £nil relates to Non-Executive Directors (31 December 2020: £66,244).
The highest paid Director in the year ended 31 December 2021 received cash remuneration, excluding notional gains on share
options or performance rights, of £313,406 (31 December 2020: £106,859). The highest paid Director in the year ended 31
December 2021 received remuneration, inclusive of the monetary value of share awards that vested in the year, of £1,401,956
(31 December 2020: £106,859).
24. Commitments and contingencies
The Group had no significant commitments as at 31 December 2021 (31 December 2020: £nil), other than the lease held by
the Group disclosed in note 12 and annual concession fees disclosed in note 8.
25. Prior year adjustment
During the six months ended 31 December 2020 (the comparative reporting period) equity issued in respect of the acquisition
of Tethyan Resource Corp had previously been recorded as an increase to share capital and share premium.
When a company issues shares, the basic rule contained in section 610 of the Companies Act 2006 is that those shares should
be accounted for at the value of consideration received in exchange. Any excess over the nominal value of the shares issued is
recorded in the share premium account.
Merger relief is a Companies Act relief from the creation of a share premium account on the issue of shares. Broadly, it applies
where a company issues equity shares in consideration for the shares of another company (ie, a share for share exchange)
where, as part of the arrangement, it secures at least a 90% equity holding in the other company. The specific criteria for
merger relief are set out in section 612 of the Companies Act 2006. Where the criteria are met, the relief must be applied and
therefore no share premium is recorded on the issue of the shares.
The company acquired 100% of the equity holding in Tethyan Resource Corp and therefore meets the criteria. The adjustment
to the comparative figures for the six months ended 31 December 2020 represents a change in classification within equity
only, with a £16,952,489 decrease in the share premium account, an increase in merger reserve of £17,256,579. Note that
£304,090 costs directly attributable to raising equity were also included within share premium and these have been reallocated
to retained deficit in line with the requirements when merger relief has been applied. There is no impact on the Group and
Parent Company net assets, profit or loss or cash flow statement for the period ended 31 December 2020.
26. Subsequent events
The Company allotted 166,000 on 7 March 2022 relating to the deferred consideration payable following the Company’s
completion of the acquisition of the entire issued share capital of Ras Metals d.o.o. (Ras) on 23 February 2021.
The Orion Debt Financing was completed on 10 January 2022 consistent with the Company’s announcement on 13 October
2021 that it had agreed a term sheet with Orion Resource Partners (UK) LLP for a US$142.5 million debt financing package
comprising:
• US$120.0 million senior secured debt; and
• US$22.5 million copper stream
No funds have yet been drawn under the facility and financial close remains subject to satisfaction of customary conditions
precedent.
160160
160
160
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
(In GBP)
ASSETS
Current assets
Cash and cash equivalents
Other receivables and prepayments
Total current assets
Non-current assets
Investment in subsidiaries
Other receivables and prepayments
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
Deferred Consideration
Borrowings
Total current liabilities
Non-current liabilities
Accounts Payable and accrued liabilities
Lease liabilities
Borrowings
Derivative Liability
Total non-current liabilities
Total liabilities
Shareholders’ equity
Share capital
Share premium
Merger reserve
Share-based payment reserve
Warrants reserve expense
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
Note
31 December 2021
(Restated)
31 December 2020
f
i
f
g
o
h
p
j
j
h
p
j
j
l
l
l
l
l
l
73,077,051
6,161,387
79,238,438
45,154,403
13,819,993
34,378
209,338
59,218,112
138,456,550
1,761,009
23,291
858,489
-
2,642,789
13,616
210,483
11,880,828
1,849,962
13,954,889
16,597,678
3,553,408
107,708,429
17,709,847
4,467,621
2,155,882
(13,736,315)
121,858,872
138,456,550
27,983,443
5,118,660
33,102,103
35,390,720
-
41,079
236,349
35,668,148
68,770,251
3,740,393
35,609
-
105,515
3,881,517
-
219,731
11,590,172
3,045,213
14,855,116
18,736,633
2,772,186
34,519,259
17,256,579
5,756,069
2,797,086
(13,067,561)
50,033,618
68,770,251
See note 25 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.
The accompanying notes on pages 164 - 172 are an integral part of these Parent Company Financial Statements.
The Company’s loss after tax for the year ended 31 December 2021 was £4,022,648 (six months ended 31 December 2020:
£4,957,675).
The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and
authorised for issue by the Board of Directors on 29 March 2022 and were signed on its behalf by:
Paul Cronin
Managing Director & Chief Executive Officer
Geoff Eyre
Chief Financial Officer & Joint Company Secretary
161161
161161
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Loss for the period
Total
comprehensive loss
Issue of share capital
Settlement Placement
Share issue costs
Exercise of options
Issue of options
Acquisition of
subsidiary (restated)
31 December 2020
Loss for the year
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
l
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
(In GBP)
Note
Number of
shares
Value
(Restated)
Share
premium
(Restated)
Merger
reserve
Share-
based
payment
reserve
Warrants
reserve
(Restated)
Retained
earnings
Total
equity
30 June 2020
179,840,987
2,401,777
23,992,967
-
4,426,185
-
(4,072,190)
10,741,114
-
-
-
-
-
–
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
-
-
-
-
-
-
-
(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
13,278,937
177,340
- 17,256,579
236,571 2,797,086
(304,090)
20,163,486
207,576,675
2,772,186
34,519,259 17,256,579
5,756,069 2,797,086 (13,087,561)
50,033,618
-
-
-
-
-
-
49,350,000
659,069
73,782,979
1,287,236
17,191
846,948
(3,277,759)
6,542,958
87,382
711,997
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,723,022)
2,098,431
-
-
-
-
-
-
-
(4,022,648)
(4,022,648)
(4,022,648)
(4,022,648)
-
-
-
74,442,048
864,139
(3,277,759)
2,723,022
799,379
-
2,098,431
-
(473,332)
473,332
1,138,151
(663,857)
(167,872)
167,872
(663,857)
453,268
-
-
(10,332)
447,370
Exercise of Warrants
984,371
13,146
1,125,005
Expiry/Cancellation of
Options / Warrants
Acquisition of
subsidiary
-
-
332,000
4,434
-
-
31 December 2021
266,073,240
3,553,408 107,708,429 17,699,515
4,467,621 2,155,882 (13,736,315) 121,858,872
See note 25 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.
The accompanying notes on pages 164 - 172 are an integral part of these Parent Company Financial Statements.
162162
162
162
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
(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 expense
Revaluation of fair value asset
Revaluation of derivative liability
Revaluation of deferred consideration
Movement of intercompany loan provision
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:
Investment in subsidiaries
Purchase of property, plant and equipment
Loan issued
Interest received
Net cash used in investing activities
Cash flows from financing activities
Issues of ordinary shares
Transaction costs arising from equity financing
Proceeds from loans and borrowings
Settlement of Deferred Consideration
Interest paid on loans and borrowings
Interest paid on lease liabilities
Note
Year Ended
31 December 2021
Six Months Ended
31 December 2020
e
g
o
l
l
l
q
q
(4,022,648)
(4,957,675)
10,917
27,011
1,434,574
1,856,543
(1,195,251)
(20,834)
(825,824)
2,518,037
(2,000,920)
6,969
15,549
2,267,239
134,504
322,987
-
-
-
(3,110,904)
3,407,207
(2,218,395)
(1,914,124)
(7,392,637)
(3,309,554)
(4,216)
(919)
(16,454,568)
(1,881,641)
-
-
(23,851,421)
(5,192,113)
77,243,716
(3,277,759)
-
(1,188,706)
(1,351,266)
(40,520)
12,317,964
(1,447,201)
14,956,849
-
(10,523)
Net cash flows from financing activities
71,385,465
25,817,089
Net increase in cash and cash equivalents
45,315,649
18,710,852
Exchange losses on cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
(222,041)
27,983,443
73,077,051
(304,597)
9,577,188
27,983,443
The accompanying notes on pages 164 - 172 are an integral part of these Parent Company Financial Statements.
163163
163163
Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
a. Corporate information
These Financial Statements represent the individual financial statements of Adriatic Metals PLC (the “Parent Company”), the
parent company of the Adriatic Metals Group for the year ended 31 December 2021.
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 UK adopted international accounting
standards.
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 29 March 2022.
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 notes to 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, are made via capital contributions and recorded as additions to investments in subsidiaries.
ii ) Intercompany loans
All intercompany borrowings and loans are initially recognised at the fair value of consideration received or paid after deduction
of issue costs and are subsequently measured at amortised cost.
iii ) Impairment
The Company recognises an allowance for expected credit losses (‘ECLs’) for all receivables held at amortised cost. ECLs are
based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the
Company expects to receive.
d. Critical accounting estimates and judgements
The preparation of the Parent Company’s Financial Statements 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 subsidiaries, which are made via capital contributions or arise upon acquisition, are
reviewed for impairment if events or changes indicate that the carrying amount may not be recoverable. When a review for
impairment is conducted, the recoverable amount is assessed by reference to the net present value of expected future cash
flows of the relevant generating unit or disposal value if higher.
No impairment indicators were identified in the year ended 31 December 2021 and judgement was made that no impairment
was charged.
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 12 months to 31 December 2021 is £4,022,648 (six months ended 31 December 2020 – £4,957,675).
164164
164
164
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION 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. Allowance is made for expected credit losses (‘ECLs’) for all receivables held at amortised cost. ECLs are based
on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the
Company expects to receive.
All current receivables due within one year as follows:
(In GBP)
Other receivables
Prepayments and deposits
Taxes recoverable
Amounts receivable from subsidiaries (note m)
31 December 2021
31 December 2020
1,706
527,681
136,877
5,495,123
6,161,387
-
70,415
98,072
4,950,173
5,118,660
All non-current receivables due more than one year as follows:
(In GBP)
31 December 2021
31 December 2020
Amounts receivable from subsidiaries (note m)
13,819,993
13,819,993
g. Property, plant and equipment
Cost (In GBP)
30 June 2020
Additions
31 December 2020
Additions
31 December 2021
Depreciation
30 June 2020
Charge for the period
31 December 2020
Charge for the period
31 December 2021
Net Book Value
30 June 2020
31 December 2020
31 December 2021
Land & Buildings
Plant and machinery
17,425
-
17,425
-
17,425
970
878
1,848
1,742
3,590
16,455
15,577
13,835
53,859
919
54,778
4,216
58,994
23,185
6,091
29,276
9,175
38,451
30,674
25,502
20,543
-
-
Total
71,284
919
72,203
4,216
76,419
24,155
6,969
31,124
10,917
42,041
47,129
41,079
34,378
h. Accounts payable and accrued liabilities
The breakdown of current accounts payable and accrued liabilities is as follows:
(In GBP)
Trade payables
Accrued liabilities
Other payables
Amounts payable to subsidiaries (note m)
31 December 2021
31 December 2020
61,645
897,046
736,482
65,836
1,761,009
238,940
405,205
14,570
3,081,678
3,740,393
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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS - CONTINUED
The breakdown of non-current accounts payable and accrued liabilities is as follows:
(In GBP)
31 December 2021
31 December 2020
Amounts payable to subsidiaries (note m)
13,616
13,616
Investments in subsidiaries
i.
The breakdown of the investments in subsidiaries is as follows:
Eastern
Mining d.o.o.
Adriatic Metals
Holdings BIH
Limited
Adriatik
Metali d.o.o.
(Restated)
Ras Metals
d.o.o.
(Restated)
Adriatic Metals Jersey
(previously Tethyan
Resource Corp.)
Cost (In GBP)
30 June 2020
Additions
31 December 2020
Additions
Transfer of Ras purchase
option to the Company
Exercise of Ras Metals
option
11,021,333
4,205,902
15,227,235
4,308,673
-
-
Capitalisation of
intercompany loan
balance
31 December 2021
-
-
-
-
-
-
-
-
100
2,186
-
-
-
-
-
11,021,333
20,163,485
24,369,387
20,163,485
35,390,720
-
4,308,673
-
-
-
-
-
-
-
20,163,485
(20,163,485)
-
2,515,399
-
-
-
-
2,515,399
-
2,937,324
2,937,324
19,536,008
2,186
22,678,884
2,937,324
45,154,402
Group restructure
(19,535,908)
19,535,908
-
-
Total
The allocation of investment value held on the Company balance sheet as at 31 December 2020 has been restated please see
note t for details.
The Company sold Eastern Mining d.o.o. to Adriatic Metals Holdings BIH Limited (which was incorporated during the year to 31
December 2021) in exchange for single share issued by Adriatic Metals Holdings BIH Limited , see note m.
Adriatik Metali d.o.o. was incorporated during the year to 31 December 2021.
As at 31 December 2020, 10% of Ras Metals share capital was owned by Adriatic Metals Jersey Ltd (formerly Tethyan
Resource Corp). As disclosed in Note 10 to the consolidated financial statements Adriatic Metals Jersey Ltd also held an option
to acquire the remaining 90% of Ras Metals. On 22 February 2021, the option to acquire the remaining 90% of Ras Metals was
purchased by Adriatic Metals Plc from Adriatic Metals Jersey Ltd, the consideration being satisfied by way of a return of capital.
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 (Ras Option Agreement) held by Adriatic Metals Jersey Ltd, a wholly owned subsidiary of the Company
including the 10% that was previously owned by Adriatic Metals Jersey Ltd.
Intercompany loan balances between the Company and Adriatic Metals Jersey Ltd were capitalised resulting in investment
balance of £2,937,324.
The list of subsidiaries of the Company is presented in note 3a of the notes to the consolidated financial statements.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
j. Financial Instruments
The Company’s financial assets and liabilities are classified as follows:
As at 31 December 2021
(In GBP)
Note
At amortised cost
At fair value through
profit or loss
Total
Financial assets
Related Party Receivables
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
As at 31 December 2020
(In GBP)
Financial assets
Related Party Receivables
Cash and cash equivalents
Other Receivables and prepayments
Total financial assets
Financial liabilities
Accounts payable and accrued liabilities
Borrowings
Derivative Liability
Lease liabilities
Total financial liabilities
Net financial assets
m
f
h
q
q
r
p
19,315,117
73,077,051
529,387
92,921,555
1,774,625
11,880,828
-
-
233,774
13,889,227
79,032,328
-
-
-
-
-
-
19,315,117
73,077,051
529,387
92,921,555
1,774,625
11,880,828
1,849,962
1,849,962
858,489
-
858,489
233,774
2,708,451
16,597,678
(2,708,451)
76,323,877
Note
At amortised cost
(Restated)
At fair value through
profit or loss
Total
m
f
h
q
q
p
1,868,495
27,983,443
70,416
29,922,354
658,715
11,695,687
-
-
-
-
-
-
1,868,495
27,983,443
70,416
29,922,354
658,715
11,695,687
-
3,045,213
3,045,213
255,340
12,609,742
17,312,612
-
255,340
3,045,213
15,654,955
(3,045,213)
14,267,399
The financial assets and liabilities held on balance sheet as at 31 December 2020 have been restated. Please see note t for
details.
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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS - CONTINUED
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.
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 with the addition of intercompany balances. 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 2021
(In GBP)
Within 30 days
30 days to
6 months
6 to 12
months
Accounts payables and accrued liabilities
1,454,414
Borrowings
Derivative Liability
Deferred Consideration
Intercompany balances
Lease liabilities
-
-
-
65,836
-
1,520,250
Over 12
months
108,775
11,880,828
1,849,962
-
570,663
210,483
-
-
-
-
-
-
639,369
219,120
11,646
651,015
11,646
230,766
14,607,095
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
iii ) Market risk
-
-
-
658,716
-
105,515
-
17,805
123,320
-
-
-
17,805
17,805
Over 12
months
-
11,590,172
3,045,213
219,731
14,855,116
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 2021, 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 £0.1 million change to the Parent
Company’s total comprehensive loss.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
iv ) Fair values
The fair value of cash, other receivables, and 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 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.
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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 23 of the notes to the Consolidated Financial Statements.
The Company had the following related-party balances and transactions during the year ended 31 December 2021 and the six
months ended 31 December 2020.
(In GBP)
Subsidiary
Eastern Mining d.o.o.
Adriatic Metals Holdings BIH
Limited
Adriatic Metals Holdings BIH
Limited
Adriatic Metals Holdings BIH
Limited
Adriatik Metali d.o.o.
Nature of
transaction
Capital
Contribution
Capital
Contribution
Sale of Eastern
Mining d.o.o.
investment
Capital
Contribution
Long Term loan
6,436,998
Year ended 31
December 2021
Six months ended
31 December
2020
At 31
December 2021
At 31
December 2020
Transaction
amount
Transaction
amount
Balance owed
by / (owed to)
Balance owed
by/ (owed to)
4,308,674
4,205,902
100
(1)
2,185
590,890
(13,616)
-
-
-
-
1,518,929
-
-
-
6,436,988
-
-
(3,081,678)
-
-
-
-
1,632,007
-
Adriatic Metals Jersey Limited
Long term loan
Adriatic Metals Jersey Limited
Long term loan
-
(13,616)
Adriatic Metals Services (UK)
Limited
Short term loan
3,928,419
236,488
4,148,236
236,488
Tethyan Resources Jersey
Long term loan
4,694,382
55,700
4,745,892
Tethyan Resources d.o.o.
Long Term loan
1,483,176
Ras Metals d.o.o.
Long Term loan
TAOR d.o.o.
Long Term loan
Tethyan Resources d.o.o.
Loan Interest
TAOR d.o.o.
Loan Interest
999,202
167,055
17,800
2,611
Adriatic Metals Services (UK)
Limited
Trading balance
(126,815)
-
-
-
-
-
-
1,474,002
997,332
165,778
17,800
2,611
(65,836)
-
-
-
-
-
-
-
Eastern Mining d.o.o.
Trading balance
1,197,815
3,081,678
1,055,882
3,081,678
Tethyan Resources d.o.o.
Trading balance
270,594
-
270,594
-
Short Term Related Party
Receivables
Long Term Related Party
Receivables
Total Related Parties
Receivable
Short Term Related Parties
Payable
Long Term Related Parties
Payable
Total Related Parties Payable
170170
170
170
5,495,123
4,950,173
13,819,993
-
19,315,117
4,950,173
(65,836)
(3,081,678)
(13,616)
-
(79,452)
(3,081,678)
ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Adriatic Metals Holdings BIH Limited was incorporated during the year ended 31 December 2021, the Company paid £100
for 100% of the share capital on incorporation. Eastern Mining d.o.o. was sold during the year ended 31 December 2021 in
exchange for a share issued by Adriatic Metals Holdings BIH Limited with £1 nominal value. Loan of £6,436,998 provided to
Adriatic Metals Holding BIH Limited was used to fund investment in Eastern Mining d.o.o.
Adriatik Metali d.o.o was incorporated during the year, the company paid £2,186 for 100% of the share capital on incorporation.
As at 31 December 2020, 10% of Ras Metals share capital was owned by Adriatic Metals Jersey Ltd (formerly Tethyan
Resource Corp). 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 (Ras Option Agreement) held by Adriatic Metals Jersey Ltd, a wholly owned subsidiary of the
Company including the 10% that was previously owned by Adriatic Metals Jersey Ltd, according the value of the investment
£2,097,170 previously allocated under Tethyan Resource Corp was instead allocated to Ras.
Intercompany loan balances totaling £2,937,324 owing from Tethyan Resource Corp to the Company were capitalised during
the period, leaving nil payable balance at 31 December 2021.
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 hence have been classified as long term loans. 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 and considers allowance for expected credit losses (‘ECLs’) for all receivables
held at amortised cost. ECLs are based on the difference between the contractual cash flows due in accordance with the
contract and all the cash flows that the Company expects to receive.
Adriatic Metals Services (UK) Limited, incurred costs in relation to group subsidiaries. Costs in relation to Corporate activities
were recharged to the Company.
The Company incurred costs in relation to the activities of its group subsidiaries. Costs were recharged on an arms length basis
to Eastern Mining d.o.o. and Tethyan Resources d.o.o.
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 13 of the Consolidated Financial
Statements. There are no differences between this and the Parent Company’s transactions.
o. Right of use asset
The right of use asset relates to the registered office address. Under IFRS 16 this has been recognised as a right of use asset.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
(In GBP)
30 June 2020
Amortisation
31 December 2020
Amortisation
31 December 2021
p. Lease liabilities
Set out below are the carrying amounts of lease liabilities and the movements during the year:
(In GBP)
30 June 2020
Interest expense
Payments
31 December 2020
Interest expense
Payments
31 December 2021
Land & buildings
251,898
(15,549)
236,349
(27,011)
209,338
265,621
10,523
(20,803)
255,341
18,953
(40,520)
233,774
Of this amount, £23,291 is recognised as a current liability and the remainder £210,483 is shown within non-current liabilities.
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NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS - CONTINUED
q. Borrowings and Derivative Liability
The movements in external loans and embedded derivative liability are as detailed in note 6 of the Consolidated Financial
Statements. There are no differences between this and the Parent Company’s transactions.
r. Deferred Consideration
Value of remaining consideration payable under Ras Option agreement was when the option and investment were ceded to
Adriatic Metals Plc from Tethyan Resources Corp was £2,515,399. When the company acquired the remaining 90% ownership
stake in Ras Metals d.o.o. the liability was reduced by cash paid and shares issued under the agreement. The liability was fair
valued at 31 December 2021 as £858,489 as detailed in Note 7 of the Consolidated Financial Statements.
s. Commitments
Commitments relating to the Parent Company have been disclosed in note 24 of the Consolidated Financial Statements.
t. Prior year adjustment
During the six months ended 31 December 2020 (the comparative reporting period) equity issued in respect of the acquisition
of Tethyan Resource Corp had previously been recorded as an increase to share capital and share premium. When a company
issues shares, the basic rule contained in section 610 of the Companies Act 2006 is that those shares should be accounted for
at the value of consideration received in exchange. Any excess over the nominal value of the shares issued is recorded in the
share premium account.
Merger relief is a Companies Act relief from the creation of a share premium account on the issue of shares. Broadly, it applies
where a company issues equity shares in consideration for the shares of another company (ie, a share for share exchange)
where, as part of the arrangement, it secures at least a 90% equity holding in the other company. The specific criteria for
merger relief are set out in section 612 of the Companies Act 2006. Where the criteria are met, the relief must be applied and
therefore no share premium is recorded on the issue of the shares.
The company acquired 100% of the equity holding in Tethyan Resource Corp and therefore meets the criteria. The adjustment
to the comparative figures for the six months ended 31 December 2020 represents a change in classification within equity
only, with a £16,952,489 decrease in the share premium account, an increase in merger reserve of £17,256,579. Note that
£304,090 costs directly attributable to raising equity were also included within share premium and these have been reallocated
to retained deficit in line with the requirements when merger relief has been applied. There is no impact on the Group and
Parent Company net assets, profit or loss or cash flow statement for the period ended 31 December 2020.
As at 31 December 2020 Adriatic Metals Plc had recognised an option asset (£20,581,714) and deferred consideration
(£2,515,399) on its balance sheet in relation to the acquisition of Tethyan Resources Corp and Ras Metals. This was to
reflect the accounting disclosed within note 10. The recognition of the option asset and liability was a reflection of how the
transaction was completed on 22 February 2021 when the option and investment were ceded to Adriatic Metals Plc from
Tethyan Resources Corp. As at 31 December 2020 this option asset and liability were legally contracted to Tethyan Resources
Corp and therefore the balance sheet has been restated to reflect the appropriate legal form at that time. The adjustments
reflected are to increase investment in Subsidiary by £18,066,315, to reflect the consideration paid for the investment in the
Tethyan group and to remove the option asset (£20,581,714) and deferred consideration (£2,515,399). There is no impact
on the consolidated group financial statements, the Company net assets on the statement of financial position, the company
statement of comprehensive income or the company statement of cash flows.
u. Subsequent events
Subsequent events relating to the Parent Company have been disclosed in note 26 of the Consolidated Financial Statement.
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The Company’s corporate governance statement for the year ended 31 December 2021 is available on the Company’s website
at https://www.adriaticmetals.com/downloads/corp-governance-files-/adt-2020-06-05-cgp-v03.pdf (“Corporate Governance
Manual”).
This statement has been approved by the Company’s Board of Directors and is current as at 29 March 2022. 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).
The Company is not established in Australia but it is subject in its home jurisdiction to an equivalent law to sections 299 and
299A of the Corporations Act requiring the preparation of a directors’ report that includes a review of operations and activities
for the reporting period which is included in the main body of this Annual Report.
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
1.
1.1
1.2
1.3
1.4
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 Joint Company Secretaries report directly to the
Board through the Chairman and are accessible to all
directors.
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Principles and recommendations
Comment
1.5
1.6
1.7
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. The Company’s
Corporate Governance Plan includes a section on
performance evaluation practices adopted by the
Company..
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 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 November and December 2021.
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. The Company’s Corporate Governance
Plan includes a section on performance evaluation
practices adopted by the Company.
The Chairman monitors the Board and the Board
monitors 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
November 2021.
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Principles and recommendations
Comment
2.
Structure of the board to add value
2.1
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.
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 Company’s Corporate Governance Plan includes
a Nomination Committee Charter, which discloses the
specific responsibilities of the committee.
The Company has established a formal Remuneration
and Nominations committee.
Refer to the Company’s Annual Report for further
details regarding the Remuneration and Nominations
committee.
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 event 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.
2.3
2.4
2.5
2.6
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.
Mr. Rawlinson, who was the Chairman through the
reporting year, is independent.
The Chairman and Company Secretaries 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.
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Principles and recommendations
Comment
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.
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.
The board of a listed entity should, before it approve’
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.
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 established an Audit & Risk
Committee.
Refer to the Company’s Annual Report for further details
regarding the Audit & Risk Committee.
A declaration in accordance with these requirements
has been provided by the CEO and CFO.
The Company seeks to ensure that its external Auditor
attends its AGM and is available to answer questions
from security holders relevant to the audit.
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.
New and substantive investor or analyst presentations
materials are released on the ASX Market
Announcements Platform ahead of presentation.
See Schedule 7 of the Corporate Governance Manual
for further details.
3.
3.1
4.
4.1
4.2
4.3
5.
5.1
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Principles and recommendations
Comment
6.
6.1
6.2
6.3
6.4
7.
7.1
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.
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.
7.2
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 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.
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.
Where appropriate, the Audit & Risk Committee makes
recommendations to the Board in respect of key
operational risks and their management. Risks and the
management thereof is a recurring item for deliberation
at Board Meetings.
Procedures are in place to ensure the Board is informed
of any material breaches of the Corporate Code of
Conduct.
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Principles and recommendations
Comment
7.3
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.
7.4
8.
8.1
8.2
8.3
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.
Remunerate fairly and responsibly
The board of a listed entity should: (a) have a
Remuneration & Nominations 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 Board, as a whole, evaluates and continually
strives for improvement in the effectiveness of risk
management and internal control processes.
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.
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.
The Company has established a Remuneration &
Nominations Committee.
The Company’s Corporate Governance Plan includes
a Remuneration & Nominations Committee Charter,
which discloses the specific responsibilities of the
Remuneration Committee.
Refer to the Company’s Annual Report for further details
regarding the Remuneration & Nominations Committee.
Refer to the Remuneration & Nominations Committee
report in the Company’s Annual Report.
The Company does not have formal policy on whether
participants in the equity-based remuneration scheme
are permitted to enter into transactions which limit the
economic risk of participating in the scheme. However,
no such transactions have been entered into by scheme
participants and such transactions may only be enter
into with the prior approval of the Company as noted
in Schedule 4 Remuneration Committee Charter of the
Corporate Governance Manual.
178178
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
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
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
Exec & NED ASX, LSE, TSX
Human Resources
NED – LSE
As part of the board’s performance evaluation and within the remit of the Nominations Committee, the Adriatic board undertook
a skills self assessment matrix review. The skills categories chosen were all discussed and noted would be required as Adriatic
moves from its development phase into a construction phase and ultimately production/steady state. The outcome of the self
assessment was as follows:
Adriatic Board Skills Matrix Self Assessment Dec-21
M&A
Social & Community Management
Environmental Management
Corporate Governance
International/Balkan experience
Capital Management & Legal
Stakeholder Relations
Information Technology
Commodity Markets & Hedging
Treasury & FX Hedging
Risk Management
Financial Reporting
Project Development & Operations
Project Evaluation & Feasibility Studies
Exploration
Strategy
0
1
2
3
4
5
6
Expert - Deep knowledge / formal qualification or experience over many years
Moderate - Moderate skills / experience – knowledgeable but not highly skilled
Aware - Some knowledge and can follow a discussion
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
ADDITIONAL ASX INFORMATION (UNAUDITTED) - CONTINUED
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 8 March 2022 as follows:
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CITICORP NOMINEES PTY LIMITED
WARBONT NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD
MR MILOS BOSNJAKOVIC
BNP PARIBAS NOMINEES PTY LTD
ABADI INVESTMENTS PTY LTD
GLAMOUR DIVISION PTY LTD
EUROCLEAR NOMINEES LIMITED
NORTRUST NOMINEES LIMITED
NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
CHASE NOMINEES LIMITED>
UBS NOMINEES PTY LTD
INTERACTIVE BROKERS LLC
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
MR ALBERTO LAVANDEIRA ADAN
APOLLO NOMINEES LTD
BBHISL NOMINEES LIMITED <128024>
Number of
ordinary shares
55,684,546
25,240,627
15,613,335
15,387,391
13,300,000
11,042,395
7,771,332
7,571,629
7,106,553
6,983,763
5,115,087
3,653,733
3,389,039
2,973,888
2,966,928
2,892,098
2,721,442
2,666,664
2,600,769
2,565,948
Percentage of
issued share
capital
20.90
9.48
5.86
5.78
4.99
4.15
2.92
2.84
2.67
2.62
1.92
1.37
1.27
1.12
1.11
1.09
1.02
1.98
0.96
1.02
Totals: Top 20 holders
Total Remaining Holders Balance
197,247,167
69,132,073
77.04%
22.96%
As at 8 March 2022 the Directors are aware of four 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.
Distribution of Ordinary Shares as at 8 March 2022
Number of
shareholders
Number of
ordinary shares
Percentage of issued
share capital
759
675
251
346
130
2,161
325,786
1,816,780
1,923,851
11,200,056
251,111,767
266,379,240
0.12
0.68
0.72
4.20
94.28
100.00
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
180180
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION
Unmarketable Parcel
ASX Minimum trade parcel AUD$500.00 parcel at
AUD$2.18 per share
230
255
21,150
Minimum Parcel
Size Shares
Number of
shareholders
Total Shares
Substantial Option and Performance Rights Holders
There are no substantial options or performance rights holders other than those disclosed in the Remuneration & Nominations
Committee Report.
Restricted securities
There were no restricted securities or securities or subject to voluntary escrow as at 31 December 2021.
Tenement holdings
The Company’s tenements at 8 March 2022 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
Exploration
License
310-02-
1721/2018-02
310-02-
1722/2018-02
310-02-
1114/2015-02
310-02-
00060/2015-02
Exploration
License
310-02-
01670/2021-02
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.
Global Mineral
Resources
d.o.o.
Raska (Suva Ruda)
87.17
28-Dec-2015
18-Feb-2022*
Kaznovice
37.1
22-Nov-2021
22-Nov-2024
* Raska concession is pending renewal, application for extension has been submitted, the Company is awaiting to receive
confirmation of extension from authorities.
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ADDITIONAL ASX INFORMATION (UNAUDITTED) - 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.
All substantive resolutions at a meeting of security holders are decided by poll rather than by 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.
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.
182182
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ADRIATIC METALS PLC ADRIATIC METALS PLC STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION COMPANY DIRECTORY
Board of Directors
Michael Rawlinson* (Chairman)
Peter Bilbe*
(Non-Executive Director)
Paul Cronin
(Managing Director & Chief Executive Officer)
Julian Barnes*
(Non-Executive Director)
Sandra Bates*
(Non-Executive Director)
Sanela Karic*
(Non-Executive Director)
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
Level 1, 10 Outram Street, West Perth WA 6005, Australia
+44 (0) 20 7993 0066
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
Australian Securities Exchange (ASX:ADT)
London Stock Exchange (LSE:ADT1)
OTC Market (OTCQX:ADMLF)
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 Quoted Company Alliance’s Corporate Governance Code
(QCA Code).
Designed and Produced by Presentation Graphics Design Ltd
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Annual Report for the Year Ended 31 December 2021STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSASX ADDITIONAL INFORMATION Ground Floor, Regent House
65 Rodney Road
Cheltenham
GL50 1HX
United Kingdom
Tel: +44 (0) 207 993 0066
www.adriaticmetals.com