From developer
to producer
Annual Report 2022
For the year ended 31 December 2022
Introduction
A significant moment in our short history
About us
Adriatic Metals is a precious and base
metals developer that is advancing the
world-class Vares Silver Project in Bosnia
and Herzegovina, as well as the Raska Zinc-
Silver Project in Serbia.
The Vares Silver Project is fully funded to
production, which is expected in Q3 2023.
The 2021 Project Definitive Feasibility
Study boasts robust economics of
US$1,062m post-tax NPV8, 134% IRR
and a capex of US$168m. Concurrent
with ongoing construction activities, the
Company continues to explore across
its highly prospective 42km2 concession
package.
Adriatic Metals is listed on the London
Stock Exchange (LSE:ADT1), the Australian
Stock Exchange (ASX:ADT) and the OTC
Markets Group (OTCQX:ADMLF).
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Highlights of the year
Corporate
Delivering European
resource self sufficiency
See p.4
Strategic Report
A scalable model to develop
sustainable strategic metals
See p.8
Governance
Delivering responsibly
developed value to
all stakeholders
See p.77
Financial Statements
Strong capital control
& cash position
See p.106
Highlights
Employees
192
Contractors
138
National employees
Foreign Direct Investment
91%
25%
Offtake contracts agreed
Drilling complete
100%
88%
DFS projected budget
Total current mine cost
$168m
$183m
Total project completion
Infill drilling
70%
8,139m
LTIFR
1.03
TRIFR
4.10
Contents
Company Overview
Chairman’s Statement
Market Review
Business Model
CEO’s Statement
Strategy
Operations Review
Financial Review
Principal Risks and Uncertainties
Directors’ section 172 statement
Principal decisions by the Board during the period
Sustainability
Adriatic Foundation
Corporate Structure
Company Directory
Corporate Governance Report
Audit & Risk Committee Report
Environmental, Social & Governance Committee Report
Female diversity
Employee Satisfaction
Remuneration & Nominations Committee Report
29%
89%
Directors’ Report
Statement of Directors’ Responsibilities
NPV8
$1,062
Cash position
$60.6m
IRR
134%
Contingency
$10m
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
Notes to the Parent Company Financial Statements
Additional ASX information
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37
42
48
55
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Corporate
Delivering
European
resource self
sufficiency
Company Overview
Chairman’s Statement
5
6
Adriatic Metals | Annual Report 2022
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sweden
Denmark
United
Kingdom
Netherlands
Poland
Belgium
Germany
France
Switzerland
Czech
Republic
Austria
Slovenia
Slovakia
Hungary
Bosnia and
Herzegovina
Vares
Sarajevo
Italy
Montenegro
Romania
Serbia
Raska
Bulgaria
Macedonia
Albania
Greece
Portugal
Spain
Company overview
Europe’s new source
of strategic metals
The Company’s asset portfolio consists of two polymetallic
projects in southeast Europe, which are both situated on
the Tethyan Metallogenic 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.
Ireland
Vares Project, Bosnia and Herzegovina
The Company’s flagship Vares Project is located in the
municipality of Vares, within the Zenica-Doboj canton,
approximately 50km north of the Bosnian capital of Sarajevo.
The town has a long history of mining. State-owned iron ore
mining operations and associated steelworks operated from
the 1890s until the late 1980s and, as a result, there remains
existing road, rail, water and power infrastructure. 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. The Company is confident that
the predominantly greenfield land package has significant
exploration potential to add to the current 10-year life of mine.
The Vares Project is now over 70% through construction.
Mining development at Rupice is progressing well and
construction at the Vares Processing Plant is well underway.
The haul road, mine site infrastructure and additional
infrastructure at the railhead and port are on track for
completion in Q3 2023. The Project is fully funded and remains
on schedule for first concentrate production in Q3 2023.
In 2023, Rupice will remain the focus of exploration activities
as the deposits remain open and still to be fully defined.
Exploration activity will continue to realise the resource and
reserve potential of this existing deposit and there is potential
to materially extend the current life of mine of the Vares Project.
In the wider Vares region, significant potential remains across
the range of greenfield, brownfield and advanced exploration
targets. Adriatic is committed to advancing exploration
regionally to find the next economic-grade deposit that will
diversify the current production profile and capitalise on the
existing tenement holding.
Bosnia and Herzegovina: A modern-day jurisdiction
Candidate for EU membership
Population and both local and federal government are supportive of mining industry
Strong mining history
Clear and concise mining code in a stable democracy
10% corporate tax and favourable royalty regime
Business friendly environment
Extensive access to rail networks linking European smelters and the seaborne market
Current reserve at Rupice is of 114Moz AgEq (7.3Mt @ 485g/t AgEq).
Our operations and European smelter locations
Vares Project
Raska Project
Sarajevo - Capital of Bosnia and Herzegovina
Likely customers in northern Europe
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
5
5
Raska Project, Serbia
Since the acquisition of the Raska Project,
the Company has been conducting
exploration activities including 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
the potential for scale.
Turkey
In 2022, a robust exploration project pipeline
was advanced. Mapping, trench–soil–rock
chip sampling, and geophysical surveys
Turkey
were completed in various combinations
across Kozya Glava, Rudnica, Kremice
Porphyry, Plavkovo, Bukovic, Lipovica
and Karadak prospects. Drill testing was
completed on the Kremice, Sastavci,
Lipovica, Bukovic, Plavkovo and Kremice
Porphyry prospects. Positive outcomes
from 2022 exploration programmes will be
followed up in 2023 across the Kizevak,
Kozja Glava, Rudnica, Kremice Porphyry,
Plavkovo and Bukovik prospects.
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Chairman’s statement
On the cusp of production
Michael Rawlinson
Chairman of the Board
Overview
The last twelve months have been
transformational for Adriatic. The Company
has evolved and significantly matured as it
progresses through the construction phase
and ever closer to production. It will soon be
delivering Europe’s new source of strategic
metals from the world class Vares Project in
Bosnia and Herzegovina and will complete
construction, commence ore mining and export
our first concentrate production in 2023.
The Company has achieved great progress during a
testing time characterised by geo-political insecurity
and economic uncertainty. Diplomatic and economic
events including Russia’s invasion of Ukraine,
Covid–19 and a global recessionary environment have
thrown up multiple challenges including high inflation,
currency volatility, supply chain issues and increasing
interest rates. It is a testament to our management’s
leadership and foresight that our operational
progress has only been marginally affected and the
Company continues to deliver on its key objectives.
Construction of the Vares Project will be completed
in 2023 with only a small slippage in the delivery
schedule and minimal increase in capital expenditure.
I have been impressed with how budgets have been
managed and I am confident of the Company’s
ability to continue to adapt to a volatile economic
environment.
The execution of the world class Vares Silver Project
demonstrates one of the fastest rates of development
for any junior mining company. The Company has
advanced from exploration discovery to construction
in less than six years; and is delivering the first project
of this scale in Bosnia and Herzegovina in over 30
years. This success is a credit to our growing team
of dedicated employees, one that now boasts 94%
nationals in the operating entity, Eastern Mining.
Their hard work and creativity continue to deliver
the solutions required to meet our strategic and
operational goals, during a historically challenging time
for our industry.
“The Company has achieved
great progress during a
testing time characterised by
geo-political insecurity and
economic uncertainty.”
Project delivery
It is a tribute to the determination of our staff that the
Vares Project is scheduled to enter production in Q3
2023. The Rupice mine site is over 70% complete and
the construction of the Vares Processing Plant is well
underway. The infrastructure and logistics required to
support these operations are also nearing completion
and first concentrate production is scheduled for Q3
2023.
Construction performance has been complemented
by outstanding results in the exploration programme.
The ore body extension discovery at Rupice
Northwest (“Rupice NW”) has delivered high-grade
results and the Company is confident that further
drilling will prove Vares to be a Tier 1 asset, with a
20-year Life of Mine. We look forward to an updated
Mineral Resource Estimate in 2023, along with the
exploration of additional target areas within the Project
concession area.
Over the past year exploration drilling continued at
Raska in Serbia, with one diamond core drilling rig. Key
prospects have been identified and exploration will
continue in 2023. However, as the Company plans to
develop the Raska Project over a longer time horizon,
the decision has been made to recognise a non-cash
partial impairment of $23.2m against Raska, bringing
the carrying value to $8.5m.
Sustainabilty
The overall purpose of our Company is to create
value for all stakeholders through responsible mining
activities. This includes careful stewardship of the
environment, positive socio-economic contributions
and shared prosperity.
The nature of Adriatic’s operations will result in a range
of socio-environmental impacts, and the Company’s
commitment to responsible business practices is
paramount to maintaining a social licence to operate.
Adriatic aims to be a leader in the industry and in
the regions in which it operates. It is recognised that
the challenges faced by the mining industry require
transformation in how mineral resources are extracted
whilst appreciating climate-risk impacts to the
business. Adriatic is well placed to produce high-grade
critical metals within Europe and reduce reliance on
imports from higher-carbon producers and often
fragile supply chains of jurisdictions further afield.
By producing concentrates which are suitable for
European smelters, Adriatic contributes positively to
the decarbonisation of European supply chains whilst
also looking to reduce the energy intensity profile of
its product.
In concert with this regulatory reporting disclosure,
Adriatic will publish its maiden Sustainability Report for
2022 which will provide further detail on the strategy
to become a Net Zero mine, in addition to current
sustainability performance.
Adriatic’s sustainability commitments are integral
to its operational functions. The Company has clear
commitments to hiring local employees, wherever
possible, and providing professional development,
including education and training for all staff. Active
leadership is advancing the workplace participation
of women in the mining sector and Adriatic can be
proud that its female workforce has grown to over
29% of total employees, against an industry average
of 15%. As the operational risk profile has increased
in line with the construction activity, the Company
has strengthened its occupational health and safety
systems, ramped up safety training, expanded the
safety team and integrated health and safety into the
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Chairman’s statement
On the cusp of production
operational culture. We want all of our employees to
return to their families fit, healthy and happy at the end
of each day.
The positive socio-economic and environmental
impacts of operations are underpinned by the
Community and Biodiversity Action Plans. Working
with businesses and entrepreneurs in the region,
Adriatic is building both capability and capacity in
local supply chains and forging links with academic
institutions to sponsor mining sector qualifications
and support the future recruitment of skilled
nationals. Over the life of the mining operations,
the Company is targeting a net gain in biodiversity,
driven by clear strategies related to climate action,
water management, waste materials control including
tailings management and reforestation.
Adriatic’s funding for the independently governed
Adriatic Foundation will support legacy-focused
investment into key areas of environment, education
and health that will fund initiatives that are decided by
the community, for the benefit of the community.
Shareholders
I would like to thank our shareholders for their
continued support. We recognise that 2022 and
2023 are our peak years of investment and we thank
our debt, equity and streaming partner, Orion Mine
Finance, for its continued commitment and assistance.
The Vares Project is financed to the delivery of first
concentrate in 2023 and whilst the Company is
targeting the commencement of shareholder returns
from 2024, we look forward to rewarding investors
for many years to come. In October 2022, Adriatic
hosted a capital markets site visit that welcomed
over 30 investors and analysts to Vares. Attendees
commented how impressed they were with the
development of the Project and the progress made by
the management team. This sentiment was reflected
in positive equity research notes and in 2022 the share
price increased by 29% on the ASX (30% on the LSE).
Outlook
As a result of the outstanding progress made in
the last few years, the Company remains on track
to achieve its ambition of first ore production in Q3
2023. Such achievements are even more creditable
given the challenging operating environment. I am
particularly proud that the team has delivered these
goals the right way – with integrity, good humour
and utmost respect for the communities and other
stakeholders that host us in country.
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
tremendous achievements. I would also like to thank
all of our stakeholders for their continued support and
commitment through this transformational year. We
all look forward to 2023, and the next phase of the
Adriatic story, with great excitement as the world class
Vares Project comes into production.
Michael Rawlinson
Chairman of the Board
Board of directors and management
Adriatic continued to strengthen the management
throughout the year with key appointments to the
operations and project delivery teams. The leadership
and commitment of our Managing Director and Chief
Executive Officer, Paul Cronin, who has again been
based in Bosnia and Herzegovina throughout the past
year, has ensured the Project is being delivered in a
first-class manner. The remarkable progress at Vares
is down to not only the dedication of Paul but the
whole team and we look forward to this momentum
continuing through 2023. The team has also built
important relationships with the Government of
Bosnia and Herzegovina. In October 2022, there was
a national election and despite political changes, the
new coalition government has signed an innovative
power sharing agreement that opens a new dimension
of behaviour in political culture and supports Bosnia
and Herzegovina’s European Union candidacy
and accession roadmap. In this context, Adriatic’s
leadership have worked tirelessly to ensure that local
authorities are fully informed of developments and
secure the Project’s continued progress.
Whilst there were no changes to the Board of Directors
in 2022, we welcomed the addition of experienced
mining executive Mike Norris to the management team
as the Company´s Chief Financial Officer. With 30
years of commercial and operational experience in the
mining industry, Mike has been instrumental in bringing
the finance team in line with international best practice.
Corporate governance
The Board is committed to strong corporate
governance and the continued application of the
Corporate Governance Code principles of the Quoted
Company Alliance, of which the Company is a member.
The Board continues to align the skills and experience
of the Directors and management with the needs of
Adriatic’s business model and strategy as it delivers
on its objectives.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Strategic Report
A scalable model
to develop
sustainable
strategic metals
Market Review
Business Model
CEO’s Statement
Strategy
Operations Review
Financial Review
Principal Risks and Uncertainties
Directors’ section 172 statement
Principal decisions by the Board during the period
Sustainability
Adriatic Foundation
Corporate Structure
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42
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55
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Adriatic Metals | Annual Report 2022
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Market review
Meeting the resource needs of Europe and beyond
Macro trends and developments
Amid heightened geopolitical tensions and ongoing conflicts, 2022
showed that the security of commodity supply chains has become
strategically important. At the same time, deglobalisation and ongoing
underinvestment in new projects will provide a challenge to meeting the
forecasted increase in demand for critical raw materials.
Compared with previous cycles of high commodity prices, mining
companies have been reluctant to bring new supply online by investing
in growth projects amid rising capital costs and investor pressure to
prioritise shareholder returns.
Looking ahead to 2023, China’s decision to relax its zero-Covid policies
is expected to strengthen demand for metals. This should offset potential
weakness in developed markets that are navigating interest rate hikes
from central banks in a bid to bring down inflation. Monetary policy
decisions and a potential global recession, as well as China’s ability to
stimulate its property sector and broader economy, will likely play a central
role affecting metal prices this year.
European Union Critical Raw Materials Act
In her September 2022 State of the Union Address, President Ursula
von der Leyen announced a European Union Critical Raw Materials Act,
to secure the supply of key transition and industrial metals. Critical raw
materials are the resources that are both important economically and
present a high supply risk. Critical raw materials are crucial in a wide range
of industrial ecosystems. They are also key to securing Europe’s Net-Zero
and digital transitions.
To achieve these transitions, the EU must significantly increase and
diversify its critical raw materials supply, strengthen circularity and support
research and innovation. The Critical Raw Materials Act was released
on 16 March 2023, and it includes targets for exploitation, refinement,
recycling and stockpiling of specific strategic and critical raw materials.
The Company is extremely well positioned to take advantage of this shift
in European resource strategy through production at its Vares mine and
this further underpins the longer term strategy to develop a European
focussed multi-asset, mid-tier diversified miner.
“But securing supplies is only a first step. The processing
of these metals is just as critical. Today, China controls
the global processing industry. Almost 90 % of rare earths
and 60% of lithium are processed in China. We will identify
strategic projects all along the supply chain, from extraction
to refining, from processing to recycling. And we will build
up strategic reserves where supply is at risk. This is why
today I am announcing a European Critical Raw Materials
Act. We know this approach can work. Five years ago, Europe
launched the Battery Alliance. And soon, two third of the
batteries we need will be produced in Europe. Last year
I announced the European Chips Act. And the first chips
gigafactory will break ground in the coming months. We now
need to replicate this success .”
2022 State of the Union Address
by President Ursula von der Leyen
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Market review
Meeting the resource needs of Europe and beyond
Bosnia and Herzegovina and Balkan region
The region is by no means insulated from the global
political upheavals of 2022, but unlike many parts
of the world, the Balkans has become more stable
because of both the war in Ukraine and the European
Union’s (“EU”) acknowledgement of future resource
criticality. State level elections in 2022 returned both
President Alexander Vucic in Serbia and Prime Minister
Milorad Dodik in Republika Srpska (“RS”). The isolation
of Russia by the Western economies is requiring
Serbia to consider deeper European integration
and the fast tracking of Bosnia and Herzegovina to
EU candidate status will ultimately prevent further
secessionist ambitions by RS.
Elections in Bosnia and Herzegovina in October 2022
returned a different coalition government to the Vares’
canton of Zenica-Doboj, but from initial engagement
with the new political team the Company is confident
that the same high level of cooperation and
engagement experienced with the last government
will remain. Whilst the state government is, at the
time of publishing this report, not yet formed (the
time being taken being normal for European coalition
democracies), it is also expected that there will be no
fundamental change to the political landscape, other
than the positive moves towards European integration
that come with EU candidate status.
International metals market
Forecasters see high metal prices in 2023, even in the
face of recessionary fears, due to a combination of
very tight inventory levels and continued supply issues
across key jurisdictions and operations.
Physical inventories of zinc in particular are at
historically low levels following shutdowns of key zinc
smelting plants in Europe by Glencore (Nordenham)
and Nyrstar (Auby and Budel) due to the high costs
of energy resulting from the Russian-Ukrainian war.
Metal premiums in Europe have remained above
$500 per metric tonne (“mt”) as metal has become
more difficult to procure. Current constraints on raw
material supplies from South America (where there
is widespread political and social upheaval) have
additionally exacerbated raw material supply fragility,
helping to firm up both zinc and lead metal prices at
the end of 2022, as supply chain disruptions peaked.
Subsequently prices have receded, but with the
recovery in China beginning to gain momentum, as the
government stimulates the economy to regenerate
growth, prices can be expected to resume their steady
upward trajectory.
Silver demand is widely expected to increase to
all-time highs in 2023, with the longer term case
bolstered by silver’s role in the energy transition and
electronics, with usage in solar photovoltaics and
electric vehicles showing strong future growth.
Metals applications
Zinc is mainly used for galvanising iron and steel
against corrosion (50%), as well as die cast parts
and brass. For the most part, galvanised steel and
die cast parts are used to manufacture automobiles,
and for steel structures and roofing in construction.
Other uses include the manufacture of zinc oxide
for vulcanising rubber and the use in cosmetics. In
addition, there is significant interest in zinc for the
manufacturing of stationary storage batteries (zinc-
bromide chemistry) for renewable energy sources, as
they represent a cheaper alternative to lithium ion.
Lead is predominately used in the manufacturing of
Lead Acid Batteries (“LABs”) for the most part used
in automobiles. LABs will still be needed in electric
vehicles (“EVs”) for high-powered applications, such as
start-up, for which a Li-ion battery is unsuitable. Other
uses of lead are in roofing, pigments, ammunition,
cable sheathing, weights, ceramics, solders, alloys and
radiation protection.
Silver has many applications; it is used in the
automobile industry to silver coat electrical contacts
(particularly crucial to EVs high-speed charging
infrastructure), and in silver membrane switches. Silver
is used in photovoltaic cells, which are in ever greater
demand as the world transitions to renewable energy.
Silver is also used in electronics, soldering and brazing,
high temperature ball bearings, medicine and water
purification, as well as a function as a precious metal,
particularly popular in the Asian sub-continent and the
Middle East.
Commodity price volatility
In the last five years, prices have varied substantially.
Zinc has risen from a low of $1,815 in March 2020 (at
the beginning of the pandemic) to a high of $4,499 in
April 2022, but averaged over the period at $2,829 per
mt. Lead reached a low of $1,585 in March 2020, rising
to a high of $2,497 in March 2022, averaging $2,049
over the period. Silver reached a low of $11.981 in
March 2020 before rallying to a high of $29.12 in
August of that year and averaging $21.26 over the
period. Gold reached a low of $1,270.69 in May 2019
and rallied to a high of $2,063.54 in August 2020 whilst
averaging $1,720.67 over the period.
It is likely that there will be continued volatility on a
forward-looking basis, but that average prices will
still be consistently strong compared with historic
averages as the world continues its gradual recovery
from the Covid-19 pandemic and the eventual ending
of the Russian-Ukrainian war (with consequent rebuild
of infrastructure).
Refining/smelting demand and shutdowns
With smelter shutdowns occurring across the industry,
smelting capacity has become a bottleneck for metal
supply. Analysts see continued constraints through
2023, despite energy prices softening globally from
recent highs.
Trafigura’s Auby zinc smelter in France (165ktpa) and
Budel zinc smelter in the Netherlands (290ktpa) were
put on care and maintenance in 2022. Glencore’s
Portovesme zinc smelter in Italy (100ktpa) remains on
care and maintenance since 2021 and the Nordenham
zinc smelter in Germany (180ktpa) was idled in 2022.
Offtakers
Contracts have been executed for the majority of
Adriatic’s first years of concentrate production. The
zinc concentrate is committed to Trafigura, Boliden
and Transamine and the silver/lead concentrate to
Transamine and Glencore. The Company has retained
the ability to market a small percentage of its annual
production directly, at what has historically been
advantageous spot terms.
Shipping
Shipping rates for dry bulk materials have reduced
considerably as world trade supply routing disruptions
have lessened following the opening up of China and
the resolution of its Australian trade dispute. As trade
begins to rise in the post-recessionary period for
many of the major global economies, economists have
predicted that ship building will increase and therefore
rates will remain low. Adriatic will be working to align
the Company more closely its customers’ shipping
requirements to optimise the shipment scheduling
ahead of production.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Our Business model
Generating positive
stakeholder
outcomes
Adriatic believes that economic
development should underpin the prosperity
and well-being of stakeholders at both local
and national level.
From inception, Adriatic has been committed to
driving a culture that places host communities
at the centre of the Company’s objectives.
Demonstrating these embedded values and
principles, the development and production of
mineral resources have the potential to deliver
long term value for all shareholders and
stakeholders.
Development
cycle
Portfolio
Development
Asset
Development
Operational
Development
Sustainable
Development
Restoration
Development
Targeting Pan-European,
value accretive assets to
diversify the portfolio
Continued exploration
to add ore reserves to
existing Vares concession
Construction, production,
workforce development
and high operational
standards
Reducing our
environmental impact
whilst increasing our
positive social impacts
Rehabilitation to ensure
that biodiversity impacts
are more than replaced
Resources and
Relationships
Leadership
expertise
Strong financial
position
High grade
deposits
Supportive
community
Local capability
and capacity
Strong ethics and clear
policies
Robust governance
framework
Experienced in-country
team
Ample financing capacity
to complete development
and commence production
Strong cash flow
projections
Stable balance sheet
Premium products can
drive a higher valuation
Historic mining region with
strong links to industry
A source of committed
employees
Quality source material
can lower processing costs
and environmental impacts
meeting supply chain
requirements
Existing industrial
infrastructure
Stable geo-political
environment
Established supply chain
partnerships
Sustainable
development
goals
* With Norwegian energy supplier
Sustainable
communities
Realising the commercial and
environmentally sustainable
development of critical raw
materials
Industry innovation
and infrastructure
Driving highly technical and
remunerated roles and skills
development for local workforce
Responsible consumption
and development
Developing local renewable
sources of energy as primary
resource can minimise the
carbon profile of the mine
Decent work
and economic growth
Generating a significant increase in
local tax revenues through royalties,
concession fees, local employment
and procurement
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 CEO Statement
A year of significant progress
Market
Adriatic is well placed to deliver critical metals
and resource efficiency to a receptive European
market that has changed dramatically over the
last few years. Shaped by geopolitical instability,
economic uncertainty, the continuing coronavirus
pandemic and the biggest war in Europe since
World War II, supply chain disruptions have
driven “deglobalisation” agendas and “resource
fragility”, especially in raw materials. These
agendas have been further challenged by
the resource efficiency requirements of The
European Green Deal.
Within our diversified metals base, silver will account
for around a third of our projected revenues. Silver’s
application to electric vehicle charging infrastructure
and photovoltaics position this metal as a key
component in global energy security and climate
change transition strategies, ensuring strong
demand for years to come. Through sustainable
and responsible mining, the Vares Project will supply
low-cost strategic metals that will increase European
resource self-sufficiency, whilst further serving the
decarbonisation agenda through reduced energy
intensity rates and shortened logistics requirements.
Project development
We have achieved excellent operational progress in
the development of the Vares Project in Bosnia and
Herzegovina. As of the date of this statement, the
Company is over 70% through construction of the
Rupice Mine and on track to reach ore in Q2 2023. The
build of the Vares Processing Plant is well underway,
and we are taking on all the necessary items for
the main infrastructure, including construction
of the filtration area and metallurgical laboratory.
The staggered development of the haul road has
progressed well; Lots 1, 2 & 5 are approaching
completion and Lots 3 & 4 are to be completed in Q2
2023. The logistics agreements that will connect our
operations with the Bosnia and Herzegovina state
railway and the port at Ploce have been, or are soon to
be, executed. With the delivery of major components
progressing, we are confident of commissioning the
Vares Processing Plant in Q3 2023.
Over the course of the year, our headcount increased
significantly to 192 direct employees and 138
contractors, as at 31 December 2022. To take
us through the next few critical months and into
production, we made some specialist appointments
in exploration, mining operations, mine geology,
metallurgical processing and engineering. Our recently
launched Employee Engagement Survey allows
us to continually assess our cultural performance
and identify areas where work can be more fulfilling,
leading to greater productivity.
Cost control
We are extremely satisfied with our operational
advances, given the especially challenging economic
and operating environment. High inflation, increasing
interest rates, and disrupted supply chains have led to
difficulty in sourcing critical long lead-time items. The
Vares Project budget has increased 9% from $168m
to $183m since the Definitive Feasibility Study (“DFS”)
was published in 2021 but the budget remains within
contingency. This increase in cost is mainly due to
additional infrastructure and earthworks required,
additional plant equipment, that will bring long term
benefits to the Project, and inflationary pressures
exacerbated by recent foreign exchange movements
due to the depreciation of the US dollar. The Project is
also expected to deliver first concentrate production
in Q3 2023, only a few months behind the original
schedule as foreseen at the completion of the DFS.
This has been a solid result during a very challenging
time for industry and construction. A benefit of the
Vares Project is that it is conveniently located close
to supportive infrastructure, and by paying close
attention to costs at all levels we have been able to
source concrete, steel, and other key components
locally. Bosnia and Herzegovina is also fortunate to
have one of the lowest national power costs globally.
I would like to recognise the management team for
their hard work and dedication to delivering the Project
during these times of uncertainty.
Exploration
During the year, we achieved further success with
our exploration programme. I am delighted with the
drilling results we have achieved over the past twelve
months, both at the Rupice main ore body and at
the new mineralised zone discovered at Rupice NW.
As all holes have intercepted mineable thicknesses
of massive and semi-massive sulphides, we believe
Rupice NW will add significant mine life to the Project
and demonstrate Tier 1 asset credentials, with
increasing potential for twenty years of profitable
production. An updated Mineral Resource Estimate
is planned in 2023 once existing areas of defined
mineralisation are closed-off and the scale of the
mineralised system within Adriatic’s tenement
holdings has been fully realised.
As the Company focuses on the Vares Project
construction and exploration, there will be limited
resources available for exploration in Serbia in the
coming year. We therefore plan to develop the Raska
Project over a longer horizon, including advancing
new prospects in our tenement area during 2023
to complement Kizevak and Sastavci. We remain
positive about the future prospects for Raska, however
due to the longer development horizon envisaged,
it is appropriate to recognise a non-cash partial
impairment of $23.2m against the Raska Project,
bringing the carrying value to $8.5m.
Offtake agreements
Given the fragility in resource supply chains, it is
extremely gratifying to have completed offtake
agreements for our future concentrate production.
Our partners are leading international commodity
smelters and traders: Boliden, Trafigura, Glencore
and Transamine. We are particularly pleased with the
significance of our agreement with Boliden – Adriatic
is the first development mining company to secure
such an offtake partnership. Boliden have integrated
ambitious low-carbon principles into their supply
chain criteria and this agreement recognises the
sustainability profile of our Company.
12
Paul Cronin
Managing Director and Chief Executive Officer
“I am very pleased to update
you on what has been a very
successful year. The Vares
Project is a world class asset and
I am delighted that over the last
twelve months great progress
has been made towards building
Europe’s next Tier 1 mine”
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
CEO Statement
A year of significant progress
Sustainability
Our objective has been not just to build a mine but to
build a legacy. As we progress towards the generation
of production revenues, we are starting to lay the
foundations required for long term success and
consistent stakeholder return.
The most important development has been
establishment of our Health & Safety Management
System. As our risk profile has increased through
construction, our focus has been on zero-harm and
the protection of all our employees and contractors.
We have worked intensively to embed an enhanced
safety culture with continual improvement. Our health
and safety framework includes policies, procedures,
training and company standards that go above and
beyond compliance.
Accordingly, we saw a continued year-on-year
improvement in our headline safety performance.
Adriatic recorded no Lost Time Injuries (“LTI”) in Q4
2022. The lost time injury frequency rate (“LTIFR”) for
2022 as a whole was 1.03 per 200,000 hours worked,
representing an 80% improvement over the previous
year.
The Vares Project workforce represents an affirmative
decision to hire young graduates and train them with
the necessary skillsets required. The average age of
our employees is approximately 27 and therefore we
need substantial programmes of vocational education
to support our high-quality operations. We believe
that every member of our staff has the right to job
security and professional development is an essential
commitment to our employees careers. Our training
programmes have included English language courses,
driving skills, safe working practices, higher education
opportunities, environmental and social principles and
personal development plans. We remunerate staff
fairly and offer a number of benefits, including private
health care for our employees and their families.
We are formally committed to the fundamental
objective of responsible stewardship and embedding
sustainable practices into all our activities through our
Environmental and Social Management System. Whilst
the construction of the mining operation has involved
planned environmental impacts, we carry out continual
inspections that include soil and water monitoring.
Adriatic also has a clear strategy for the management
of natural resources, waste processing, including
tailings management, and biodiversity regeneration.
Working with and for the community, we understand
the role that preservation plays in maintaining our
social licence to operate.
In addition to our mandatory reporting of Greenhouse
Gases - and in line with our climate risk strategy
- we are developing calculations and predictions
for the imminent production phase to include total
emissions and emissions intensity per tonne of
concentrate produced. We are also preparing the Life
Cycle Assessment that quantifies natural resource
consumption and pollutant emissions, and this is
expected to be completed in July 2023. To support
our lower-carbon commitments’, we are developing
a Net Zero strategy which will determine the location
of sites suitable for renewable energy projects,
underpinned by a signed MoU with Norwegian
renewable energy supplier, Emergy, for cooperation
on the development of a 30 MW solar facility for direct
supply to the Vares Processing Plant.
In addition to building the mining operations, it is
important that we also create sustainable socio-
economic benefits for the communities around the
Project. Our Community Development Plan has
formalised our local investment approach, through
targeted activities of local need, alongside regular
communication with community representatives via
the establishment of a Public Liaison Committee
(“PLC”).
The established Adriatic Foundation also identifies
and invests in community driven initiatives that target
education, health and the environment outcomes.
This independently governed body, seed funded
and part-maintained by a percentage of production
revenue from Adriatic, will help attract further
investment into projects that can help drive an
economic renaissance in Bosnia and Herzegovina.
Stakeholders
The multi-disciplinary execution of the Vares
Project accomplishes one of the fastest rates of
development for any junior mining company – from
discovery to construction in less than five years. This
achievement is due in great part to the support we
have enjoyed from the Government and Ministries
in Bosnia and Herzegovina. 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 and Herzegovina for more than a generation.
I would like to express my appreciation to all our
stakeholders including the Government of Bosnia and
Herzegovina, our financiers, our shareholders and
our local communities. Without their encouragement,
partnership and support this Project would not have
been possible.
Over the past year, the rapid developments at Vares
have garnered understandable interest from various
stakeholders. I personally recognise how imperative
it is to have clear and transparent engagement with
all of our stakeholders, to ensure the continued
understanding of our business. We are constantly
communicating with our external partners, especially
those in the local community. Our Information
Centre in Vares continues to provide updates on our
operational activity to local residents and businesses.
We are also increasing our marketing activities
and investor relations through roadshows and
conferences. In October 2022, we hosted a site visit
for over 30 analysts, investors and advisors to see the
Project for themselves, taking in Rupice, Vares and
Sarajevo. We believe such engagement is essential for
external stakeholders to have an accurate perception
of our strategic delivery, operational progress and
future prospects.
The 2022 elections in Bosnia and Herzegovina passed
without any disruption in operations and the Company
continues to forge strong relationships with elected
officials at all levels. Bosnia and Herzegovina’s fast
track to EU candidacy promises to further open the
country to the stabilising forces of commerce.
13
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 CEO Statement
A year of significant progress
Outlook
As Adriatic delivers on its strategy, we look ahead
to continued growth and expansion. The Company
has clear aspirations to be a leading pan-European
operator with a multi-asset focus on projects that align
with our strong sustainability principles. We aim to
expand our pipeline of projects through opportunistic
acquisitions of assets that will create significant
shared value.
In conclusion, I would like to extend my gratitude to
all our employees for their energy, hard work and
perseverance throughout the year. I would also like
to thank the Board and our advisors for their counsel
and guidance and, most importantly, my thanks to all
our local partners for their hospitality and continued
support. We have commenced the year with
confidence and excitement, and we look forward to
delivering on these expectations and unlocking further
value through our exploration programme and growth
strategy.
Paul Cronin
Managing Director and Chief Executive Officer
Finances
The final Project cost estimate is $183m, including
contingency of $10m. As of 15 March 2023, a total
of 84% of capital expenditure excluding contingency
is awarded, pending award, or recently quoted. Of the
16% of pricing that is not yet confirmed, approximately
half relates to purchases and works to be performed
by local contractors in Bosnia, which includes
the remaining haul road construction and Rupice
earthworks.
In December 2022, the Company successfully
completed the drawdown on the first tranche of $30m
of the Orion Mine Finance (“Orion”) $120m senior
secured debt (“Senior Secured Debt”), and in February
2023 completed the drawdown of the second $30m
tranche as well as the receipt of the $22.5m copper
stream deposit. The total project finance debt
package from Orion is $142.5m, with the balance of
$60m of the Senior Secured Debt remaining available.
The Company’s cash balance on 31 December 2022
was $60.6m and the high investment rate of return
(“IRR”) will see significant debt reduction in 2024 and
2025, targeting a repayment within 12 months of the
commencement of nameplate production.
We have also appreciated the international
endorsement of EBRD through this development
process, as indicated by their £6m investment. This
stake has also helped drive our commitments to
sustainable performance disclosure, that is a regular
part of our continued relationship.
As we progress into production, we look forward to
increasing our royalty contributions, in line with our
concessionary agreements, that will support essential
GDP growth in the region and help fund local services.
14
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Strategy
Focus on project execution
As operations move from development to production Adriatic will evolve priorities and measures of progress. These figures are as at 31 December 2022.
Strategic initiatives for 2022
Remuneration alignment – STIP
Performance
Risks
Priorities for 2023
Progress construction of mine,
processing plant and haul road
Vares Project on time
Vares Project completion
60%
Decline progress(metres)
410m/
244m (l/u)
Delays in equipment delivery due to
global supply chain issues leading to
additional project costs
Bring Vares Project into
production on time and on
budget
Manage inflationary pressures to
maintain budgetary parameters
Maintain compliance with permits
Vares Project on budget
Develop offtake agreements
with strategic partners
Vares Project on budget
Exploration drilling to extend
existing resource
Grow mineral resource base
Maintain excellent sustainability
performance and set targets
Effective health & safety systems
Develop skilled workforce
and build capacity in supply chain
Staff satisfaction
Maintain strong capital position
Ensure compliance with debt funding
DFS projected budget
Total current mine cost
$168m
$183m
Increases in material costs due to
global inflationary trends and energy
shortages
Drive commercial
efficiencies in mining and
processing
Major contracts agreed
100%
Products are too difficult to market
and transport costs have a significant
negative effect on the Project’s
financial performance
Commence supply of
concentrate to customers
Infill drilling
Resource base
8,139m
7.3Mt
Availability of drilling rigs
and equipment
Access to key exploration areas and
landowner permits
Invest in further exploration
LTIFR
1.03
Employees
192
Cash position
$60.6m
TRIFR
4.10
Employee
satisfaction
89%
Contingency
$10m
Safety issues cause a pause in
operations, reputational damage,
NGO attention and negative impacts
Implement sustainability
plans to drive improved
performance
Ability to recruit and retain key
engineering staff, transfer of
knowledge, cultural change
Drive capability and
capacity amongst
employees and suppliers
Delays in equipment delivery due
to global supply chain issues
Generate near term cash
flow and pay down debt
Failure to achieve CPs, renewal
requirement of Reps and
Warranties
15
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Outstanding project economics
The Vares Project, Bosnia and Herzegovina
The Company’s flagship Vares Project is located approximately 50km north of Sarajevo,
in the district of Vares.
Adriatic, through its wholly owned subsidiary Eastern Mining d.o.o., owns 100% of the 42km2 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.
The concession area expires in 2038 but can be
extended for a further 10 years upon written request.
The Company 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.
Adriatic 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. Following the
granting of the exploration permit in June 2021, for
the additional 32km2 of concession area, exploration
activities during 2022 have covered these new areas
of Semizova-Ponikva, Brezik and Vares East, alongside
the Rupice NW extension.
Vares Project: key metrics
The results from the 2021 Definitive Feasibility Study
indicated high-margin economics, a low up-front
capital expenditure and the following characteristics:
High-grade mineral resources with strong
potential for exploration upside
The polymetallic underground deposit of Rupice
has high grades of silver and zinc, with lead, copper
and gold credits. The style of mineralisation has
the strong potential to repeat along strike, as well
as extend at depth. This suggests further such
discoveries will occur across the concession area.
Marketable concentrate grades
The Vares Project has two commercial product
streams; a zinc concentrate and a silver-lead
concentrate. Over the first 24 months of production,
the zinc 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 the current life
of mine, the Project will produce 511,496 tonnes of
zinc concentrate, and 580,507 tonnes of silver-lead
concentrate.
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.
16
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Outstanding project economics
Brownfield processing plant site, Greenfield underground mine
The new Vares Processing Plant has utilised 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 a new facility
constructed alongside the refurbished administrative building that serves as the Company’s main office. The
Rupice deposit is a greenfield site located 11km from the Vares Processing Plant site.
Ore Reserve
7.3Mt at 485g/t AgEq
Mining Rate
800,000 tonnes / year
Life of Mine
10 years
Mining
Mining Method
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%
Infrastructure
Roads
24.5km of haul road (which includes 9km 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
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 Ploče and sea freight to end user
Key Metrics 2021 Definitive Feasibility Study vs 2020 Pre-Feasibility Study
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
Unit
US$m
%
years
US$m
Mt
years
US$/AgEq ounce
US$/AgEq ounce
2021 DFS
2020 PFS
1,062
134%
0.7
168.2
7.3
10
7.0
7.3
1,040
113%
1.2
173.0
11.1
14
9.5
9.7
Average Annual AgEq Production Years 1-5
Moz/year
14,975
15,302
Underground Mining Costs (mined)
US$/t mined
Underground Mining Costs (milled)
Processing Costs
G&A Costs
Refining & Freight Costs
Revenue1
Average Annual EBITDA Years 1-51
Profitability Index1
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$/t milled
US$m
(Post-Tax NPV8/
CAPEX)
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 US$2,300/t.
2. Cash costs are inclusive of mining costs (US$/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.
17
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Key stages of project development
2022 was yet another transformative year. Adriatic moved through the construction phases of the Vares Project,
continued exploration activities, and extended the concession area boundaries along-strike to broaden the
strategic land package.
Vares Project development timeline:
Activity
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Construction decision / development
Order long lead mechanical equipment items
Underground decline development at Rupice
Vares Processing Plant site construction
Haul road construction
Underground development of orebody/stoping
Commence plant commissioning
First production / export
Mine site
Rupice
Processing facility
Vares
Utilities
Power supply
Logistics
Haul road, railhead
Offtake
Supply chain
Exploration
Drilling
The stockpile pad excavation is
nearly complete and the backfill pad
construction is close to completion.
Further geotechnical drilling for the
backfill pad is also fully completed.
Lower and upper decline
development including auxiliary
development and the commissioning
of underground water sumps is
underway.
The installation of the Vares
Processing Plant buildings is
progressing well with all buildings on
schedule for completion at the end
of Q2 2023.
A tender is underway for the building
construction of the assay and
metallurgical laboratory.
Laboratory management have also
been appointed.
Diesel generators have been
installed and are fully operational
providing power to Rupice during
mine development until the 35kV
buried cable grid connection is
completed in Q2 2023.
The mining contractor workshop has
been commissioned to encourage
greater efficiency and safer
operations onsite.
The 24.5km haul road development
remains on target to connect Rupice
and Vares ahead of first ore delivery
requirements in Q3 2023. The haul
road is split into 5“Lots”, allowing
for simultaneous construction by
multiple civil works contractors.
The detailed engineering plan of
the Vares Majdan railhead facilities
is underway with construction to
commence in Q2 2023.
Offtake contracts have been
executed with Boliden, Glencore,
Trafigura and Transamine.
Focus is now shifting to the logistics
component of the offtake, with the
Company interviewing shipping
brokers and forwarding agents.
A technical review of the port of
Ploce’s facilities was conducted
in December 2022 ahead of first
exports in 2023.
The Company continues to progress
infill drilling of the Rupice Mineral
Resource Estimate in parallel with
continued expansion and infill of the
Rupice NW discovery.
2022 has seen significant success
across each programme, resulting in
the clear potential to extend mine life
and optimise the mine plan, ahead of
first production in Q3 2023.
18
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Rupice mine site
Commencing ore
mining in summer 2023
Rupice underground mine
Rupice Surface
Infrastructure works have
advanced significantly
over the past few months
19
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Operations review
Rupice mine site
The Rupice Underground Mine design indicates the location of the planned declines, ramps, levels and
stopes at Rupice. The design includes an illustration 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).
The mineral recovery for Rupice is projected to be 95%, with an average underground dilution factor of 13%. The
Net Smelter Royalty (“NSR”) calculations have been carried out and incorporated into the block model, providing
the basis for determination of ore and waste classification.
Upper Return
Airway Portal
Middle Access
Portal
Upper
Longitudinal
Long hole
Stopes
Lower
Transverse
Long hole
Stopes
Lower
Access
Portal
N
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 the 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.
Secondary development will consist of level access
drives that connect the ramps with the footwall
drives on each sub-level. The footwall drives are
designed with a minimum stand-off of 25m from the
orebody and will have dimensions of 5.0m wide x 5.0m
high. The transverse stopes will be accessed along
horizontal cross-cut drives leading from the footwall
drive at dimensions of 5.0m wide x 5.0m high and
developed at right angles to the strike of the deposit.
Adriatic’s Resource Estimate model will be updated in
2023, and mine planning will be re-evaluated based
on the latest information. The following items will be
reviewed to reduce costs, and improve mining rates:
1.
Investigate use of single ramp to access ore;
current design has two ramps
2. Review 20m drive level spacing; 25m spacing will
reduce the number of levels required
3. Review requirement for dedicated ventilation drive;
use of alternative ventilation methods will eliminate
need for dedicated ventilation decline
4. Geotechnical review of stope dimensions and
Rupice Underground Mine design (view from the northeast) showing the two mining method zones
View From North-East
footwall drive stand-off distances
5. Optimising schedule to allow in mine blending (see
below).
Mine construction
The primary access to the underground workings
will be via two separate declines, developed from the
surface. A third, return airway decline has replaced the
previously proposed return air raise-bore shaft.
Following the installation of appropriate portal support
systems, the declines have been developed with
dimensions of 5.5m wide x 5.5m high. The lower
decline will serve as the main ingress route into the
mine while the upper decline will serve as the main
egress, allowing for a dedicated flow of traffic in
one direction to increase the efficiency of 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.
Development Completed
Development started on the lower decline in June
2022, for a total of 343m. Development on the
upper decline started in August 2022, for a total of
224m. Total development in 2022, including auxiliary
development (sumps and stockpiles), is 654 m.
Although there was limited geotechnical drilling ahead
of the declines, ground conditions have been as
expected. Assessment of each development round
is carried out by the geology team and appropriate
ground support is installed.
Blending
Blending will be critical to optimising concentrate
grades. By opening multiple stopes of varying grade
underground, minimal blending on the run-of-mine
(“ROM”) stockpile will be required. Blending exercises
have been completed on the current mine plan proving
the ability to blend through stope sequencing.
The ore will be recovered from the ROM stockpiles by
front-end loader, which will discharge into the primary
crusher so that final blending effectively takes place
in the crushing plant at Rupice. The crushed ore is
deposited onto a stockpile before being reloaded onto
on-highway trucks for haulage to the Vares Processing
Plant.
Rupice Infrastructure
Earthworks at Rupice are progressing well and to
date approximately 65% of earthworks have been
completed. The stockpile pad excavation is 51%
complete and the backfill pad construction is 85%
complete.
The installation of the Vares Majdan – Rupice 35kV
buried power line and communications cable has
commenced with 1km of cable complete. All the
construction permits for the power line have been
granted. The construction of the main transformer
station at Rupice has commenced.
The water treatment plant is complete and the water
supply pipeline from Mrestilište to Rupice was also
completed in February 2023.
20
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Rupice mine site
Decline
Return Air Drive
Ore Drive
Cross-cut
Ramp
Footwall Drive
View From South-East
Rupice Underground Mine design (view from the southeast)
Return Air Raise
Ramp Up
The agreement with the mining contractor Nova Mining & Construction d.o.o (“Nova”) was signed in June 2022.
Mobilisation of equipment started immediately and, as of the end of December 2022, the following equipment
was on site:
Purpose
Type
Number
Purpose
Type
Number
17t Loader
Load & Haul
14t Loader
Development
45t Truck
Jumbo
Boltec
2
1
4
3
2
Spraymec
Ground Support
Mixer
Auxiliary
Carmix
Excavator
Lube Truck
Manitou
2
3
1
2
1
2
Manning numbers have also increased at Rupice and,
as of December 2022, all key personnel were on site to
support operations. Nova have procured all necessary
equipment for production activities and continue to
increase staffing levels, with 138 employees as at 31
December 2022.
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.
To assist operations further, temporary facilities
have been constructed. These include offices,
changing rooms for Nova and Eastern Mining staff,
an emergency clinic, workshop and laydown areas for
consumables.
The underground stoping will be divided into two main
mining method zones, as follows, and as shown in the
mine plan in the Rupice Underground Mine design:
1. Transverse Longhole Open Stoping zone (“TLOS”)
Mining Production Rate
The Rupice Underground Mine production rate is
designed to match the nameplate capacity of the
Vares Processing Plant at a nominal 800,000 tonnes
per annum.
Stope development of the Rupice Underground Mine
will start three months prior to commissioning of the
Vares Processing Plant. This will ensure sufficient ore
is available in the surface stockpiles for consistent and
optimal grade of feed to the Vares Processing Plant
during commissioning and ramp-up. This provides
versatility and reduced risk during commissioning
and early operations. As operations ramp up, the
commissioning will commence on lower grade
ore. Thereafter, it will be possible to increase the
feed grade of the ore as confidence builds with the
processing and plant operating stability is achieved.
When commissioning commences there will be
approximately 130,000 tonnes of ore on the stockpile
– about two to three months of ramp-up capacity.
During the life of mine 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.
2. 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 20m. 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 20m. 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.
21
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Vares Processing Plant
Improved operability of
Brownfield site
Steel construction
The steel construction
for the flotation building
has been installed and
100% of the steel for
the grinding building has
been installed
22
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Operations review
Vares Processing Plant
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 and other smaller
thickeners, some of which will be repurposed for
future use. Inspections have confirmed that one
of the smaller thickeners is suitable to be re-used
as the process water tank.
The former tailings thickener will become the base of
the coarse ore stockpile. The administration building
has been in use as the Company’s offices since
2020. As part of further material regeneration, the
old foundations were also demolished to be used
as road building material and other fill material, with
the reinforcing steel being sold as scrap metal. New
concrete foundations will be constructed for the new
processing facility.
The main structures of the Vares Processing Plant
are under construction and all buildings remain on
schedule for completion by Q2 2023. 75% of the roof
panels have been installed on the flotation building
and 100% of the roof panels have been installed for
the grinding building. Wall panel installation on the
flotation and grinding buildings is ongoing. Concrete
foundations for the filtration area are 70% complete
and the main concrete columns have been erected,
with anchors and base plates now in place.
The overhead cranes for the grinding and the flotation
buildings have been installed. Contracts for the
filtration and workshop overhead cranes have been
awarded and are being manufactured. The building of
the shell for the control room is also at manufacturing
stage.
The agreement for equipment foundations supply
and installation was awarded and signed in December
2022, and construction started in January 2023. The
mill base foundation is in progress and in the flotation
building and the excavation of the flotation cells
foundations, is underway. The Vares Processing Plant
structural steel supply, manufacture and installation
contract has also been awarded.
The Vares Processing Plant underground services
(potable process, fire water and drainage) are
approximately 60% complete, with completion
scheduled for April 2023. Whilst expediting the
delivery of key equipment is ongoing, the mill
sole plates, main two transformers and shotcrete
equipment have been received into the warehouse in
Vares.
In Q4 2022, an internal technical review of the process
flow sheet was undertaken by Ausenco Metallurgical
Group. In order to maximise the returns of the Project
once in production, the Company decided to install
two Jameson flotation cells. Based on comparable fine
grinding flotation plants, these cells should effectively
maintain concentrate grade and lead to improved
recoveries, for a small additional investment, which is
to be funded out of the existing debt facility.
Schematic of Rupice site
Schematic of the Vares Processing Plant
23
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Vares Processing Plant
Crushed Coarse Ore Handling
Crushed ore will be trucked 24.5km 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 tonnes. The crushed ore will
be fed by a belt feeder to a belt conveyor. The belt
conveyor will transport the crushed ore to a conical
stockpile contained under a dome, providing a live
residence time of 23 hours and a corresponding
capacity of 2,260 tonnes of ore on a dry basis. Ore will
be reclaimed from the stockpile by belt feeders and
discharged to the ball mill feed conveyor.
The crushed ore stockpile provides surge capacity
between the crushing system at Rupice 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 stockpile
belt feeders based on the ball mill feed conveyor
weightometer output and the mill control system set-
point.
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 4.3m and an effective grinding length of
7.5m. The ball mill discharge passes over a slotted
trommel screen with an aperture size of 10mm x
25mm. The ball mill will be charged with grinding
media, ranging in diameter from 25-40mm utilising an
automatic ball feeder.
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 40µm.
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 as does the majority of
the gold. 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 the rougher flotation cells 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 an 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 10µm. 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 2-3mm diameter and mill
discharge will report to the Jameson flotation cell,
where the concentrate can either go to the cleaner
cells or directly to the concentrate filter feed tank.
The Jameson cell tails will report to the silver-lead
cleaner circuit.
Silver-Lead Cleaner Flotation
Zinc Regrind Circuit
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.
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 20µm. 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 2-3mm diameter and the mill discharge
will report to the Jameson flotation cell where the
concentrate can go to the cleaner circuit or to the
filter feed tank. The Jameson flotation cell tailings will
report 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.
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.
24
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Haul road
Minimising our
operational footprint
Existing road
Haul road development
remains on target to
connect Rupice and
Vares ahead of first ore
delivery requirements in
Q3 2023
25
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Operations review
Haul road
A new haul road of 24.5km 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 24.5km haul road will
be made up of both newly constructed (15.5km)
and upgraded (9km) 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 the
life of mine.
Construction of the 24.5km haul road is well underway
and completion remains scheduled for
Q2 2023.
The haul road is split into 5 Lots:
Rupice
Mine
LEGEND
Explotation permit
LOT 1 - In construction
LOT 2 - In construction
LOT 3 - Forestry started cutting the trees,construction permit is in progress
LOT 4 - Preliminary desing is in progress
LOT 5a - Existing road from Municipality
LOT 5b - In construction
Legend
Vareš M.
Propust ispod pruge do rijeke
669763.10
Processing
plant
a
nje jark
a
šiv
u
Is
Map showing the haul road route between Rupice and Vares Processing Plant
© 2023 Microsoft Corporation © 2022 Maxar ©CNES (2022) Distribution Airbus DS
762.50
1689
1690
1691762.30
762.57
1704761.86
1774
761.83
1777761.57
1778
761.34
761.96
1786
1779
760.92
1761
761.32
1806
760.66
1934
760.41
760.14
1931
372
758.18
176762.83
507762.92
2398
762.94
2150769.20
Railway station
2399
762.68
2400
762.04
Vehicle tracking and telemetry
The haulage fleets for ore, tailings and concentrate
will be equipped with GPS tracking and dashcams
recording road activity. In addition, they will be fitted
with driver fatigue monitoring and alarm systems. The
haulage vehicle movements will be constantly tracked
in the haulage control centre.
The light vehicle fleet will also be equipped with GPS
tracking and dashcams.
Water supply
The 9km water supply pipeline to Rupice and the
pump station at Mrestilište have been completed and
tested. This will provide potable water to Rupice and a
back-up supply for the industrial water requirements of
the mine. The potable, industrial and fire hydrant water
reticulation systems to the portals and infrastructure
have been completed with the exception of the
stockpile and backfill plant areas where earthworks is
still being undertaken. Industrial water will normally be
obtained from pump-stations on two local streams.
The water supply to the Vares Processing Plant area
utilises the existing supply pipeline. Reticulation around
the Plant site is close to completion.
Lot 1
Excavations 80%,
embankments 70%, water
absorbing layer and external
drainage ongoing
Lot 2
Forestry clearance ongoing
and haul road construction in
progress
Lot 3
Final design is being optimised
for tender
and construction
permit approval
Lot 4
Request for detailed
design complete,
pending award
Lot 5a
Existing road,
maintenance only
– ongoing
Lot 5b
Forestry clearance
ongoing and construction
in progress
Contracts have been awarded for the haulage of ore and tailings between Rupice and the Vares Processing
Plant, and for the onward transportation of concentrate to the Vares Majdan railhead.
26
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Other logistics
Connecting our
operations to Europe
Railhead
The detailed engineering
plan required to
commence
construction of the
Vares Majdan railhead
facilities is underway with
construction to
commence in Q2 2023
27
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Operations review
Other logistics
Railhead
In order to connect our operations in Vares to the
main export terminal at Ploče in Croatia, facilities at
the Vares Majdan railhead need to be redeveloped.
Following the conclusion of lease arrangements, the
detailed engineering plans required to commence
construction got underway in 2022, with construction
to commence in Q2 2023.
The rail journey from the Vares railhead to the Port
of Ploče passes through three locations where
locomotives will be changed according to the line
requirements.
The first 25km section of the line from Vares to
Podlugovi uses diesel locomotives and was last
used in 2012. Federation of Bosnia and Herzegovina
Railways (“BiH Railways”) have surveyed the route and
consider the sections of line that require upgrading
can be completed within a short timescale.
The remaining journey to the Port of Ploče will be on
electrified lines, alongside other regular 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 Ploče will take
approximately 10 hours.
In 2022, Adriatic and the BiH Railways reviewed the rail
line sections requiring upgrade between Vares Majdan
and Breza and the railhead facilities at Vares Majdan.
The commercial terms required for the framework
agreement to be converted into a commercial
services agreement are nearing conclusion. This will
agree the commercial relationship between Adriatic
and BiH Railways and allow BiH Railways to initiate
refurbishment of the line. These agreements are due
to be completed in Q2 2023.
Port
The Port of Ploče 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 17.8m, allowing vessels as large
as Capesize (100,000 dwt) to berth. The container
terminal has a length of 280m and depth of 14m.
The port operates 24/7, 362 days a year. All the main
thoroughfares and terminals are floodlit and the port
benefits from a large, well equipped, dedicated fire
service.
Port of Ploče 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 Twenty-
foot Equivalent Unit (“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), indicating that 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.
An inspection visit of the port at Ploče took place
in December 2022. A schedule of work has been
agreed with the port authorities ahead of first
delivery of concentrate. Adriatic is also undertaking
environmental and OHS audits of rail and port facilities.
Concentrate transportation
Map of the rail route from Vares to Ploče
28
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Exploration
Exploration Upside
Drilling and assaying
A total of 9,455m from
32 exploration drill
holes was completed
in 2022.
29
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Operations review
Exploration
Exploration Upside
Rupice and Rupice NW will remain the focus
of exploration activities in the Vares region
and the deposits remain open and still to
be fully defined. Exploration activity in 2023
will continue to realise the resource and
reserve potential of these existing deposits.
The opportunity for significant growth has
encouraged further drilling investment and
the prospect of material extension to the
current life of mine (“LOM”) assessment of the
Vares Project.
In the Vares region, significant new potential
remains across the range of greenfield,
brownfield and advanced exploration targets.
As part of a cohesive strategy, Adriatic is
committed to advance exploration regionally
to find the next economic-grade deposit that
will diversify the current production profile
and capitalise on our existing extensive
tenement holding.
In 2023, exploration will focus on drill testing
targets that have already been defined
by mapping, soil sampling, rock-chip
sampling and ground geophysics (mainly
gravity). Prospects for further drill testing
include – Rupice West, Semizova Ponikva,
and Droskovac. Droskovac is a historic
underground iron ore mine associated with
lead and zinc mineralisation that have not
previously been of interest to the iron ore
miners. Rupice West and Semizova Ponikva
are exciting ground gravity targets, coincident
with surface zinc and lead anomalies.
To drive new project generation, the Vares
exploration team have scheduled systematic
surface mapping and sampling across 5km x
2km of the Vares East tenement. This under-
explored area hosted historic artisanal mining
projects for both barite and base metals.
Drilling & Assay
Drilling in 2022 was completed using three
diamond drill rigs and crews provided by
Drillex International (Drillex d.o.o. as of 1
November 2022). Holes were typically large
diameter PQ size to a depth of ~100m
through barren Jurassic sediments. The hole
diameter was reduced to HQ size coring
through Triassic sediments and mineralisation
to end-of-hole. Holes varied in depth from
250m to 350m, depending on the depth to
drill target. All holes were downhole surveyed
using a Reflex EziTrack tool and core oriented
using the Reflex ACT3 tool.
Drill core was logged and processed in
Lipovici, an outer suburb of Vares, at Adriatic’s
exploration core yard. In 2022, exploration
switched from using a manual drop-down
brick saw, to an automatic Almonte core
saw capable of processing 200m of core a
day. Exploration in 2022 also switched from
using the sample preparation and assaying
services of ALS (Serbia-Ireland-Romania) to
SGS in Turkey. Primarily, this was to improve
turn-around-time, lower cost and reduce the
number of labs processing samples. Barium
over-limit assays (>50% Ba) were sent to SGS
Canada for completion of assay.
Drilling in 2023 will continue with an increase
to four Drillex d.o.o. diamond drill rigs. The
principal sample preparation laboratory will
remain at SGS in Turkey (Ankara) with QAQC
umpire lab services contracted to ACME
(Bureau Veritas) in Turkey (Ankara).
Exploration Holes
A total of 9,455m from 32 exploration drill
holes was completed in 2022. This total
includes four abandoned holes.
Drilling was focused on defining the Rupice
NW deposit on a 40m section spacing,
with holes on sections drilled as part of drill
fans. Drill fans were designed to intersect
mineralisation 25-30m apart. To minimise
biodiversity impacts, fan drilling reduced
the need for forest clearing, permitting
and ground disturbance across difficult,
mountainous, environmentally sensitive
terrain.
The target in 2022 for exploration drilling was
8,349m, delivering 113% over budget metres
to ensure sufficient exploration to define
Rupice NW. Drilling will continue in 2023 to
complete the closure and extension of the
Rupice NW deposit.
As at end of December 2022, a horizontal
distance of 90m separates Rupice NW from
the Rupice orebody. This is an obvious target
zone for testing in 2023. The intention is to
prove the connection between Rupice NW
to Rupice, to establish significant growth
in the resource and support production
optimisation.
Other areas to be exploration drill tested in
2023 include Rupice West, Semizova Ponikva
and the historic Droskovac mine area.
Plan View. Rupice and Rupice NW 2023 planned drilling shown as yellow hole traces. Holes
target areas open to mineralisation extension. Gaps in mineralisation identified from new 3D
modelling of massive and semi-massive sulphide distribution and 3D geology.
Reserve Infill & Step–Out Drilling
A total of 8,139m from 40 Rupice
reserve development drill holes were
completed in 2022. The total includes
two abandoned holes. The 2022
budgeted reserve development drilling
was 9,495m. The reserve drilling was
14% under budget metres due to poor
drill rig performance, reallocation of
drilling equipment to geotechnical holes
and the prioritisation of Rupice NW. A
total of 1,356m of uncompleted reserve
definition drilling activities will be carried
over into 2023.
Drilling focused on closing gaps in
existing ‘Inferred’ resource to achieve
an ‘Indicated’ Resource or ‘Probable’
Reserve level of confidence in
mineralisation. Results of this drilling
will be reported as part of a 2023
Rupice Mineral Resource Estimate.
Step-out drilling, as part of the Reserve
development drilling program, also
extended the Rupice resource 40m to
the southeast of the existing Rupice
reserve. The mineralisation remains
open in this direction and is a focus of
2023 drilling.
Other areas for exploration step-out
drilling aimed at adding to Rupice
reserve include drilling up-dip and
down-dip of the known open-ended
Rupice resources and reserve. This is
a significant program of holes over the
650m strike length of the main body of
Rupice mineralisation.
30
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Exploration
Extending life of mine
Adriatic’s long term strategic vision is to safely and
efficiently grow the business into a long-life, major
producer of metals.
Rupice deposit: significant opportunity to
increase in mine life
Following extensive drilling through 2022 and into early
2023, the Rupice deposit has shown the potential to
extend beyond the publicly declared 2020 Minerals
Resource Estimate and 2021 Mineral Reserves
Estimate.
Exploration drilling at Rupice NW during 2022 followed
up on initial discovery holes drilled in 2021. The initial
Rupice NW discovery was ~210m to the NW of the
Rupice orebody. Recent drilling has brought the new
mineralisation to within 90m of the existing Rupice
orebody. Exploration was completed across five 40m
spaced section lines covering a distance of over
200m. Holes were planned to intersect mineralisation
25m to 30m between holes on section. Mineralisation
was found to be of equivalent tenor to the Rupice
orebody, grades were continuous from section to
section and hole to hole. Thicknesses of over 40m
were repeated across sections. As at end 2022, the
up-dip, down-dip, northwestern and southeastern
extents of mineralisation were not closed-off.
Rupice NW represents a significant unconstrained
body of mineralisation that once drilled-out, modelled
and estimated will make a material difference to the
LOM of the Rupice orebody in terms of tonnes, and
metal added to resources and reserves. An updated
Mineral Resource Estimate of Rupice and Rupice NW
is anticipated in 2023.
In parallel with Rupice NW exploration drilling, reserve
development drilling was completed to convert Rupice
Inferred to Indicated resources and reserve. As part of
this process, it was identified that the Rupice orebody
remained open to extension. Additional growth
potential was targeted at:
areas of completed drilling with visible mineralisation
not sampled and assayed;
mineralisation outside of visible massive and semi-
massive sulphides not being completely sampled and
assayed;
early drilled geotechnical and hydrogeological holes
away from the Rupice reserve being mineralised,
unsampled and unassayed;
a review of mineralisation in 3D showing mineralisation
was not closed-off up-dip and down-dip of resources;
the discovery of the existence of an Upper Zone of
mineralisation at Rupice through relogging and new
sampling.
The above prospects were pursued with further
sampling of existing drilled areas. Additional
exploration drilling is planned in 2023 to realise
the potential of up-dip and down-dip areas of
mineralisation extension.
Reserve drilling also completed step-out exploration
to the southeast of Rupice, extending mineralisation
in this direction by 40m. This drilling also proved the
concept of Rupice being more continuous up- and
down-dip than captured in existing resources with
width of >200m on the south-eastern-most section.
The drilling also confirmed Rupice being open to
south-eastward extension.
An updated Rupice Mineral Resource Estimate is
planned for 2023 to capture the described resource
growth potential defined by 2022 reserve drilling and
extensive historic core re-sampling. Further resource
growth and positive impacts on LOM are expected
through completion of additional up-dip, down-dip and
extensional exploration drilling in 2023.
SE
4,894,500 Y
6,519,000 X
4,895,000 Y
NW
OPEN
OPEN
1,000Z
Rupice
Main
OPEN
OPEN
650 m
OPEN
L E G E N D
Drill Hole Traces
Adriatic Metals Exploration Drill Hole
Rupice & Rupice NW-Massive & Semi-
Massive Sulphides
Underground Infrastruture Plan
Drill Intervals
(AgEq g/t)
50 to 100
100 to 300
300 to 500
500 to 800
>800
100 Metres
BR-15-22
21.60m @ 838.0g/t AgEq, 26.9% ZnEq
(352.0g/t Ag, 6.0% Zn, 3.4% Pb, 1.6g/t Au, 0.3% Cu,
81.0% BaSO and 0.1% Sb) from 221.20m
4
BR-18-22
12.60m @ 425.0g/t AgEq, 13.7% ZnEq
(91.0g/t Ag, 2.4% Zn, 2.2% Pb, 1.1g/t Au, 0.1% Cu,
84.0% BaSO and 0.0% Sb) from 236.60m
4
B O S N I A
R u p i c e E x p l o r a t i o n P e r m i t
L o n g - S e c t i o n o f R u p i c e
L o o k i n g S o u t h w e s t
B R - 1 1 , 1 4 , 1 5 , 1 6 , 1 8 ,
2 0 , 2 1 , 2 2 & 2 3 - 2 2
BR-22-22
1.90m @ 378.0g/t AgEq, 12.2% ZnEq (164.0g/t Ag,
2.5% Zn, 1.3% Pb, 0.6g/t Au, 0.1% Cu,
37.0% BaSO and 0.2% Sb) from 154.70m
4
BR-21-22
11.00m @ 417.0g/t AgEq, 13.4% ZnEq
(138.0g/t Ag, 4.6% Zn, 2.3% Pb, 0.9g/t Au, 0.4% Cu,
5.0% BaSO and 0.1% Sb) from 213.00m
4
BR-16-22
19.40m @ 681.0g/t AgEq, 21.9% ZnEq
(297.0g/t Ag, 3.8% Zn, 3.7% Pb, 1.5g/t Au, 0.4% Cu,
48.0% BaSO and 0.1% Sb) from 212.60m
4
OPEN
BR-11-22
45.60m @ 464.0g/t AgEq, 14.9% ZnEq
(100.0g/t Ag, 5.4% Zn, 2.7% Pb, 0.9g/t Au, 0.2% Cu,
48.0% BaSO and 0.1% Sb) from 302.10m
4
BR-14-22
45.90m @ 701.0g/t AgEq, 22.5% ZnEq
(102.0g/t Ag, 9.5% Zn, 5.9% Pb, 1.0g/t Au, 0.6% Cu,
53.0% BaSO and 0.1% Sb) from 216.10m
4
Upper
Zone
Rupice
NW
250 m
BR-23-22
28.90m @ 695.0g/t AgEq, 22.3% ZnEq
(140.0g/t Ag, 9.1% Zn, 4.7% Pb, 1.0g/t Au, 0.3% Cu,
69.0% BaSO and 0.1% Sb) from 255.20m
4
BR-20-22
30.30m @ 932.0g/t AgEq, 30.0% ZnEq
(283.0g/t Ag, 10.3% Zn, 7.5% Pb, 0.9g/t Au, 0.5% Cu,
68.0% BaSO and 0.1% Sb) from 247.70m
4
Long Section of Rupice and Rupice NW sulphide and semi-massive sulphide mineralisation to end of 2022. Significant assays
reported as at 12 January 2023 highlighting mineral endowment of Rupice NW. Open LOM growth potential is highlighted in blue
and to the Northwest and Southeast of existing drilled mineralisation.
31
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Exploration
Mineral resources
The JORC compliant Mineral Resource Estimate
for the Vares Project is 19.4Mt. The Rupice Mineral
Resource Estimate was updated in August 2020
by CSA Global of Perth and comprised of 12.0Mt
Indicated and Inferred Resources at 149g/t Ag, 1.4g/t
Au, 4.1% Zn and 2.6% Pb, as set out below. This
estimate remained unchanged for the Feasibility
Study.
Rupice Mineral Resource Estimate by Classification
Rupice Mineral Resources, August 2020
Grades
Contained Metal
Class.
Indicated
Inferred
Total
(Mt)
9.5
2.5
12.0
AgEq
(g/t)
450
111
387
Ag
(g/t)
176
49
149
Zn
(%)
4.9
0.9
4.1
Pb
(%)
3.1
0.7
2.6
Cu
(%)
0.5
0.2
0.5
Au
(g/t)
1.6
0.3
1.4
BaSO4
(%)
29
9
25
Sb
(%)
0.2
0.1
0.2
AgEq
(Moz)
Ag
(Moz)
137
9
149
54
4
58
Zn
(kt)
465
23
488
Pb
(kt)
294
18
312
Cu
(kt)
52
4
56
Au
(koz)
500
27
526
BaSO4
(kt)
2,730
218
2,948
Sb
(kt)
21
3
24
Veovaca Mineral Resource Estimate by Classification
Veovaca Mineral Resources, July 2019
Grades
Contained Metal
Class.
Indicated
Inferred
Total
(Mt)
5.3
2.1
7.4
AgEq
(g/t)
225
116
193
Ag
(g/t)
50
17
41
Zn
(%)
1.6
1.1
1.4
Pb
(%)
1.0
0.5
0.9
Au
(g/t)
0.1
0.1
0.1
BaSO4
(%)
AgEq
(Moz)
Ag
(Moz)
16
6
13
38
8
46
9
1
10
Zn
(kt)
83
23
106
Pb
(kt)
55
11
66
Au
(koz)
14
4
18
BaSO4
(kt)
860
123
984
Combined Notes:
Rupice Notes:
Veovaca Notes:
Mineral Resources are based on JORC Code definitions
A cut-off grade of 50g/t silver equivalent has been applied
A cut-off grade of 0.6% ZnEq has been applied
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
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
Metal recoveries and payabilities from the PFS have been
applied
The applied formula was: AgEq = 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 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. 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
32
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Exploration
Mining
Ore Reserves
The Ore Reserve Estimate was prepared by Mining Plus and comprises Probable Reserves as shown in the table
below:
Vares Project Ore Reserve Estimate, August 2021
Deposit
JORC Class.
Rupice
Probable
Ore
Mt
7.3
AgEq
g/t
Ag
g/t
485
202
Zn
%
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.
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, AMC
(Australia), 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 at time of
Mineral Resources estimate was 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 consented 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. Sergei Smolonogov,
who is a Registered Professional member of the
Australian Institute of Geoscientists (RPGeo AIG).
Mr. Smolonogov is Head of Exploration for 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. Smolonogov 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.
Competent Persons Statement
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.
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, AMC
(Australia), Ausenco and others as part of the
governance and internal controls in relation to mineral
resource estimates and the reporting thereof.
33
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Exploration
Tenement holdings
The Company’s tenements at 8 March 2023 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
Licence holder
Concession name
Area (km2)
Date granted
Expiry date
Concession Agreement
No.:04-18-21389-1/13
Eastern Mining d.o.o.
Annex 3 & 6 Area
Extension
Annex 5 – Area
No.: 04-18-21389-3/18
Eastern Mining d.o.o.
Veovaca1
Veovaca 2
Rupice-Jurasevac, Brestic
Rupice - Borovica
Veovaca - Orti - Seliste - Mekuse
1.08
0.91
0.83
4.52
1.32
Orti-Selište-Mekuše- Barice- Smajlova Suma-Macak
19.33
Extension
No: 04-18-14461-1/20
Eastern Mining d.o.o.
Droskovac - Brezik
Concession Agreement
No: 04-14-5359-3/22
Eastern Mining d.o.o.
Exploration Licence
310-02-1721/2018-02
Adriatic Metals d.o.o.
Exploration Licence
310-02-1722/2018-02
Adriatic Metals d.o.o.
Exploration Licence
310-02-1114/2015-02
Adriatic Metals d.o.o.
Borovica – Semizova Ponikva
Saski Do
Kizevak
Sastavci
Kremice
Exploration Licence
310-02-00060/2015-02
Deep Research d.o.o.
Rudno Polje Raska
Exploration Licence
310-02-01670/2021-02
Adriatic Metals d.o.o.
Kaznovice
2.88
9.91
1.28
1.84
1.44
8.54
81.39
37.1
12-Mar-13
12-Mar-13
12-Mar-13
14-Nov-18
14-Nov-18
3-Dec-20
3-Dec-20
3-Dec-20
19-Jul-22
12-Mar-38
12-Mar-38
12-Mar-38
12-Mar-33
12-Mar-33
3-Dec-50
3-Dec-50
3-Dec-50
19-Jul-25
3-Oct-19
16-Oct-22 (pending)*
7-Oct-19
16-Oct-22 (pending)*
21-Apr-16
26-Jul-22 (pending)*
28-Dec-15
24-Oct-24**
11-Oct-21
22-Nov-24
i
i
a
n
v
o
a
g
n
e
v
z
o
r
e
g
H
e
z
d
r
n
e
a
H
a
d
n
n
s
a
o
B
a
n
s
o
B
i
i
i
a
b
r
e
S
a
b
r
e
S
i
* These concessions are pending renewal, applications for extension have been submitted, the Company is awaiting to receive confirmation of extensions from authorities.
**Possible to obtain a 1 year extension, but only for preparation of reserves elaborate which excludes any geological exploration work
34
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Operations review
Exploration
Raska, Serbia
The Raska project, Serbia
The Raska Zinc-Silver Project in Serbia was obtained
through the acquisition of Tethyan Resource Corp.
(“Tethyan”), which was completed in October 2020.
Tethyan was exploring a highly prospective 130km2
land package in southern Serbia, focused primarily
around two historic open pit mining operations,
Sastavci and Kizevak, both of which 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 demonstrates the potential for scale.
35
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Operations review
Exploration
Raska Project Developments
During Q3 and Q4 2022, all exploration permits were
transferred to Ras Metals d.o.o. Subsequently, the
company name was changed to Adriatic Metals d.o.o.
in October 2022. During 2022, exploration rights for
the Kizevak, Sastavci, Kremice and Rudno Polje Raska
permits expired. All required documentation for each
permit extension was delivered to the Ministry of Mining
and Energy on time. The Rudno Polje Raska Permit was
granted extension in October 2022. Extension approvals
are pending for the Kizevak, Sastavci and Kremice
projects.
Adriatic Metals d.o.o. holds the Kizevak and Sastavci
exploration licences relating to the Raska Project.
Exploration has continued at Raska during 2022 with
1 diamond core drilling rig. The drilling started on 8
July 2022 over the Lipovica prospect at the Kaznovice
licence. Work on permits exploration period extensions
with Ministry of Mining and Energy caused a general
delay to the start of the 2022 drilling campaign. In
total over 4,000m of diamond core drilling has been
completed for the year. The focus during the year was
on the field work and creating 3D geology models
for Kizevak and Sastavci. Mapping, soil sampling,
MAG survey, rock, channel and trench sampling were
followed by environmental studies that covered different
prospects within the Raska project area.
At the Kizevak prospect, an infill drilling campaign
was completed in August 2022. The drilling program
successfully validated the Kizevak geology model
and mineralisation model. Potential pit optimization
studies were completed utilising data from 2021 and
2022 drilling. Metallurgical testwork results for Kizevak
were received from Belgrade University in Q3 2022.
Comminution testwork was completed by WAI in UK in
March 2022.
Internal geological and mineralisation models were
created for the Sastavci deposit based on 2021 drilling
results. Metallurgical testwork on Sastavci mineralisation
was completed and reported by Belgrade University in
Q3 2022. Comminution testwork also completed at WAI
in UK.
At the Karadak prospect, drilling continued in 2022,
testing the depth potential of mineralisation uncovered
by exploration surface trenching over interpreted gravity
anomalies. Encouraging mineralisation was intersected
near surface in two boreholes and a narrow high-grade
interval in a one borehole approximately 50m below the
surface.
Across the Lipovica and Bukovik prospects scout drilling
campaigns were completed over targets in the newly
acquired Kaznovice permit (granted on 22 November
2021). Near surface mineralisation was tested with
wide spaced diamond drilling to shallow depths at
Lipovica perpendicular to a geochemically anomalous
NE trending corridor. Narrow base-metal-silver veining
was intercepted suggesting the potential for a more
substantial mineralised system at greater depth. Two
boreholes collared at the Bukovik prospect tested
interpreted geophysical anomalies (magnetic and IP) for
potential lithocap related epithermal Au and porphyry
Au+-Cu mineralisation. Drilling was completed late in
Q3 and in Q4 2022 and results from drill hole assay are
expected in 2023.
A LiDAR survey was conducted over entire Kaznovice
Permit in Q2 2022, to assist in planning of all exploration
activities and identification of potential historic workings.
The Kremice Porphyry prospect was drill tested with
two boreholes in Q4 2022. The first borehole tested the
footprint of an extreme magnetic low interpreted to be
associated with a porphyry related altered demagnetised
zone. A second borehole tested a manganese depletion
zone identified in soils over a magnetic low anomaly.
Both holes were successful in defining a low-grade
diorite porphyry-hosted, gold bearing quartz vein
stockwork.
In 2023, exploration work will continue to advance the
Kozya Glava (Kremice & Rudno Polje Raska licences),
Rudnica (Rudno Polje Raska licence), Kremice Porphyry
(Rudno Polje Raska licence), Plavkovo and Bukovik
(Kaznovici licence) prospects. Each of the projects
has been ranked as having potential to advance up
the exploration pipeline based on results to date
and/or proximity or association with existing known
mineralisation, as a complement to Kizevak and Sastavci.
Work on Kizevak and Sastavci will continue to better
understand and incorporate data collected in 2021 and
2022.
Engagement in Raska
In 2022, Adriatic published public newsletters that are
available at its information centre (see further information
below) and on the Company website, providing valuable
information to interested parties. These newsletters
serve as a means of keeping stakeholders informed
about the latest developments, including updates
on sustainability initiatives, community engagement
activities and interviews from the local community.
In 2022, representatives from the Company presented at
the local high school regarding sustainable development
and education. The goal was for the students to
understand the value of sustainable development within
the local economy.
In 2022, Adriatic has been involved in a number of
social projects and initiatives in Raska that align with the
Company’s values. Adriatic donated to a local veteran
association for the restoration of the monument to the
fallen soldiers in the nearby village of Radosice, located
near Kizevak. Adriatic also made a donation to the
cultural organisation Novi Pazar. The organisation is
dedicated to preserve and promote the cultural heritage
of the Raska region. Adriatic continued to support the
local football tournament for the fifth consecutive year.
The tournament, organised by the village of Rudnica
in Raska, has been gathering teams and spectators
from a large area surrounding the Raska municipality.
The Company also supported a project for spreading
environmental awareness and provided financial support
for a solar bench in the city park of Raska.
Environmental studies
Throughout 2021 and 2022, Adriatic conducted
extensive environmental baseline studies in the areas
surrounding its explorational licenses Kizevak and
Sastavci, together with the local consulting company
Envico. These studies have provided valuable insights
into the local ecosystem, including the flora and
fauna, water quality, air quality and cultural heritage.
These studies provide a detailed understanding of
the environmental conditions in the areas where
explorational activities take place, enabling the Company
to make informed decisions and implement measures
to reduce its environmental footprint in the future and
have a starting point for the Environmental Social Impact
Assessment (“ESIA”) process.
Adriatic acknowledges that historical pollution from
past operations may have impacted the environment in
the areas where it currently operates. The Company is
committed to identifying and addressing environmental
issues and will continue monitoring the key points. In
addition, Adriatic operates in areas that are in proximity
to the National Park Kopaonik. As individually protected
spies of fauna could be found in the explorational
licenses, the Company recognises the importance
of preserving these species and their habitats and
is committed to taking all necessary measures to
ensure their protection. In 2022, an environmental
baseline study has been started for the Kaznovice
explorational licence. The scope of works includes air
quality field tests, surface, underground, drinking water,
and sediment quality laboratory test. The study also
included an archaeological field survey. The Company
will continue to conduct archaeological surveys and
implement measures to protect sensitive areas and
it is also aware that cultural and historical resources
are essential to the local communities where there are
operations.
The environmental baseline study will be extended
to new areas in Rudnica, Kozja Glava and Kremice in
2023. Adriatic recognises that its operations have the
potential to impact the environment and is committed to
implementing best practices and innovative solutions to
reduce its environmental footprint and ensure the long
term sustainability of its operations.
Information centre and feedback
By opening the information centre in Raska at the end of
2021, Adriatic has been able to provide a space where
all interested parties can communicate with the team
to ask questions about the Company and express any
opinions or concerns. The centre offers a wide range
of services, including information about the Company’s
history, mission, values and vision. Visitors can also learn
about the Company’s commitment to sustainability and
community engagement. The information centre had
almost four hundred visits in 2022. The most common
questions were regarding job opportunities, donations,
and Adriatic’s operations and field activities.
36
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Financial review
Secure funding position
Income statement
(In USD)
Year ended
31 December 2022
Year ended
31 December 2021
Change
Exploration costs of $1.4m expensed in the year relating to the Raska Project were lower than the prior year
($3.7m) due to lower levels of drilling, as activity focused on developing a detailed understanding of the Raska
Project’s potential and a revised development plan.
Exploration costs
Operating loss before impairment
(13,287,601)
(13,121,371)
(166,230)
Exploration and evaluation impairment
(23,186,959)
-
(23,186,959)
Operating Loss
(36,474,560)
(13,121,371)
(23,353,189)
Net finance expense & fair value
movements
(10,668,258)
(1,069,441)
(9,598,817)
Loss before taxation
(47,142,818)
(14,190,812)
(32,952,006)
The Group made an operating loss of $36.5m for the year ended 31 December 2022 compared with an operating
loss of $13.1m for the year ended 31 December 2021 (“prior year”). The increase is primarily due to a $23.2m
partial impairment of the Raska Project. Excluding this impairment, the operating loss in the year was broadly
similar to the prior year reflecting a reduction in exploration expenditure in Serbia offset by a continuing ramp up in
activity as the Group advanced the construction phase of the Vares Project in Bosnia and Herzegovina and began
its preparation for the operational phase.
General and administrative expenses
General and administrative costs incurred in the year were $10.6m (prior year: $7.3m) due to increased headcount
and higher depreciation. The share-based payment expense of $1.3m (prior year: $2.0m) reduced due to lower
value of share options and performance rights vesting in the year compared with the prior year.
Wages and salaries in the year totalled $4.4m, an increase compared with prior year ($2.7m) due to higher
headcount, with an average number of employees of 158 in the year (prior year: 109).
Professional fees in the year of $0.9m were slightly lower than the prior year ($1.2m), while stock exchange fees of
$0.2m were in line (prior year: $0.2m).
Finance expense
The finance expense in the year was $7.1m (prior year: $2.9m) mainly as a result of a higher foreign exchange
loss in the year of $4.6m (prior year: loss of $1.0m) on revaluation of cash held in Euros for the Vares Project
construction, as the Euro depreciated against the US dollar. This adverse impact in the income statement was
compensated by the fact that the weakening of the Euro mitigated inflationary increases on the Vares Project
construction in US dollar terms.
Revaluation of derivatives and fair value of liabilities
The Group issued $20m 8.5% convertible debt to Queens Road Capital Investment Ltd on 30 November 2020
which may be converted into equity securities of the Company at the option of the debt holder at any time until
30 November 2024. The conversion feature of the debt has been accounted for as a derivative liability and is
fair valued at each balance date. Fair value movements, which primarily relate to the changes in the Company’s
share price, exchange rates and the estimated timing of conversion, are taken to the income statement. Mainly
due to the Company’s higher share price, the increase in fair value of the derivative liability at 31 December 2022
resulted in a $3.9m loss in the year ended 31 December 2022 (prior year: gain of $1.7m), with the Company
share price at 31 December 2022 of A$3.15 (prior year: A$2.45) which was above the conversion strike price of
A$2.7976 per ordinary share.
Following settlement during the year of the remaining cash and share consideration for the Ras Metals acquisition
in 2021, the Company recognised a revaluation gain of $0.2m in the year in respect of deferred consideration
(prior year: gain of $0.03m).
Impairment of Raska Project
The Company’s focus on Vares Project construction and exploration means that resources available for
exploration in Serbia will be more limited in the coming year, with the result that the Raska Project will now be
developed over a longer horizon. The Company has therefore determined that it is appropriate at this time to
recognise a partial impairment of $23.2m against the Raska Project, reducing the carrying amount to $8.5m.
37
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Financial review
Strong capital control
Cash Flow and Balance Sheet Review
Cash Flow
(In USD)
Year ended
31 December 2022
Year ended
31 December 2021
Net cash
(In USD)
At 31 December 2022
At 31 December 2021
Change
Cash and cash equivalents
60,585,277
112,506,468
(51,921,191)
Net cash used in operating activities
(11,233,068)
(10,417,089)
Net cash used in investing activities
(58,664,242)
(13,761,598)
Long term borrowings (including
embedded derivative liability)
Net cash inflows from financing activities
Net (decrease)/increase in cash and cash equivalents
22,410,095
(47,487,215)
96,813,807
72,635,120
Net cash
(48,867,271)
(18,573,489)
(30,293,782)
11,718,006
93,932,979
(82,214,973)
Net cash used in operating activities during the year was $11.2m compared with $10.4m in the prior year.
Investing activities included cash outflows for the purchase of property, plant and equipment during the year of
$58.7m (prior year: $13.8m) mainly reflecting the commencement of construction of the Vares Project.
Net cash inflows from financing activities totalled $22.4m including draw down of the first $30m tranche of the
Orion Senior Secured Debt, net of fees and associated legal costs totalling $3.8m. Other financing outflows
included the final $0.5m payment of deferred consideration in respect of the Ras Metals acquisition and $1.7m
interest paid on the Queens Road Capital convertible debt, offset by interest received on cash holdings of $0.3m.
The cash balance at 31 December 2022 was $60.6m, a decrease of $51.9m compared with 31 December 2021,
reflecting Vares Project construction outflows partially compensated by first draw down of the Orion Senior
Secured Debt.
Combined short term and long term borrowings at 31 December 2022 totalled $48.9m, comprising $26.2m
Orion Senior Secured Debt (31 December 2021: nil) and $22.7m Queens Road Capital convertible debt, including
embedded derivative liability (31 December 2021: $18.6m).
The net cash position (cash and cash equivalents minus long and short term borrowings) at 31 December
2022 was $11.7m, a decrease of $82.2m compared with 31 December 2021, reflecting cash used in operating
activities and in Vares Project construction, partially offset by debt draw down.
Prior year financing activities included $104.9m inflow from issue of share capital as part of the Vares Project
finance package, less transaction costs of $4.5m, to provide the Company with sufficient financial resources to
commence concentrate production in Q3 2023.
Non-current assets
Working capital
(In USD)
At 31 December 2022 At 31 December 2021
Change
Receivables and prepayments
Accounts payable and accrued liabilities
18,830,315
(5,341,740)
2,219,562
16,610,753
(4,318,794)
(1,022,946)
Working capital
13,488,575
(2,099,232)
15,587,807
The Group had a positive working capital position at 31 December 2022 of $13.5m, compared with a negative
position of $2.1m at 31 December 2021, mainly due to advance payments made during the year in respect of
processing plant equipment for the Vares Project construction.
(In USD)
At 31 December 2022
At 31 December 2021
Change
Exploration and evaluation assets
8,500,000
31,901,708
(23,401,708)
Property, plant and equipment
77,860,563
29,877,774
47,982,789
Right-of-use assets
8,953,835
733,246
8,220,589
Total non-current assets
95,314,398
62,512,728
32,801,670
Total non-current assets increased to $95.3m at 31 December 2022 (31 December 2021: $62.5m) due to
progress on the construction stage of the Vares Project and capitalisation of mining equipment provided under
the Nova mining services contract under IFRS 16, offset by a partial impairment of $23.2m against the Raska
Project’s carrying value.
38
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Financial review
Clear debt repayment programme
Vares Project development budget
The Project cost estimate has increased to $183m,
including an unutilised contingency of $10m. The
Company remains fully funded to Project completion.
The increase reflects scope changes to improve
the safety and efficiency of future operations as well
as inflationary pressure affecting the global mining
sector. In view of periods of US dollar weakness over
the last six months, the Company has rebalanced its
cash holdings to align more closely with the expected
currency profile of expenditure, as a hedge against the
Euro and Bosnian Mark strengthening against the US
dollar and thereby preventing adverse impacts on the
Group’s finances.
Of the total Project cost, as at 15 March 2023, 84%
of capital expenditure excluding contingency was
awarded, pending award, or recently quoted as shown
below:
Awarded and invoiced
Pending award
Pending confirmation
Awarded not invoiced
Quotation received
Cash
The Company had a cash balance at 31 December
2022 of $60.6m and, subject to satisfaction of
customary conditions precedent, an undrawn debt
facility of $112.5m.
Orion Mine Finance Project Finance Package
In the prior year the Company secured a $244.5m
project finance package (“Orion Project Finance
Package”) to provide the Group with sufficient funding
through to first concentrate production at the Vares
Project. The package consists of:
$142.5m project finance debt package from Orion,
comprising $120m in Senior Secured Debt and a
$22.5m Copper Stream deposit (together, the “Orion
Debt Finance Package”); and
An equity raise of $102m, including a $50m
subscription from Orion.
During the year all conditions precedent for draw down
of the first tranche of $30m of the Senior Secured
Debt were satisfied and these funds were received in
December.
All conditions precedent for draw down of the second
$30m tranche of the Senior Secured Debt and for
receipt of the $22.5m Copper Stream deposit were
satisfied subsequent to year end and these funds
were received in February 2023. The third and fourth
tranches of the Senior Secured Debt will be drawn
down in 2023 when required
Queens Road Capital convertible debt
Concurrent to the first draw down of the Orion Debt
Finance Package, the Company and Queens Road
Capital Investment Ltd executed an amendment to
the 30 November 2020 deed of covenant, confirming
that the Company is not required to redeem the
debentures and increasing the cash coupon
from 8.5% to 9.5% per annum. As a result of this
amendment, an additional $20m (less interest) will be
available for the Project funding should it be required.
Share price performance
The Company’s share price has appreciated 96% during the past three years, outperforming relevant comparable
market indices, S&P ASX 300 Metals & Mining (31% appreciation) and FTSE 350 Mining index (42% depreciation).
FTSE 350 Mining Index
S&P ASX 300 Metals & Mining
ASX : ADT
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
9
1
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0
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0
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D
39
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Financial review
Resilient through cycles
Commodity price performance
The value of the Company’s assets and potential
earnings will be affected by fluctuations in
commodity prices, such as the US$ 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.
The Company routinely monitors commodity pricing
trends, exploration results and technical study
outcomes to ensure efficient use of capital. The DFS
indicated the LOM average contribution to revenue
split by commodity, based on the DFS pricing
assumptions as follows:
LOM average revenue split by commodity from 2021
Definitive Feasibility Study
Ag
Other
Zn
Pb
Au
The price performance during the year of relevant commodities for the Vares Project are shown in the graph
below:
Silver (Ag)
Zinc (Zn)
Lead (Pb)
Copper (Cu)
Gold (Au)
Antimony (Sb)
Average
Revenue Split
Others
Sb
Cu
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Dec 21
Jan 22
Feb 22
Mar 22
Apr 22
May 22
Jun 22
Jul 22
Aug 22
Sep 22
Oct 22
Nov 22
Dec 22
Silver (Ag)
Zinc (Zn)
Lead (Pb)
Copper (Cu)
Gold (Au)
Antimony (Sb)
Silver appreciated by 3.7% making
it the best performing metal of the
commodities considered here. In
2022 the silver price reached a high
of $26.2/oz and low of $17.8/oz in
March and September respectively.
In the 12 months from 31 December
2021 to 31 December 2022 the
zinc price averaged $3,491/t. Out
of the metals considered here,
zinc had the weakest performance,
depreciating by 16.7%. The metal
peaked in April at $4,530, dropped
to a low of $2,682 in October and
ended 2022 at $3,025/t.
The lead price has appreciated
by 0.3% in the 12 months from
31 December 2021. The metal
averaged $2,159/t over the year
which remained above its post-
Covid-19 low of $1,577/t. The price
at the end of 2022 was $2,335/t.
During the 12 months from 31
December 2021 the copper price
has depreciated by 13.5%. After
reaching a high of $10,730/t in
March, the price declined to a low
of $7,000/t recovering to $8,390/t
by the end of 2022. Most of this
decline has occurred since the start
of June 2022 as recession fears
have gripped the market. For the
12 months the copper price has
averaged $8,827/t.
The gold price ended 2022 flat,
depreciating just 0.4% over the 12
months from 31 December 2021
and averaging $1,804/oz. In 2022,
gold reached its highest price of
$2,017/oz in March, before falling
to a low of $1,618/oz at the end of
September. Since then the precious
metal recovered to $1,812/oz by
the end of 2022. Gold followed
the turbulent trend seen with
other metals in 2022 but with less
extreme swings.
(price delivered to Rotterdam of
99.65% ingots)
The antimony price has decreased
by 7% over the 12 months of 2022
ending at $11,600/t at the end of
the year. During 2022 the metal
peaked at $14,300/t in April and
averaged $12,740/t for the year.
40
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Financial review
Resilient through cycles
Financial analysis – from 2021 Definitive Feasibility Study
LOM annual average feed grade and tonnes processed by the Vares Processing Plant
Tonnes
Feed Grade
Silver
Zinc
Lead
Copper
Gold
Barite
Antimony
kt
g/t
%
%
%
g/t
%
%
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
638
800
800
800
802
800
794
775
769
260
56
340
6.6%
4.4%
0.7%
2.8
42%
0.2%
242
9.0%
5.4%
1.0%
2.5
35%
0.3%
199
9.5%
5.7%
1.1%
2.1
30%
0.3%
204
8.7%
5.0%
0.9%
2.3
34%
0.3%
231
5.4%
3.3%
0.6%
2.3
37%
0.2%
240
5.9%
3.7%
0.5%
2.2
37%
0.2%
182
3.7%
2.6%
0.4%
1.6
30%
0.2%
127
2.6%
1.9%
0.3%
1.0
23%
0.2%
110
1.8%
1.3%
0.3%
0.7
23%
0.2%
98
1.3%
1.0%
0.3%
0.6
26%
0.2%
186
1.4%
1.6%
0.4%
0.9
57%
0.3%
Revenue split by metal over LOM from 2021 Definitive Feasibility Study
Zn
Pb
Cu
Au
Ag
Sb
s
n
o
i
l
l
i
M
$
S
U
450
400
350
300
250
200
150
100
50
0
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
41
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Principal risks and uncertainties
Enterprise risk management
The Board is responsible for putting in place a system
to manage risk and implement internal controls. The
Board has considered mechanisms by which the
business and financial risks facing the Group are
managed and reported to the Board. The principal
business and financial risks have been identified
and control procedures implemented. The Board
acknowledges it has the responsibility for reviewing
the effectiveness of the systems that are in place to
manage risk.
The Board has delegated certain authorities for 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 and Independent.
The Audit & Risk Committee is responsible,
inter alia, for:
Reviewing the Company’s risk management
framework at least annually in order to satisfy itself
that the framework continues to be sound and to
determine whether there have been any changes in
the material business risks the Company faces;
Ensuring that the material business 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.
a. Financial controls
The Company has an established framework of
internal financial controls, the effectiveness of which
is regularly reviewed by the Senior Management Team,
the Audit & Risk Committee and the Board in light of
an ongoing assessment of significant risks facing the
Company.
The Board is responsible for reviewing and approving
overall Company strategy, budgets and plans. Monthly
results and variances from plans and forecasts are
reported to the Board.
The Audit & Risk Committee assists the Board
in discharging its duties regarding the financial
statements, accounting policies and the maintenance
of proper internal business, 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 Engineering Canada Inc
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 Pre-Feasibility
Study (“PFS”). It was subsequently retained for the
Definitive Feasibility Study the following year. The
preservation of knowledge and experience from the
2021 DFS and 2020 PFS has been a major advantage
in the swift transition of the Project through the
detailed engineering phase towards completion of
construction.
The Audit & Risk Committee reviews the adequacy of
accounting and financial controls together with the
implementation of any associated recommendations
of the external auditors.
Internal controls
b.
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 matters
reserved for Directors’ consideration;
A risk management process;
An established organisation with clearly defined lines
of responsibility and delegations 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 considering
significant financial control matters as appropriate;
Documented whistleblowing policies and procedures.
c. Risk management policy
The Board determines the Company’s risk profile
and is responsible for overseeing and approving
risk management strategy and policies, internal
compliance and internal controls.
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.
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).
42
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Principal risks and uncertainties
Enterprise risk management
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. An assessment of
each of the risks below has been made to determine
whether they have changed during the year. The Group
has concluded that except for certain risks indicated
below which it considers have reduced, there has
been no material change in the risks described below,
compared with the prior year.
The Company has yet to commence production
and is exposed to development risk
The Company’s future success will largely depend
upon the Company’s ability to complete the
development of, and then manage, the Vares Project
in accordance with the plans set out in the Definitive
Feasibility Study. The DFS is a conceptual study based
on certain technical and economic assessments.
As such, it is insufficient to provide certainty that
the conclusions of the DFS 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.
While the Company’s strategy is to commence
concentrate production of the Vares Project in Q3
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 complete development of the Vares
Project, reach concentrate 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.
Development of the Vares Project
The principal risks relating to the remaining
development of the Vares Project are discussed
below:
unforeseen escalation in anticipated costs of
development including adverse currency movements;
longer than expected delivery times for key equipment
and other delays to construction, including the impact
of supply chain fragility resulting from the Covid-19
pandemic and/or the continuing geopolitical tensions
between Europe and Russia;
adverse ground conditions and slow advance rates
during the development of the upper and lower
declines;
difficulties in commissioning the plant and equipment;
difficulties or delays experienced by the state rail
operator of Bosnia and Herzegovina in preparing
the railway line for the movement and storage of
concentrates from the Vares Railhead to the port of
Ploce;
adverse developments regarding the infrastructure
required at the deep-water port of Ploce in Croatia
required for shipping of concentrates to smelters;
non-performance by third party construction
consultants and contractors;
civil unrest in or around the development sites and
supply routes; and
failure to satisfy any remaining conditions to draw
down of the third and fourth tranches of the Orion
Senior Secured Debt.
Despite difficult global macroeconomic conditions,
the Company’s project team has continued to
progress the Vares Project to schedule with only
a modest increase in cost. Significant inflationary
pressures, notably higher diesel prices, have been
largely offset by well-planned procurement processes
and intelligent execution of engineering design. In
addition, it has increased the use of local suppliers
with the result that the large majority of costs are
in Euros or Bosnian Marks which is pegged to the
Euro. During 2022, Project costs benefited from the
stronger US dollar which meant local costs were lower
in dollar terms for most of 2022, but these currencies
have strengthened recently. Following the drawdown
of $82.5m of the Orion Debt Finance Package, the
Company has therefore adjusted its cash holdings to
match the expected expenditure currency profile for
the remainder of the Project and the large majority
is now held in Euros or Bosnian Marks. The large
majority of capital expenditure is awarded, pending
award or recently quoted and the Company therefore
sees no reason that the Project cannot be delivered
on time, and expects that a relatively small increase
in construction costs can be funded out of existing
treasury.
During the year, the Company did not experience
any material disruption to the development due
to Covid-19 or supply chain issues and does not
currently expect any to occur during the remainder of
the Project. The Company continues to monitor the
situation in Ukraine and the associated impact on fuel
and energy costs.
The ground conditions at the start of the declines
were as expected, and support consisting of steel arch
sets, bolting, meshing and fibre-crete were required.
As mining advanced away from the weathered, near
surface ground into more competent rock, advance
rates increased but the need for extensive ground
support continues in some areas.
The Company has a commissioning plan, including
internal resources and additional external specialists,
designed to ensure a successful commissioning.
During the year, reviews took place of the rail line
sections requiring upgrade between Vares Majdan
and Breza and the railhead facilities at Vares Majdan,
and BiH Railways considers the sections that require
upgrading can be completed within a short timescale.
A site visit to the deep-water port of Ploce in Croatia
took place in the first half of the year and a technical
review of the port of Ploce’s facilities was conducted
in December 2022. The port operates at about 50%
capacity at both its bulk and container terminals. The
bulk terminal is currently only used for coal and scrap
steel exports. However, in recent history the wharf
used to ship bulk cargoes of bauxite, iron ore, lead and
zinc concentrates. Therefore, it is not expected that
any major upgrades will be required.
The Company continues to work with internationally
experienced technical consultants to deliver on its
development plan for the Project and to mitigate
development risks where possible through the use of
industry best practice and the recruitment of capable,
experienced staff and contractors.
The Company has completed the drawdown of
$82.5m of the $142.5m Orion Debt Finance Package
and remains confident of satisfying all conditions
required to draw down the remaining $60m of the
Senior Secured Debt when required.
43
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Principal risks and uncertainties
Enterprise risk management
Operation of the Vares Mine
The principal risks relating to operation of the Vares
Mine following completion of its development are
as follows. In the event that any of these potential
risks arise, the Company’s operational and financial
performance may be adversely affected. This includes,
but is not limited to:
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 operating the plant and equipment,
including mechanical failure or plant breakdown;
shortage of transportation and interruptions in
transportation services;
increases in extraction, processing or transportation
costs, including unanticipated metallurgical problems
which may affect extraction costs;
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 operations
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, fuel oil or other contaminants into
watercourses;
potential opposition from environmental groups, local
residents or others;
civil unrest around the mine site, processing plant and
supply routes;
changes to anticipated levels of taxes and royalties;
and
a material and prolonged deterioration in the prices of
the commodities to be produced by the Vares Project.
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 as
well as increasing greenhouse gas emissions. To
mitigate these risks, the Company plans to develop
its own renewable energy capacity including solar and
wind power and has signed a MoU with a Norwegian
renewable energy supplier, Emergy, for cooperation
on the development of a 30 MW solar facility for direct
supply to the Vares Processing Plant.
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, as well as potential environmental issues.
A haulage road is being constructed for the haulage
of 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 Company will pay for the maintenance of the
haul 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 has already entered into agreements for
all long lead equipment and with third-party providers
for various services, notably contract mining and
transportation of ore and tailings between Rupice
and the Vares Processing Plant and transportation of
concentrate from the plant to the railhead. It is also
at an advanced state of discussions with the Bosnian
State rail operator, the Bosnian state electricity
provider and the Ploce port operator.
Although the Company is confident of doing so, there
can be no assurance that the Company will be able
to secure the provision of all the remaining services
and equipment required in a timely manner or on
commercial terms currently expected (including as to
cost).
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;
any change to the terms on which these services
are made available or by the lack of availability of key
personnel or equipment; or
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
44
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Principal risks and uncertainties
Enterprise risk management
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 companies' operations and/or
financial performance.
Exploration
During the year, the Company achieved further
success with its exploration programme at Vares, with
strong drilling results both at the Rupice main ore body
and at Rupice NW, which the Company believes will
add significant mine life to the Project, serving to de-
risk the project and its commercial viability.
Nonetheless, 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 future exploration activities of the Company may
be affected by a range of factors including geological
conditions, limitations on activities due to seasonal
weather patterns, unanticipated operational and
technical difficulties, unavailability of drilling rigs,
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.
Change during the year: The Company considers
there is now a lower risk that exploration will not
result in an economic mineral resource or will not
be economically exploited. The ore body extension
discovery at Rupice NW has delivered high-grade
results and the Company is confident that further
drilling will prove Vares to be a Tier 1 asset, with a
20-year Life of Mine.
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.
Up to 2021 the Company 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.
As of 2022, the services of AMC (Perth) were engaged
for future resource estimation and sign-off on the
QA/QC related to all resource block models and
resultant estimates produced. As with CSA Global and
Mining Plus, AMC is a globally recognised geological
consultancy providing registered competent persons
capable of completing and signing off on JORC
standard resource estimates.
Environmental risks
The Company’s activities are subject to the
environmental laws and regulations applicable to the
mining industry and those specific to Bosnia and
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 Task Force on
Climate-related Financial Disclosures (“TCFD”) 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, underground mining (for example
relating to flooding, seismic activity, shaft and tunnel
integrity issues), and processing plant operations.
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 worksites 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.
As the operational risk profile has increased in line
with the construction activity, the Company has
strengthened its occupational health and safety
systems, ramped up safety training, expanded the
safety team and integrated health and safety into the
operational culture, with the objective of ensuring that
all employees return home safely at the end of each
day.
Foreign exchange risk
Effective 1 January 2022, several Group entities
changed their functional currency to US Dollars
(“USD”), on the basis that the USD is a more widely
recognised currency for the mining sector in
which it operates and that its project finance debt
package, offtake agreements and mining services
contract are denominated in USD. The Company
considers that this change gives investors and other
key stakeholders a clearer understanding of the
Company’s performance over time.
However, a proportion of the Company’s costs and
expenses in Bosnia and Herzegovina and Serbia
and other countries are likely to be in currencies
other than the USD. Accordingly, the appreciation
of these currencies relative to the USD could result
in a translation loss on consolidation which is
taken directly to shareholder equity. Conversely,
the depreciation of these currencies relative to
the USD could result in translation losses on non-
USD cash holdings which is taken to Statement of
Comprehensive Incomes.
45
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Principal risks and uncertainties
Enterprise risk management
The majority of the Group’s revenues once the Vares
Mine is in production are expected to be earned
in USD. For any revenues denominated in other
currencies, any depreciation of these non-USD
currencies relative to the USD will result in lower than
anticipated revenue.
The Orion Debt Finance Package is denominated in
US dollars. Any depreciation in the US dollar relative
to the non-US dollar expenditure requirements of
the Vares Project will therefore result in a reduction in
the effective value of the funding received. Following
the draw down of $82.5m of the Orion Debt Finance
Package, the Company has mitigated this risk by
adjusting its cash holdings to match the expected
expenditure currency profile and the large majority is
now held in Euros or Bosnian Marks. However, foreign
exchange remains a material risk to the Group’s future
operations
Historic tailing storage facility
Whilst the historic tailings storage facility (“Historic
TSF”) is the legal responsibility of the Municipality of
Vares and is not located inside the area covered by the
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 monitoring continues. A management plan
will be developed to address any ongoing issues
identified.
Community/NGO concerns affecting exploration/
operational activity
The Company continues to maintain an active, two-
way dialogue with the communities surrounding the
Project with the aim of mitigating the risk of potential
opposition from environmental groups, local residents
or others. This is primarily achieved through three
channels: The Public Liaison Committee (“PLC”), the
Vares Project Information Centre and the many staff
that the Company employs from its local communities.
The PLC consists of 28 members, was set up in July
2020 and meets on a quarterly basis. The Information
Centre is a staffed location, open to the public, located
centrally in the town of Vares and has been open since
September 2019.
The community of Vares, government stakeholders
and the wider audience in Bosnia and Herzegovina
remain supportive of the Project. As the Project
moves towards the end of construction, the Company
is very conscious of its requirements to honour
commitments made to date, most pressingly levels of
employment and opportunity afforded to residents of
the near-mine communities. A significant proportion
of the Company’s staff it employs is from the local
communities of Vares, Breza and Kakanj. Another
priority is 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, and to rectify any issues arising
through sincere and transparent communication
and committed, prompt action. These efforts will
continue during the remainder of the construction and
then on an ongoing basis during future operations
in order to honour commitments made, and thereby
mitigate the risk posed by community or NGO
concerns. The Company seeks to mitigate these
risks through effective engagement with relevant
stakeholders, including all levels of government and
local communities.
An information centre has also opened in Raska,
which, like Vares, is a community with a rich
mining history and therefore broadly supportive
of the Company’s activities to date. The Company
approaches its community and environmental
obligations at Raska with the same commitment as at
Vares.
Bribery and 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 has responsibility for adherence,
and management has implemented the Company’s
Anti-Bribery & Corruption Policy and provided training
to all staff, with refresher training programmed as part
of its HR management plan. A whistleblowing policy is
in place, providing all staff the opportunity to disclose
anonymously any infringement of the Company’s
codes, including incidences of bribery and corruption,
directly to the Chair of the Audit & Risk Committee.
There were no reported incidences in 2022.
Political instability
The Company acknowledges the potential impact
of political instability and civil unrest in or around the
Vares mine site, processing plant or its supply routes,
or at its Raska Project, on its ability to advance the
projects. To mitigate this risk, the Company closely
monitors the national political situation and carefully
considers every engagement with politicians (at all
levels, including internationally).
In Q4 2021, Milorad Dodik, the president of Republika
Srpska (“RS”), one of the constituent entities that
form Bosnia and Herzegovina, started publicising
secessionist rhetoric, which received national and
international attention. RS subsequently withdrew
temporarily from many of the federal institutions.
Subsequently, however, the situation calmed, with
RS returning to the federal institutions and an
increased commitment on the part of the international
community towards political and economic stability,
most notably the European Union, United Kingdom
and the United States of America. Federal, national
and cantonal elections were held in October 2022
and, following a recount, Mr. Dodik was returned as
president of RS. After the reporting period, the annual
RS Day parade in Sarajevo East received media
attention for its militaristic nature but without any
significant traction in country. A number of western
embassies continued to discourage nationalistic/
secessionist rhetoric and in December 2022 the
EU confirmed Bosnia and Herzegovina’s status as
an EU accession candidate. In late December 2022,
tensions rose along the Kosovo/Serbia border over
the withdrawal of Serbian number plates from ethnic
Serbs in Kosovo, resulting in militaristic posturing from
Serbia and further attention in the international media.
The borders were temporarily blocked, but within five
days the barriers were removed.
The Company recognises that the political landscape
in Bosnia after Russia’s invasion of Ukraine remains
complicated, but believes measures are in place
to prevent any deviation from the Dayton Accords,
whether externally instigated or not, and the Company
does not consider the conflict in Ukraine to have
a significant impact on its operations. The conflict
is still ongoing at the date of this annual report and
management will continue to assess the impact on its
operations and seek to mitigate accordingly.
Mining concessions in Bosnia and Herzegovina
and Serbia
The laws and regulations on mining in Bosnia and
Herzegovina and Serbia are still developing and, as a
result, some areas of the laws on mining are unclear.
If the Company does not comply with the terms
of agreement, it may be in default and the mining
concession may be terminated, which would have
adverse consequences for the Company’s operational
and financial performance.
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
46
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Principal risks and uncertainties
Enterprise risk management
Company’s Directors and senior managers
The Company relies heavily on a small number of
key individuals, in particular the Directors, its senior
management and consultants, including, among other
matters, to manage and operate the Project and to
develop and maintain effective engagement with
government, regulatory authorities and communities
in Bosnia and Herzegovina and Serbia. The Group’s
business may be negatively affected by the departure
of any of these key individuals or any of a number of
other key employees and the failure to attract suitable
replacements. Although the Company has succeeded
in attracting and retaining key personnel and is
confident of continuing to do so, there can be no
guarantee of this. 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.
joint venture partners with carried or other interests.
Outcomes in courts in Bosnia and Herzegovina and
Serbia may be less predictable than in the United
Kingdom, which could affect the enforceability
of contracts entered into by the Company or its
subsidiaries in Bosnia and Herzegovina and Serbia.
There is no guarantee that the Company will be able
to obtain all required approvals, licences and permits
relating to its exploration and subsequent exploitation
activities. Notwithstanding these risks, the Company
has made good progress in obtaining the permits it
needs for development and preparation for operations.
Other country risks
In common with mining companies in any
jurisdiction, the Company will be subject to other
political, sovereign, economic and other risks and
uncertainties associated with operating in Bosnia
and Herzegovina, Serbia and any new countries it may
enter in future.
These other risks and uncertainties include, but are
not limited to, labour unrest, the risks of conflict or
civil unrest, expropriation and nationalisation, 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.
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.
47
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ section 172(1) statement (stakeholder engagement)
Working and communicating with our stakeholders
Corporate engagement can take many forms,
including surveys, focus groups, town hall meetings
and one-on-one conversations. It is a key aspect of
corporate social responsibility and is often considered
essential for companies seeking to build and maintain
a positive reputation and achieve long term success.
The Company publishes on its website a range
of information which helps current and potential
shareholders to assess the Group’s position and
prospects:
Shareholders
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 public
relations advisers to facilitate engagement.
Investor presentations
Technical reports on the Project
Resource estimates
Drilling updates
Annual and Interim Financial Statements
Sustainability Reports
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 (annual general meeting, etc.)
Contact details for the Company
Board review
The Board is kept informed of the views and concerns
of major shareholders by briefings from the CEO,
Chairman, Head of Investor Relations and the
Company’s Brokers. Analysis of the share register
commissioned from external consultants is also
periodically circulated to the Board, together with
significant investment reports from analysts.
The Company’s annual general meeting will be held
in London, following the publication of its annual
results and after issue of the Notice of Annual General
Meeting, and all shareholders are invited to attend.
The Board is mindful of its duties under Section
172 of the Companies Act 2006, which mandates
that the directors of a company must promote
the success of the company for the benefit of
its members as a whole. The Directors consider
various factors, including the interests of
the Company’s employees, its customers
and suppliers, the impact of the Company’s
operations on the community and environment,
the need to maintain a reputation for high
standards of business conduct, and the long term
consequences of decisions.
Adriatic continually communicates and collaborates
with individuals or groups that have an interest or
impact on the organisation. Through both formal
and informal engagement, the objective is to
understand and respond to the needs and concerns
of stakeholders, and to work together to find mutually
beneficial solutions.
The Board acknowledges the importance of forming
and retaining constructive relationships with all
stakeholder groups. Effective engagement with
stakeholders provides valuable feedback and insights,
enabling Directors to ensure stakeholder interests are
considered when making decisions, and is crucial for
achieving the long term success of the Company.
The Company continuously interacts with a variety of
stakeholders including shareholders, debt providers,
staff, national, cantonal and municipal government
administrative and environmental bodies, NGOs, the
local community and suppliers. In its engagement
with shareholders, Adriatic endeavours to strike a
proper balance between open communication and
the need to keep commercially sensitive information
confidential.
The 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.
48
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ section 172(1) statement (stakeholder engagement)
Working and communicating with our stakeholders
Local stakeholders
Adriatic recognises that its activities and the
forthcoming commissioning of the Vares Project
create significant potential impacts on, as well
as opportunities for, local people. The ongoing
management of environmental and social issues is
based on an international standard of ESIA. In addition,
the Company 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 following table sets out the Company’s key
stakeholder groups, how the Company has engaged
them during the year and describes how the Directors
have engaged in regard to the matters set out in
section 172(1)(a)-(f) of the Companies Act 2006.
Key Stakeholder groups
Key topics raised
How and why we engage
Engagement outcomes
The Company has engaged with investors on topics of strategy,
governance, project updates and performance.
In addition to a number of investor roadshows and one-to-one
meetings, the Company conducted a capital markets site visit
in October 2022 that hosted over 30 investors and analysts for
them to directly experience the progress of the Vares Project
and understand more about the development process.
Shareholders
Current or potential individuals or
Current or potential individuals
or entities that may own shares
have a financial interest in its
performance through changes
in share price or payment of
dividends.
Shareholders also have the right to
vote on certain important matters,
such as the election of directors
and approval of major corporate
actions such as mergers and
acquisitions.
As the Company progresses
through the development cycle and
into production, shareholders have
raised the following topics:
Construction progress on the Vares
Project
Geopolitical impacts on supply
chain and sourcing of materials
Inflationary impact on cost of
materials
Climate change / TCFD reporting
Board diversity
Executive remuneration versus
targets
The Company maintains a regular
dialogue with 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 annual
financial results.
The key mechanisms of engagement
included:
The Annual General Meeting
Annual and Interim Results
Sustainability Report
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 Klara Kaczmarek,
the Company’s Head of Investor
Relations, at klara.kaczmarek@
adriaticmetals.com
49
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ section 172(1) statement (stakeholder engagement)
Working and communicating with our stakeholders
Key Stakeholder groups
Key topics raised
How and why we engage
Engagement outcomes
Existing and potential future
debt providers
Individuals or entities that provide
loans to fund operations and
finance growth in exchange for
fixed income payments, such as
interest and principal repayments.
The Orion Debt Finance Package
agreements contain a number of
financial and other Project-related
reporting obligations that the
Company must comply with on
a regular basis; and has done so
during the year.
In December 2022, all conditions precedent for the first tranche
of $30m of the $142.5m Orion Debt Finance Package were
satisfied and funds received.
There was no requirement in 2022 to redeem the $20m
convertible debt from Queen’s Road Capital Investment Ltd,
thereby ensuring additional funds available for Project financing
if required.
The Debt Finance Package from Orion includes a donation to the
Adriatic Foundation comprising one or more annual payments of
$100,000 each (pro-rated where relevant) from the repayments
of the Senior Secured Debt during the repayment period
The Company has $20m of convertible
debt in place issued to Queens Road
Capital Investment Limited on 1
December 2020.
The Company also has a $142.5m debt
financing package with Orion that was
completed in January 2022.
During the year, one-to-one meetings
with the CEO and/or CFO were
undertaken on a regular basis to provide
regular updates on progress of the Vares
Project.
Following completion of the Orion Debt
Finance Package, routine operational
and financial performance reporting has
been provided to Orion in 2022 (and on
an ongoing basis).
Regular technical team meetings 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 Queens Road Capital, as well as
external consultants, on an ongoing
basis.
50
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ section 172(1) statement (stakeholder engagement)
Working and communicating with our stakeholders
Key Stakeholder groups
Key topics raised
How and why we engage
Engagement outcomes
Workforce
Employees are critical to Adriatic’s
culture and have a vested interest
in the Company’s success.
Employees have a direct impact
on the Company’s performance
and can also be impacted by its
decisions.
Employees have raised a number of
topics during the course of the year,
including:
Adriatic maintains an open line of
communication between its employees,
senior management and Board.
Compensation and benefits
Health and safety protocols and
training
Professional career growth and
personal development
Diversity and inclusion
Opportunities for female
empowerment
The Group monitors health and
safety on a daily basis and reports
performance of lost time injury and
frequency rates.
The Group undertakes annual group-
wide employee surveys to capture
important insights and monitor
workforce satisfaction.
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.
Senior management regularly visit the
operations in Bosnia and Herzegovina
and Serbia and engage with employees
through one-on-one and staff meetings,
employee events and Project updates.
Adriatic can benefit from engaging
with and prioritising the needs of
employees. This can lead to increased
employee satisfaction, motivation, and
loyalty, which can positively impact the
Company’s performance and success.
In 2022, we introduced a formalised HR system and team to
build capability and support the workforce.
Health & safety
The Company maintained an excellent safety record during the
year. The lost time injury frequency rate (“LTIFR”) at the end of Q4
was 1.03 per 200,000 hours worked.
The Company also established a robust health and safety
framework and initiated the ‘iAuditor’ Safety Culture platform to
improve monitoring and measurement.
Training
2022 included a focus on upskilling of employees, including
culture and competence training.
A mentoring programme was also initiated to impart knowledge
from experienced personnel to provide guidance, support and
advice to junior members of staff.
Diversity
The Company has maintained a strong level of female
representation in the workforce of 29%. In addition, Almedina
Likić, Information Centre Associate was recognised for her
contribution in Women in Mining UK 2022 100 inspirational
women.
Employee Survey outcome
In October 2022 an Employee Survey was conducted to gauge
the performance of senior management’s delivery of the
Company’s values and visions.
Participation of the survey was at 84% with 80% providing
favourable feedback and 14% providing neutral. 91% of
respondents were proud to work for the Company and 89%
would recommend Adriatic as a great place to work
51
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ section 172(1) statement (stakeholder engagement)
Working and communicating with our stakeholders
Key Stakeholder groups
Key topics raised
How and why we engage
Engagement outcomes
Governmental and NGO
bodies
Adriatic maintains strong working
relationships with governmental
representatives at all levels in the
host regions where we operate,
to foster continual dialogue and
build trust.
Governmental bodies are critical
in determining local regulations
and can influence decision-making
through their input, feedback,
advocacy and policies.
We also engage with independent,
non-governmental organisations
that focus on socio-political
and environmental goals such
as human rights, education,
business ethics, health, safety and
biodiversity preservation.
A number of areas were raised and
discussed during the course of the
year, including:
Construction progress at the Vares
Project
Socio-economic development
in the Vares region including
concessionary payments
Environmental impacts associated
with construction including the
remediation of water quality in local
river courses resulting from Rupice
surface infrastructure and haul road
construction
Regional business benefits resulting
from local procurement
The Company engages with local
(Municipal), regional (Cantonal) and
national (Federal) government in Bosnia
and Herzegovina.
In Serbia the Company engages
with local (Municipal) and national
government.
In addition to statutory reporting
the Company regularly updates the
government departments and that
open, continuous engagement is key
to developing a successful permitting
regime.
The Country Managers report regularly
to the Board on progress with obtaining
licences and permits.
Adriatic is committed to being a
long term actor in both Bosnia and
Herzegovina and Serbia with a firm
commitment to each country’s
sustainable development. We
are committed to conducting
our relationships on the basis of
transparency, partnership, integrity and
shared prosperity.
Bosnia and Herzegovina
During 2022 the following licences and permits applications
were successfully completed:
Concession agreement Saski Do 04-14-5359-3/22 received
19.07.2022;
Annex VI of Concession Agreement 04-14-5757-2/22 received
19.07.2022;
Proof of meeting the minimum conditions for performing work in
the mining industry UP1-16-14-2-05289/2022-16-3 received
08.07.2022;
The main mining project - underground exploitation of the
deposit of complex ore - Rupice 06-14-1-740/21 received
06.01.2022;
Supplementary mining project - Creation of capital premises
for the opening of the pit “Rupice” 06-14-1-253/22 received
10.05.2022;
Supplementary mining project - Construction of access roads
and Rupice plateau 06-14-1-208/22 received 18.04.2022;
Supplementary mining project - Construction of backfill plant
and access road to Rupice 06-14-1-264/2 received 20.05.2022;
Main mining project - Tisovci processing plant 06-14-1-240/22
received 28.04.2022; and
Supplementary mining project - Construction of Rupice plateau
and crushers 06-14-1-526/22 received 28.09.2022.
Serbia
During 2022 the following licence applications were successfully
made:
Decision on transfer of the approval for geological exploration-
Kaznovice no. 310-02-01670/2021-02, dated 16 June 2022,
received 12 August 2022 (GMR to Ras Metals);
Decision on transfer of the approval for geological exploration-
Kremice no. 310-02-01114/2015-02, dated 27 June 2022,
received 16 August 2022 (Taor to Ras Metals);
Decision on extension of the approval for geological exploration
Suva ruda (Deep Research) no. 310-02-01114/2015-02, dated
15 September 2022, received 24 October 2022; and
Decision on adoption of the annex on the project of geological
exploration-Kaznovice no. 310-02-01670/2021-02, dated 19
October 2022, received 18th November 2022 (Adriatic Metals).
52
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ section 172(1) statement (stakeholder engagement)
Working and communicating with our stakeholders
Key Stakeholder groups
Key topics raised
How and why we engage
Engagement outcomes
As Adriatic is progressing through
the project development process,
the Company is starting to have
significant social, economic and
environmental impacts on the local
community and surrounding area,
leading to questions around:
Employment opportunities
Community development plans
including provision of local services
Local supplier enquiries
Applications to the Adriatic
Foundation
Donations and other initiatives
Community
Establishing and maintaining good
relations with the local community
throughout the development,
operation and ultimately closure of
the mine is vital for the Company’s
social licence to operate.
Principally, the Company needs
to engage with its affected
communities in order to build
trust. Community engagement
will inform better decision making,
particularly during the Project
development stage.
Bosnia and 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 licence areas) and the wider
population of both Southwest
Serbia and Northern Kosovo.
Bosnia and Herzegovina
Following earlier household surveys as
part of the ESIA consultation, Adriatic
management continues engagement
through the Vares Information Centre
and Public Liaison Committee, proving
an excellent forum for community
feedback.
This includes dissemination of Project
developments, the advertisement of the
public consultations and the Company’s
approach to sustainability.
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.
Serbia
The blueprint of Community
Engagement developed in Bosnia and
Herzegovina is being rolled out in Serbia.
Following an initial public consultation
and the opening of the Information
Centre in the town of Raska, a Public
Liaison Committee was created in 2022.
Procurement and contracting
The Company 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 engage with local suppliers
and contractors.
Bosnia and Herzegovina
The Information Centre has received over 2,400 visits in 2022,
double the 2021 amount, with visits predominately about job
opportunities and funding of local initiatives.
The 2021 household survey had identified a clear lack of
sufficient healthcare provision. In May 2022 Adriatic therefore
opened the Eurofarm Polyclinic in Vares for the use of both
employees and the community.
Our Media Coordinator has been responsible for the increase
in social media flow associated with the Project including 48
Facebook posts and 11 video updates.
The Public Liaison Committee, a panel of 28 community
volunteers met four times during the year. A Project site visit
provided attendees with a detailed presentation about the
findings and proposed mitigation measures identified during the
ESIA.
To track our progress in local community engagement, we
established a Commitments Register which lists all the actions
that need to be undertaken by the Company with respect to
social and environmental issues.
In December 2022, Adriatic helped mark Miners’ Day by
organising municipality celebrations.
Serbia
The Company’s relations with the Community of Raska have
been maintained successfully during the year. With a relatively
low operational footprint in the community, the Company’s focus
remains on the smaller communities adjacent to the exploration
activities. The Information Centre, opened in late 2021, provides
a focus for wider community engagement and welcomes a
steady flow of interest; at this stage of the project most visitors
are enquiring about employment opportunities or making
sponsorship or financial support requests.
53
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ section 172(1) statement (stakeholder engagement)
Working and communicating with our stakeholders
Key Stakeholder groups
Key topics raised
How and why we engage
Engagement outcomes
Suppliers
Suppliers are fundamental
to ensuring that Adriatic can
construct the Vares Project on
time and on budget.
Using quality suppliers ensures
that the Company can meet the
highest standards of performance
and safety across all areas of the
business, including contractors
and sub-contractors.
Both during and after 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 and support ongoing
production. Key areas of discussion
currently include:
Supplier code of conduct
Procurement opportunities
Supplier screening criteria
Material cost inflation
The procurement team has undertaken
the pre-qualification of several
engineering providers and mining
contractors, with engagement including:
One-on-one meetings between
management and suppliers
Contact with procurement departments
and accounts payable
Membership of Cantonal and National
Chambers of Commerce
Presentations at National trade events
and forums
At a local level, the Company has
also engaged and partnered with
smaller companies, some of which are
independent or family run businesses..
Bosnia and Herzegovina
Adriatic commenced a series of workshops with local vendors
with the purpose of addressing business experience gaps,
providing motivational sessions, business plan support and
introductions to potential funding partners.
Adriatic hosted EBRD, World Bank, Swiss and British Embassies,
British-Bosnian Chamber of Commerce and the UNDP to
promote confidence in investing in local businesses.
54
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Principal decisions by the Board during the period
High standards of business conduct
The Company defines principal decisions as
those which potentially have a long term strategic
impact and are material to the Group, and/or are
significant to 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 interests of the shareholders:
a. Closing of the Orion Debt Finance Package
In December 2022, the Board approved the entering
into of additional agreements and documents to
facilitate the closing of the Orion Debt Finance
Package.
All conditions precedent to drawdown of the first
tranche of $30m of the Senior Secured Debt
were completed and draw down took place in late
December 2022, as announced to the market on
the 30 December 2022. Drawdown of the second
tranche of $30m of the Senior Secured Debt as well
as the Copper Stream deposit of $22.5m took place
in February 2023, as announced to the market on
13 February 2023. The third and fourth tranches
under the Senior Secured Debt will be drawn down as
required during 2023.
Previously, following an extensive process undertaken
by management, the Board approved a Project
Finance Package of approximately $244.5m, 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 signed a term sheet for a $142.5m Debt Finance
Package, comprising of:
–
–
$120m senior secured debt; and
$22.5m copper stream.
In addition to the Orion Debt Finance Package, the
Company completed an equity raise in October 2021
of approximately $102m, consisting of:
–
a conditional placing of approximately $52m (the
“Placing”), conducted through an accelerated
bookbuild process (a method whereby the offering
of new shares occurs over a short period);
c. Major Project Agreements
The Board ratified the December 2021 appointment of
Ausenco Engineering Canada Inc. as the engineering
and procurement contractor for the Project. The
Board also supported the June 2022 appointment
of Nova Mining & Construction d.o.o. as the mining
services contractor for the Project.
d. Sustainability Report
The Company engaged Buchanan to prepare its
maiden Sustainability Report for 2022, which will
provide further detail on the strategy to become a
Net Zero mine, in addition to current sustainability
performance. The Sustainability Report is expected to
be published in Q2 2023.
e. Change to Trading Policy and Dealing Code
The Board approved amendments to the Company’s
Trading Policy and Dealing Code, which was lodged
with the ASX in accordance with ASX Listing Rule
12.10, as announced to the market on 22 April 2022 .
f. Appointment of new Chief Financial Officer
The Company appointed Mike Norris, who has over 30
years commercial and operational experience in the
mining industry, as the Company’s new Chief Financial
Officer, as announced to the market on 14 March
2022.
–
a conditional equity subscription for $50m by
Orion (the “Orion Equity Subscription”).
Together, the Orion Debt Finance Package of
$142.5m, the Orion Equity Subscription of $52m and
the Placing of $50m form the $244.5m Orion Project
Finance Package.
Definitive documentation for the Orion Debt Finance
Package was approved by the Board on 8 January
2022 and completed on 10 January 2022, as
announced to the market on the same date.
b. Approval of Offtake Agreements
The Company agreed heads of terms with four
international commodities trading and smelting
companies (“Offtakers”) for the purchase of
concentrate production from the Vares Project,
subject to final contract negotiations, as announced
to the market on 20 April 2022. Allocation to the
Offtakers was agreed as follows:
Zinc concentrate to Trafigura Pte Ltd, Transamine SA
and Boliden AB; and
Silver-lead concentrate to Glencore International AG
and Transamine SA.
The final Offtake Agreements have been finalised and
executed with each of the Offtakers, who have been
allocated a substantial portion of the total projected
concentrate production over the first 24 months.
The remaining portion of concentrate production
not included within the Offtake Agreements has
been intentionally allocated for either advantageous
spot market sales or for additional long term offtake
agreements to be agreed at a later date.
55
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Standards and commitments
Our approach to sustainability
This sustainability section presents a summary
of Adriatic’s performance in 2022. Information
is provided that demonstrates how sustainable
development contributes to the Company’s
long term success and how value is created
for stakeholders including employees, local
communities, contractors and shareholders.
Sustainability policy
Adriatic’s Sustainability Policy regulates and provides
guidance for the Company’s and its subsidiaries’
management of activities to minimise adverse
workforce, community or environmental impacts
and to realise opportunities in these areas. The
Company recognises that its principal concern must
be the wellbeing of its people, whether employees,
contractors, consultants, affected near-mine persons
and communities or other stakeholders. The health
and safety of those persons, and the sustainability
of the environment in which they work or live, is a
critical factor in measuring the long term success of
the Company’s business and, therefore, also for its
investors. The Company is committed to implementing
and maintaining the best practical standards of
governance and transparency.
The Company also recognises the importance of the
impact of its operations on climate change, use of
land, water quality and availability and biodiversity.
The overall objective is to ensure that communities
where Adriatic works are ultimately enhanced by its
presence.
Basis of preparation
This report has been developed in accordance with
legal requirements such as Streamlined Energy and
Carbon Reporting (“SECR”), TCFD, Companies Act and
Bosnian Mining Law. References to the recommended
TCFD disclosures are incorporated throughout this
report (where you can see the logo), a full index table
can be found in the appendix on page 65.
Disclosures have largely been shaped by the ESIA
carried out in 2021, developed in accordance with
the World Bank’s International Finance Corporation
(“IFC”) guidelines and Equator Principles, and are
the benchmark reporting standard agreed with
investors the European Bank for Reconstruction and
Development (“EBRD”).
This report is further guided by leading voluntary
sustainability disclosures including the Global
Reporting Initiative (“GRI”), Carbon Disclosure Project
(”CDP”’), Net Zero, Science Based Targets initiative
(“SBTi”) and the sector specific International Council
on Mining and Metals (“ICMM”).
Unless clearly stated, all sustainability disclosures
are related to operations in Bosnia and Herzegovina,
where impacts are most evident and material.
Global Reporting Initiative (GRI)
Standards enable understanding
and reporting on impacts on the
economy, environment and people
in a comparable and credible way,
thereby increasing transparency
on their contribution to sustainable
development
Sustainability Accounting
Standards Board (SASB)
SASB Standards identify the
subset of environmental, social and
governance issues most relevant to
financial performance and enterprise
value. SASB is now part of the IFRS
Foundation and integration agenda of
sustainability.
International Finance
Corporation (IFC)
ESIA delivered in conformance with
IFC’s performance standards as
agreed with EBRD..
International Council on Metals &
Mining (ICMM)
10 Principles for sustainable
development to set a standard of
ethical performance. Adopted by
London Metals Exchange as certified
standards as well as Boliden.
Carbon Disclosure Project (CDP)
A not-for-profit charity that runs the
global disclosure system for investors,
companies, cities, states and regions
to manage their environmenta
limpacts.
Equator Principles
Voluntary guidelines adopted to
ensure that large scale development
or construction projects appropriately
consider the associated potential
impacts on the natural environment
and the affected communities.
Taskforce on Climate-Related
Financial Disclosures (TCFD)
TaskForce on Climate-related
Financial Disclosures, a guidance
framework that helps companies
disclose climate-related financial risks
to investors, lenders and insurers.
European Bank for Reconstruction
& Development (EBRD)
Guidance framework that helps
companies disclose climate-related
financial risks to investors, lenders,
and insurers.
56
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Creating a ready workforce
Workforce Management system
Business Context
Business Strategy & People Vision
Organisational Values
Organisational Design and Workforce Costing
Resourcing Strategy
Compensation and
Benefits Strategy
Talent and
Learning Strategy
By laying the right foundations, Adriatic is building a
business that will see long term success. This has
been addressed through the development of a robust
management structure that considers all facets of the
organisation and follows best practice in establishing
the required policies and procedures. This enables the
Company to minimise potential risks and future-proof
the business.
Human resources (“HR”) in the mining sector has
traditionally been treated as an adjacent, non-core
support function. Things are done differently at
Adriatic; the Company believes that HR is an integral
business function and as such should be incorporated
into the central business strategy, directly aligned with
corporate objectives. By embedding HR functions
into the business in this way, Adriatic can develop a
collective understanding of the Company vision and
ensure that everyone is working towards the same
goal.
“We were seeking longevity
and reliability in establishing
the HR function. We were not
building it around one individual,
but instead creating a lasting
structure, and by doing the
preparatory work now to ensure
we are ahead of the curve
with regard to stakeholder
expectations, we are setting
the business up for success
and supporting our overriding
objective of getting a ready
workforce for day one of
operations.”
Lachlan Spicer
Head HR Consultant
Building a team
Equipped with a clear understanding of the corporate
objectives and the role of HR in achieving them,
Adriatic has assembled a team of individuals who are
best placed to deliver the workforce vision. Rather
than recruiting a group of HR professionals, the
Company instead enlisted experienced specialists
who possess the required depth of understanding
in areas such as psychology and law. This allows
Adriatic to address key areas of the HR function in turn,
assigning a member of the team to lead on a specific
objective, and avoid overstaffing or overlapping
skillsets.
“I am really proud to say that we
have a brilliant HR team. There is
an enthusiasm and energy in our
team that makes it such a great
environment to work in and we
always jump at the opportunity
to help each other. By having a
modern approach with each of
us being responsible for our own
aspect of HR, I think we have
created a dynamic and effective
function.”
Hanadi Željo,
HR Senior Consultant
Total number of employees
Male
Female
250
200
100
150
50
0
2020
2021
2022
Board
Diversity
57
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
A holistic approach
Benefits and recruitment
The central objective of the Resourcing Strategy is
to enable identification, attraction and selection of
the best talent for the roles required. The recruitment
process is grounded in principles of fairness and
transparency, with the objective of finding the best
candidates, whilst also encouraging diversity. The
process has been formalised and covers all enrolment
stages, including the approval of the job description,
appropriate channels through which to disseminate
the job opportunity, criteria for short-listing, the
interview process and final personnel checks.
Recruitment opportunities are open to internal as well
as external candidates, to ensure that the Company is
both accessing the widest pool of available talent and
providing current employees with the opportunity to
progress within the Company. In 2022, 20% of senior
management were hired from the local community,
including the Head of Sustainability.
Training and development
By focusing on hiring young highly qualified individuals,
Adriatic has been building a self-driven and educated
workforce. The focus of the Talent and Learning
Strategy has therefore been to provide the specific
technical and behavioural skills training that individuals
require - when having limited or no previous mining
experience - and to create learning opportunities
that will enable employees to develop and fulfil their
potential. In 2022, 93% of employees were ‘extremely
satisfied’ with training content, facilitation process and
material.
Total hours of training
2,511
Average training hours per
year per employee
16.1
As part of Adriatic’s Community Development
Plan, the Company is keen to promote more job
opportunities in Vares and the surrounding areas,
with the objective of enabling young Bosnians
to stay in the country rather than having to seek
employment elsewhere in Europe. A key element of
this recruitment strategy has therefore been targeted
advertising of job opportunities in the local cantons
and hiring individuals that may not have previous
mining experience but have the right aptitude to learn
and develop in these roles. This strategy enables the
Company to not only create opportunities that deliver
a positive legacy is Bosnia, but also to develop and
retain talent for the long term.
Vares
Zenica
Sarejevo
Breza
Kakanj
Origin of national
employees
Workshops
Face to face
E-learning
Hours of
training by type
58
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Ensuring opportunity for all
Employee Relations
To track effectiveness, Adriatic conducted an employee
survey with the purpose of receiving feedback to gauge
workforce sentiment. From the responses gathered,
the HR team were able to identify initiatives that are
working well, what improvements could be made,
and where changes should be implemented. These
actions are to be set out at the beginning of the year
and, in recognition of the importance of having an
engaged workforce, the results of the survey are to
be linked to corporate bonuses. Adriatic believes that
the efficacy of cultural approach is evidenced in the
strong engagement scores that were recorded from the
employee survey.
In 2022, participation in the survey was 84% with 80%
of employees providing favourable feedback and 14%
providing neutral. 91% of respondents were proud
to work for Adriatic and 89% would recommend the
Company as a great place to work. Following the survey,
Adriatic has set up a working group in order to develop
and launch employee engagement initiatives.
Sanela Karic has been appointed responsible by the
Board for employee relations and in discharging these
duties attends both the working group and employee
council meetings.
Diversity and equality
Adriatic is committed to creating a diverse workplace
and firmly believes in the benefits that arise from
cultivating a multi-demographic environment. The
Company aims to appeal to the broadest pool of
high-quality candidates, to access different societal
perspectives and ideas, and improve employee
retention. This commitment is enshrined in the Diversity
Policy, which provides a framework for workplace
culture that is characterised by inclusive practices and
behaviours for the benefit of all employees.
A particular focus at Adriatic has been on supporting
female employees and bringing more women into the
industry. The Company has committed to achieving
improved employment and career opportunities
for women in an industry that has historically been
predominated by men and have adopted the target of
25% female representation across the organisation.
Adriatic is very pleased to have exceeded that target for
a third year running with 29% female employees at the
end of 2022.
% female in Bosnia
30
25
20
15
10
5
0
2020
2021
2022
% female of new hires
35
30
25
20
15
10
5
0
2020
2021
2022
% female on the Board
35
30
25
20
15
10
5
0
2020
2021
2022
59
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
A zero harm approach
Health and Safety
Adriatic is committed to protecting the safety,
occupational health and welfare of the workforce.
The Company strives to achieve Zero Harm and to
eliminate the potential for accidents and injury in the
workplace. Adriatic also ensures that its operations
do not impact negatively on the safety or health of
associated communities.
Health and safety framework
Health and safety performance
▲ Image caption
Health and safety is approached through the lens of
continuous improvement and, in 2022, the Company
established a robust health and safety framework that
includes policies, procedures, training and Company
standards.
All employees are undergoing training with the
safety culture programme ‘Creating Safe Work’.
The programme has been developed to better
align employees on Adriatic’s Health and Safety
Model, safety leadership, risk management and the
psychology of safety.
LTIFR
TRIFR
First aid injury
Serious potential incident
)
s
r
h
0
0
0
0
0
2
,
(
y
c
n
e
u
q
e
r
f
t
n
e
d
c
n
i
I
7
6
5
4
3
2
1
0
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
During 2022, the Company experienced substantial
improvement across its operations and positive
changes in safety culture across employee and
contractor base. Focus has been on leadership and
engagement, people, standard and systems and
critical risk management which has placed Adriatic
in good stead for future operations and growth. The
Company has experienced a decrease across lag
indicators and seen positive increases across lead
indicators.
For instance, the rise in first aid injuries is attributable
to a better reporting culture and user-friendly systems
to report incidents. First aid injuries are fairly minor in
nature i.e. minor cuts/abrasions – and these would not
have been reported previously.
ISO 45001 Health and safety management
standard
ISO 45001 is the world’s international standard for
occupational health and safety, issued to protect
employees and visitors from work-related accidents
and diseases. The certification was developed to
mitigate any factors that can cause employees and
businesses irreparable harm.
Geared toward senior management, ISO 45001
has the ultimate goal of helping businesses provide
a healthy and safe working environment for their
employees, as well as anyone else who visits the
workplace. This goal can be achieved by controlling
factors that could potentially lead to injury, illness and
— in extreme situations — even death. As a result, ISO
45001 is concerned with mitigating any factors that
are harmful or that pose a danger to workers’ physical
and mental well-being.
In 2023, Adriatic will be working towards gaining ISO
45001 accreditation.
60
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Sustainability
Maintaining our social licence to operate
Community relations and engagement
Vares information centre
Adriatic has instituted a number of other methods
of community engagement. In the centre of Vares
the Company installed an Information Centre where
information can be accessed regarding the project,
community meetings and job applications, and
residents can submit any grievances through a formal
process. There are hundreds of physical visits to the
centre every month, but residents can also contact
the Company via phone or email.
Visit reason
Visitors number
Adriatic Foundation
Job application
Employment information
Donations/Initiatives
Post services
Meetings
Employees
Investor visits
Other
TOTAL
370
251
156
77
327
76
777
41
343
2,418
“It is through making
connections, arranging
meetings, and having regular
communication that you can
truly understand a community.
By talking to local people and
embedding our operations here
we’ve been able to get to know
everyone and provide services
that actually meet their needs.”
Almedina Likic
Information centre Associate and
Adriatic Foundation Secretary
Maintaining a social licence to operate
Adriatic is committed to creating a lasting positive
legacy in the regions where it operates by uplifting
the life chances of local people and supporting
sustainable socio-economic development. Active
and inclusive consultation and engagement with the
communities associated with our operations is critical
to delivering on these commitments. Cultivating
collaborative local relationships based on honest and
transparent communication is therefore at the heart
of the community strategy and the Company employs
a number of channels of communication to gather
feedback, understand local needs, and provide clarity
on the Company’s activities.
Community relations and engagement
One of the first engagements with the surrounding
communities in Bosnia and Herzegovina was through
the household survey, conducted as part of the
ESIA. This comprised over 100 questions covering
all aspects of life in the region and was sent to all
the villages which would be impacted by Adriatic’s
operations. There was a high level of engagement with
95% of households responding, providing a high level
of confidence in utilising the results of the survey as
the basis for a community strategy in Vares.
Public Liaison Committee (“PLC”)
To ensure structured, regular communication, Adriatic
established the PLC. It comprises of a group of
individuals representing a range of demographics in
the locality; members are selected or reappointed
every two years and the Chairperson is elected with a
mandate of two years. The purpose of the Committee
is to continually inform the local community about
current and future Company activities, provide a forum
for the discussion and sharing of views or concerns,
and an opportunity for locals to advise the Company
on how best to serve the needs of the community.
61
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Maintaining our social licence to operate
Sustainable Community Development Plan
(“SCDP”)
As a joint venture with the Municipality of Vares,
Adriatic created a SCDP which focuses on responsible
long term initiatives to support the increase in
entrepreneurial activity, build capacity and resilience in
the local supply chain, and work with local government
to best prepare them for future revenues from the
mining project. To ensure the effectiveness of the
SCDP, it was created with consideration for local
realities, culture, and capacities, and to complement
the Municipality’s pre-existing vision and strategy for
the development of Vares.
Supply chain and procurement
Critical in creating a synergy between Adriatic and the
community has been the engagement of businesses
in Vares to work on the Project. Local procurement
is prioritised where possible, seeking contractors
and suppliers from within the Municipality of Vares,
neighbouring municipalities and at national level,
in that order. Much of the construction phase has
necessitated the engagement of larger international
companies as local contractors have lacked the
experience and scale, but Adriatic has encouraged
these companies to set up regional offices and
facilities and employ locally to make sure the
economic benefits are still felt in Vares.
“We are more than willing to help
local contractors and suppliers.
By helping them to meet our own
requirements, we are ensuring
they have the recognised
practices and standards in place
to work with other international
businesses. It’s also fantastic
to see where a single business
is unable fulfil a service for the
Project alone, they are forming
consortiums with other local
businesses in order to meet the
brief.”
Mark Richards
Procurement and Logistics Manager
Community health and safety
The community health and safety management plan has been in place for two years and includes strategies
to prevent illness and injury, as well as the promotion of healthy lifestyles and behaviours. As well as providing
access to healthcare, Adriatic is looking to provide health screenings to help detect illnesses early in order to
deliver an improved quality of life.
EuroFarm case study
As well as contributing to economic development, Adriatic is committed to working with the local
municipality to deliver much needed social projects. Following the household survey, the lack of sufficient
healthcare provision was clear. In May 2022 Adriatic opened the Eurofarm Polyclinic in Vares. The clinic
was established to provide healthcare, not only to the Company employees and their families, but also
to the entire community. Funds were also donated for the renovation of the children’s playground in the
town. The Company will continue to work alongside the municipality to create beneficial social impacts
wherever possible.
62
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Understanding global risks
Environmental impacts
Adriatic is committed to the responsible stewardship of
natural resources and aims to operate in a sustainable
manner that eliminates, minimises, mitigates or
compensates for adverse impacts and maximises
positive environmental and socio-economic impacts.
It is recognised that mining is often associated with
significant environmental impacts and intensive
resource use, and that these factors create a significant
responsibility that exists from exploration through to
closure.
Climate change
Climate change represents one of the most significant
challenges facing the world today and, as declared
in Adriatic’s climate change policy, the Company
supports the goals of the Paris Agreement. The
aim is to minimise the Company’s contribution to
greenhouse gas emissions, to consider and plan
for the physical risks of climate change on our
operations and to work with host communities to build
understanding of the Company’s resilience to the
physical impacts of climate change.
By producing the metals which are essential for the
European Green Deal, Adriatic contributes positively to
the transition to clean energy and aims to play a part in
global decarbonisation.
Adriatic has aligned its reporting with the TCFD in
relation to managing the impacts of climate change
(see page 65).
Biodiversity and rehabilitation
Adriatic is aware of the importance of preserving
biodiversity, the need for the proper management of
protected areas and integrated land-use planning.
The Company addresses potential adverse impacts
on biodiversity by applying a mitigation hierarchy that
aims to achieve ‘no net loss’ of priority biodiversity
features or critical habitats and, where possible, to
contribute to a ‘net gain’ of biodiversity as a result of
its activities.
63
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Responsible resource use
Water as a shared resource
The Company is committed to the responsible
and efficient use of water and applies strong water
governance measures that adopt a collaborative
approach with other water users. Adriatic is putting
in place activities to achieve 100% of recycled water
through the processing plant and during underground
mining. Systems for wastewater treatment and acidic
rock drainage are in the phase of detailed design and
commissioning.
Several watercourses were found adjacent to or
within project activity areas and mitigation has been
incorporated into the project design to avoid any
potential negative impacts. The following measures
have been implemented to ensure that residual
impacts to surface water and groundwater will not be
significant:
1. No discharge effluent from Vares Processing Plant
2. Establishment of site-wide drainage and
settlement ponds
3. Active treatment of contact water contaminated
by acid rock drainage
4.
Implementation of a Water and Wastewater
Management Plan
The quality of water within the surrounding
hydrological system is monitored during the
construction and operations phases in order to ensure
against potential pollutants entering the drainage
system.
Tailings management
Adriatic is committed to managing tailings and waste
responsibly in conformance with national legislation
and international codes of best practice.
Building local capacity
Adriatic is committed to conducting its business
affairs in an ethical and responsible manner, including
through the sourcing of goods and services.
Tailings are a by-product of mining. After ore
containing the desired recoverable commodity is
mined from the earth, that commodity is extracted
in the mill and processing plant. After the metal is
extracted from the ore material, the resultant waste
stream is termed ‘tailings’.
Waste tailings from Adriatic’s processing will be
de-watered and filtered prior to being transported
via truck to the Rupice mine for use as backfill
with crushed waste rock and cement in the mine,
as required. Depending on the volume of the ore
processed, it is predicted that approximately 39,000
tonnes per month of tailings will be generated. Excess
tailings not required for backfill will be disposed of in
the new dedicated ‘tailings storage facility’ (TSF). The
TSF has a 14-year life-of-mine, 2.5Mm3 capacity and
will be lined and designed to to collect all non-contact
(i.e. rainwater that did not contact the tailings) surface
water for immediate disposal in the downstream
stream. Any rainwater or snow in contact with the
tailings and any drainage from the tailings will be
collected in a lined pond and returned to the process
plant as process water.
Total production as of July 2022, was 2.79Mt with a
tailings volume of 1.6Mm3.
The aim is to minimise any adverse social or
environmental impacts arising from the supply chain
and to ensure that the communities associated with
operations are left with a positive legacy including
through the development of new enterprises capable
of generating sustainable skills, livelihoods and
capacities.
The Company has developed outreach processes to
communicate procurement opportunities and support
local suppliers to build capacity and to compete
for suitable contracts including supporting them
to complete the contract process. In 2022, 68% of
Adriatic’s spending was on local suppliers and 94%
of subsidiary Eastern Mining’s spending was on local
suppliers.
Approach to tax and concessionary payments
The construction and operational phase of the Project
will have a positive impact on the national economy
through payments of value-added tax on construction
supplies, including materials and equipment, fuel,
food, and advisory services and through construction
workforce income tax contributions. Project royalties
and taxes are paid according to legislation in Bosnia
and Herzegovina, at the state and cantonal levels,
and then distributed to the municipality level. In 2022,
Adriatic and its subsidiaries paid a total of over $1.5m
in concession fees, insurance and taxes.
In addition to these statutory payments - and to
provide a more direct form of community funding - the
Company established an independent charity, the
Adriatic Foundation, to support and promote local
sustainable socio-economic development, with a
particular focus on the communities associated with
Adriatic’s operations.
64
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Assessing the impact
Taskforce on Climate-Related Financial Disclosures (TCFD)
The Company recognises that climate change
represents one of the most significant challenges
facing the world today and supports the goals of the
Paris Agreement. The Company aims to minimise
contributions to greenhouse gas emissions, to
consider and plan for the physical risks of climate
change on operations, and to work with host
communities to build their understanding of their
resilience to the physical impacts of climate change.
Financial Conduct Authority (“FCA”) listing rules require
premium listed and standard listed companies to
make disclosures under the TCFD framework on a
‘comply or explain’ basis. This statement captures
the Company’s second year of disclosure under a
programme of continued progression as it moves
towards commissioning and production. No external
assurance has been carried out.
When preparing its TCFD statement of compliance
in the table below, and given the importance of
maintaining its social licence to operate, the Company
has undertaken a process to identify and prioritise
the most significant issues facing the organisation.
The Company was keen to understand the potential
impacts of its operations and provide a framework
for prioritising and addressing these issues. As part
of its broader risk assessment, it conducted a review
of the sustainability topics that were most relevant
to the Company and its stakeholders, assigning
a level of importance to each issue based on its
potential impact and the level of concern expressed
by both internal and external stakeholders. A list of
26 key topics has been identified and ranked as low,
medium, high or critical risk. This materiality model is
used to guide the development of the Company´s
sustainability strategy, identify initiatives for
improvement, integrate sustainability into its decision-
making processes, achieve long term business
success and help it to communicate progress to
stakeholders. To support this, the management
of each material issue has been assigned to key
functional areas of the business, establishing clear
lines of responsibility and accountability.
Governance
TCFD Consideration
Report on TCFD recommendations
Describe the
Board’s oversight
of climate-
related risks and
opportunities
The Board recognises climate change presents a range of risks and opportunities that are critical for the
business to address.
The Board has oversight of climate-related issues through its Sustainability Committee, which reports to
the Board half-yearly. Key climate-related elements during the year include:
–
–
Assessment and approval of construction and operational ESG KPIs, including the commitment to a 30%
emissions reduction by 2027
Target a strategy and commitment for decarbonisation and Net Zero through Science Based Targets
initiative (“SBTi”)
The Sustainability Committee has implemented a climate change policy and monitors the content,
effectiveness and implementation of this policy on a regular basis.
Material breaches of this policy will be reported to the Sustainability Committee and the Board.
Statement of compliance
Compliant.
65
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Assessing the impact
Governance
TCFD Consideration
Report on TCFD recommendations
Describe
management’s role
in assessing and
managing climate-
related risks and
opportunities.
At executive-level, the CEO is ultimately responsible and accountable for the Company’s approach to
environmental and climate change management, supported by the Head of Sustainability.
The Head of Sustainability leads the operational level working group that is responsible for delivering the
Company’s sustainability strategy, including climate-related activities that mitigate risk and drive opportunities.
Responsibility for the application of the Company´s climate change 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. Several activities, including the establishment of a public liaison committee, provide an
invaluable platform for information dissemination.
Statement of compliance
Compliant.
Strategy
TCFD Consideration
Report on TCFD recommendations
Describe the
climate-related
risks and
opportunities the
organisation has
identified over the
short, medium and
long term.
Assessment has been made to consider the way in which the climate is expected to vary over the life
of the mine based on local projections for Bosnia and 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.
Increased snowfall could cause flooding and extreme cold could adversely affect employees.
Adriatic has engaged Alfa Energy to provide a detailed life cycle analysis (“LCA”) for the Vares
Project. This assessment will incorporate the operational climate-related risks and opportunities
that are likely to impact the business, which will in turn help inform a robust view on the transitional
and physical risks and opportunities over the short, medium and long term. This assessment will be
completed during 2023.
Adriatic intends to provide a detailed risk and opportunity analysis during 2023.
Statement of compliance
Not yet compliant.
The Company has not provided the
climate-related time horizons for the
scenarios provided because it has not
yet completed the LCA required to
determine key inputs.
During 2023, the Sustainability Working
Group, guided by its advisers Buchanan
and Alfa Energy, will clearly define risks
and opportunities identified over the
short, medium and long term.
Following conclusion of the LCA, the
Company will disclose its business
model resilience testing, as well
as climate-related time horizons
for various scenarios and how the
outcomes of the scenario analysis
influenced strategic planning and any
actions taken as a result
66
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Assessing the impact
Strategy
TCFD Consideration
Report on TCFD recommendations
Statement of compliance
Describe the impact of
climate-related risks
and opportunities on
the organisation’s
businesses, strategy,
and financial planning.
The Sustainability Committee considers climate-related issues when reviewing and guiding strategy.
Not yet compliant.
The main sources of greenhouse gas (“GHG”) emissions associated with the Project relate 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;
–
Adopting mitigation strategies for preserving integrity of soil stockpiles;
– Minimising tree felling (only trees needing to be removed for safety reasons above the haul road will be
felled);
–
–
–
Providing improved materials 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 installing a 23kW solar facility on the roof of the Tisovci administration building for 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’s logistics and scheduling are progressed,
consideration will be given to the optimisation of vehicle and equipment movements to improve
efficiency and reduce overall CO2 emissions;
The upgrading of energy intensive machinery during the operational phase is expected to improve
efficiency and reduce CO2 emissions compared to plant that has been removed. Further energy
efficiency opportunities will also be investigated; and
– Onsite renewable energy projects are being identified to increase energy security supply,
simultaneously providing independence from unpredictable price jumps in the electricity market.
Identified are locations for ground mounted photovoltaic power plants, wind power plants and lakes for
eventual floating photovoltaic power plants, or a pumping-hydro power plant implementation.
The Company has not
provided the climate-
related time horizons for the
scenarios provided because
it has not yet completed the
LCA required to determine
key inputs.
During 2023, the
Sustainability Working
Group, guided by its advisers
Buchanan and Alfa Energy,
will clearly define risks and
opportunities identified over
the short, medium and long
term.
Following conclusion of
the LCA, the Company
will disclose its business
model resilience testing,
as well as climate-related
time horizons for various
scenarios and how the
outcomes of the scenario
analysis influenced strategic
planning and any actions
taken as a result
67
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Assessing the impact
Strategy
TCFD Consideration
Report on TCFD recommendations
Describe the resilience
of the organisation’s
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 .
Upon conclusion of the LCA, the Company will assess its direct operating base under
various climate scenarios to test the resilience of the business model. It will also provide
climate-related time horizons related to the scenarios and disclose how the outcomes
of the scenario analysis influenced strategic planning and any actions taken as a result.
In conjunction with its efforts to define a Net Zero pathway to satisfy the requirements
of the SBTi, the Company will also conduct a financial resilience test of its supply
chain to assess energy source cost implications as well the associated emissions
implications.
Statement of compliance
Not yet compliant.
The Company has not provided the
climate-related time horizons for the
scenarios provided because it has not yet
completed the LCA required to determine
key inputs.
During 2023, the Sustainability Working
Group, guided by its advisers Buchanan
and Alfa Energy, will clearly define risks and
opportunities identified over the short,
medium and long term.
Following conclusion of the LCA, the
Company will disclose its business model
resilience testing, as well as climate-related
time horizons for various scenarios and
how the outcomes of the scenario analysis
influenced strategic planning and any
actions taken as a result
Risk Management
TCFD Consideration
Describe the
organisation’s
processes for
identifying and
assessing climate-
related risks.
Report on TCFD recommendations
The Environmental and Social Impact Assessment (“ESIA”) for the Vares Project commissioned by
the Group and completed with international consultants Wardell Armstrong considered the Vares
Project baseline and identified potential sources of impact from across the mine life (construction,
operation and closure). An assessment of the magnitude of impact was made and methods of
avoidance, mitigation and management 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 and
climate related risks will be identified and assessed as part of the future scoping study stage of the
Raska Project.
The Company’s risk management processes are disclosed within the Principal Risks and
Uncertainties section on page 42 of this annual report.
Statement of compliance
Compliant.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Assessing the impact
Statement of compliance
Compliant.
Report on TCFD recommendations
The Company has developed an Environmental and Social Management System (“ESMS”), which
guides the implementation and monitoring of the mitigation and management methods identified
in the ESIA. The ESMS comprises corporate policies, the ESIA, and environmental and social
management plans and action plans.
The Board and management team have been committed to developing a mining project in harmony
with the local environment and communities, taking appropriate and robust steps in the process to
meet this objective. Bosnia and Herzegovina’s electricity grid is powered increasingly by renewable
energy sources, but a significant proportion still comes from coal powered energy sources. The
assessment of these risks in the context of strategic planning and capital allocation informed the
approval and development of a small-scale solar project at Eastern Mining’s Vares administrative
building.
The Company considers that the most material climate-related risks will occur once the mine
and Processing Plant are operational. Therefore, the greatest opportunity to reduce those risks
(including emissions risk, carbon taxes and other associated transitional risks) is during the design
and construction phase of the Project. Energy supply for powering mining and processing activities
is deemed a material area of climate-related focus, as well as fuel types for powering the mobile
fleet. Hydrogen powered trucks have also been considered for the mobile fleet and the Company will
continue to assess investment into low-emission operating technologies.
The ESIA was developed alongside and in close collaboration with the definitive 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.
Compliant.
Risk Management
TCFD Consideration
Describe the
organisation’s
processes for
managing climate-
related risks.
Describe how
processes for
identifying, assessing,
and managing climate-
related risks are
integrated into the
organisation’s overall
risk management.
69
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Assessing the impact
Metrics and Targets
TCFD Consideration
Report on TCFD recommendations
Disclose the
metrics used by the
organisation to assess
climate-related risks
and opportunities in
line with its strategy
and risk management
process.
Disclose Scope
1, Scope 2 and, if
appropriate Scope 3
greenhouse gas (GHG)
emissions and the
related risks.
Describe the
targets used by
the organisation to
manage climate-
related risks and
opportunities and
performance against
targets.
Carbon emissions will be reported in Streamlined Energy and Carbon Reporting (“SECR”), Net Zero,
and Carbon Disclosure Project (“CDP”) reports. Since SECR is energy-related, the Company will also
report its energy reduction and document its energy efficiency measures. It has also committed
to using LCA to assess its impacts on the environment during the operational lifetime of its mines
and process plants. This will map all energy and manufacturing inputs and associated emissions
throughout the product life cycle (i.e. raw material acquisition, processing/manufacturing, use, and
end-of-life treatment). Besides global warming, other potential relevant environmental performance
indicators will also be adopted as appropriate (e.g. acidification potential, human toxicity, freshwater
aquatic ecotoxicity).
Scope 1 & 2 GHG emissions are disclosed in the SECR on page 72 below.
Scope 3 GHG emissions and the risks related to GHG emissions are not yet disclosed. The
Company intends to develop this disclosure during 2023.
GHG reduction strategy:
30%
Target a 30% reduction in combined Scope 1 & 2 GHG emissions by 2027, from a 2024 baseline (i.e.
from the first full year of concentrate production)
Zero
Develop a Net Zero strategy during 2022 and 2023 (measures for emission reduction and shape
boundaries of an eventual effective net zero target, including Scope 1,2 and 3 evaluation and
workshop, develop and publish strategy document)
SBTi
Commit to emissions reduction through SBTi for external verification of sustainability strategy and
defined goals during 2022 and 2023
Statement of compliance
Not yet compliant.
The Company has not
yet provided the required
metrics or targets. During
2023, the Sustainability
Working Group, guided
by Buchanan and Alfa
Energy, will clearly define
metrics beyond scope
1, 2 and 3 that will aid its
analysis of climate-related
performance
Partially compliant.
The Company is not yet
compliant on Scope 3
disclosure and intends to
develop this disclosure
during 2023.
Not yet compliant.
The Company has not yet
provided a description
of the targets to manage
climate-related risks and
opportunities as these risks
and opportunities have not
yet been fully defined.
It intends to complete a
LCA for the Vares Project
during 2023 which will
incorporate the operational
climate-related risks and
opportunities, enabling
appropriate targets to be
provided.
70
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Sustainability
Assessing the impact
Summary of estimated 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
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
CH4
tonnes
N/A
2.29
2.62
0.34
0.42
0.36
1.05
N/A
N/A
N/A
N/A
N2O
tonnes
N/A
15.77
18.09
2.37
2.89
2.49
7.27
N/A
N/A
N/A
N/A
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
ii. CO2e emissions were estimated based on a global warming potential of 1, 28 and 265 for CO2, CH4 and N2O, respectively (IPCC AR5, 2015).
CO2e(ii)
tonnes
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
71
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Calculating our impacts
Streamlined Energy & Carbon Report
Scope 1, Scope 2 greenhouse gas (GHG) emissions,
and the related risks
Scope 1 and scope 2 GHG emissions for projects are
calculated and reported as part of the Company’s
SECR and as part of its CDP reports.
The Company has assessed its energy fuel
consumption and has determined that energy
consumption is above the 40 MWh threshold set by
the SECR for reporting 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 ended 31 December
2022 are significantly higher than the prior year due
to the intensive construction works that have been
undertaken on the Vares Project construction. Once
the mine site, processing plant and logistics activities
are operational, the Company plans to set a new
baseline upon which to better measure performance
and drive carbon efficiencies.
Total
UK
Non UK
Total
UK
Non UK
Location-based Reporting
01/01/2022 -
31/12/2022
01/01/2022 -
31/12/2022
01/01/2022 -
31/12/2022
01/01/2021 -
31/12/2021
01/01/2021 -
31/12/2021
01/01/2021 -
31/12/2021
Emissions Scope
t CO2e
t CO2e
t CO2e
t CO2e
t CO2e
t CO2e
Emissions from combustion of gas
Emissions from combustion of fuel for transport
purposes
Emissions from other activities which the company
own or control including operation of facilities
Emissions from purchased electricity
Scope 1 + 2
1
1
1
2
0.0
45.4
920.5
303.3
1269.2
0.0
0.0
0.0
2.1
2.1
0.0
45.4
920.5
301.2
1267.1
2.1
0.0
117.6
163
282.7
0.0
0.0
0.0
1.8
1.8
2.1
0.0
117.6
161.1
280.8
Underlying energy (kWh)
t CO2e / FTE (Scope 1 + 2)
Average Headcount
3,733,065
10,667
3,722,398
746,938.0
8,550
738,388
8.75
145
2.59
109
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.
72
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Sustainability
Net Zero roadmap
Energy
Adriatic is committed to using energy and resources
efficiently and sustainably, proactively evaluating
options where this is a commercially viable approach,
to increase the use of non-fossil fuel sources of
energy and to optimise the energy efficiency of
operations. The Company has incorporated energy
efficient elements into the design of the mine and the
plant, including energy saving systems, insulation and
recycling of energy and heat in ore processing.
GHG reduction strategy:
30%
Target a 30% reduction in combined Scope 1&2 GHG
emissions by 2027, from a 2024 baseline (i.e. start of
metal production) .
Zero
Develop a Net Zero strategy (measures for emission
reduction and shape boundaries of an eventual
effective net zero target, including Scope 1,2 and
3 evaluation and workshop, develop and publish
strategy document) during 2022 and 2023.
SBTi
Commit to emissions reduction through SBTi (Science
Based Targets initiative) for external verification of
sustainability strategy and defined goals during 2022
and 2023.
By submitting the Science Based Target initiative
(SBTi), Adriatic will have to reduce and report its
emissions. If the Company intends to stay on track in
achieving Net Zero, the Company will have to measure
its reduced emissions every financial year.
Carbon and the supply chain
In 2022 Adriatic entered into offtake agreements
with four international commodities trading and
smelting companies (or ‘offtakers’) for the purchase
of concentrate production from the Vares Project,
including a zinc concentrate to Boliden AB.
Boliden is a Swedish, multinational metals, mining,
and smelting company headquartered in Stockholm
and has had a strategic focus on reducing its C02
emissions since 2016, to advance zero-emissions
mining.
To address global climate change objectives, natural
resources supply chains are rapidly aligning to ensure
to efficient extraction, processing, shipping and
refinement/smelting of products as part of full lifecycle
assessment that monitors and manages waste and
energy efficiency.
Boliden has established a clear sustainability policy
and supply chain agenda that looks to address these
key areas of operational impact and drive improved
performance in line with the targets of the Paris
Accord and international climate risk frameworks such
as TCFD.
As part of the initial ‘ESG Evaluation of Business
Partners’ screening process, Adriatic was asked
to conduct a thorough self- assessment followed
by the Boliden teams investigation into specific
potential risk factors, such as water management,
tailings management, community relations, GHG
performance and country risk. These focus areas will
be key areas for further review as part of stage 3 and 4
assessments.
73
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Adriatic Foundation
Supporting and promoting local communities associated with Adriatic’s operations.
The Adriatic Foundation (“Foundation”) is a
charitable initiative established by Adriatic Metals
in 2021 to support local communities around the
Vares Project and create a positive long term
legacy.
The Foundation is managed by a Board of Trustees,
which includes four independent representatives from
the region surrounding the Vares Project and meets
quarterly to discuss and approve submitted proposals
that meet the Foundation’s objectives.
Focus
Following surveys with local residents to understand
the areas of primary local need, the Foundation has
chosen to focus on supporting education, health,
culture, and environmental projects, in order to directly
address:
concerns for the local environment as a result of the
experience of poor mining practices in the past;
inadequate primary health care provision in the region;
and
a scarcity of employment opportunities and the fear
this would not be alleviated by Adriatic as locals lacked
relevant experience.
Funding and independence
The Foundation is entirely funded by the donations
of benefactors who pledge their support to
enable the financing of new projects, avoiding the
possibility of any direct benefit.
In accordance with the law on associations and
foundations in Bosnia and Herzegovina, the
organisation implements its goals through an
independent board of trustees comprised of
prominent members of the communities of the
municipalities of Kakanj and Vares. Regular board
sessions foster an independent and transparent
rapport to drive continual awareness of local
opportunities.
Position
Name
Rationale
President of the
Board of Trustees
Vildana Mahmutovic
Head of Sustainability
Director
Trustee
Trustee
Trustee
Trustee
Sanela Karic
Adriatic Metals Non-Executive Director
Gordana Lukic
Resident of Vares - long term experience in NGO sector
Mirela Masic
Resident of Kakanj – civil servant
Nusret Muftic
Resident of Vares – police administrator
Zlatko Jarmanovic
Resident of Vares – forestry worker
Secretary
Almedina Likic
Eastern Mining Information Centre Manager
Foundation Investments
The flagship education initiative in 2022 offered
free English lessons to residents in Vares. Adriatic’s
operations are bringing a number of international
people to the town, and it is recognised that
conversing in English will enable residents to further
capitalise on this increased economic activity. The
initiative was a huge success, with 227 individuals
taking the six-month language course, including all age
groups from 7 to 70 years old.
The Foundation also launched a scholarship
programme. Research had uncovered that there
were many such schemes at university level,
but few for high school students. Therefore, the
Foundation established a programme to provide much
needed funding for the education of children from
disadvantaged backgrounds, through which a year’s
school funding was provided for 25 local students.
The programme in 2021 had 47 applicants; in 2022
another 47 people applied, reflecting the increased
awareness of the Foundation’s activities and efforts to
raise its profile in the local region.
"As a help with the costs of
studying, this scholarship means
a lot to me, and I am very happy
that through today's positive
experience, I have had the
opportunity to help."
Scholarship holder from Kakanj
Under the environmental focus, a grants programme
was set up for sustainable projects. Residents and
organisations are invited to apply for funding for
projects that they feel will have a positive impact on
local ecology. Applications from two environmental
projects have been approved to date: one for the
installation of solar panels to provide electricity for the
Hikers’ Association in the mountains – to support its
conservation activities; the second for the Fishermen’s
Association’s project to breed fish and reintroduce
them to the local rivers to increase the population.
Adriatic employees have also supported a number
of environmental initiatives, including road clearing
and afforestation activities. For some of the projects,
scholarship holders were invited to develop their
environmental awareness skills to encourage a culture
of ecological responsibility amongst attendees.
Despite only being founded last year, the Foundation
has already been able to deliver some community-
focused projects. To address the target health
objectives, it is planning a number of activities to
improve the understanding of mental health and
also raise road safety awareness. Interactions with
the local community continue to inform the strategy
for delivering programmes that will provide the
greatest benefit. Many of Adriatic’s contractors are
currently contributing towards these initiatives, and
a percentage of the profits from Adriatic’s revenues
are set aside as a source of continual funding once
operations begin, in addition to the seed funding
already provided.
74
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Adriatic Foundation
Supporting and promoting local communities associated with Adriatic’s operations.
NEW PROJECTS
Projects that have received supported have focused on taking actions that reduce the negative impact on
the environment and promote sustainable practices. These initiatives can bring together both individuals and
business to demonstrate ecological responsibility by conserving energy, reducing waste and protecting natural
habitats.
Zvijezda Scout Association
Vares project:
“I love nature, I love Vares”
Zvijezda Hunting Club
Vares project:
“Technical modernization of hunting and
breeding infrastructure”
Sports Fishing
Society project:
Preservation, protection and improvement of the
fish stock through actions to preserve natural
and artificial stocking
Association for the Protection of
Animals Skitnica Kakanj project:
‘Don’t throw garbage on nature and flowers’
Eco Association Medena
dolina Kakanj project:
‘Let’s protect nature - treasure that is
disappearing’
Association Center for Ecology
and Sustainable Development
(CEKOR) Kakanj project:
‘Celebrating Earth Day 2023’
GSS Kakanj Rescue Club
Association project:
Cleaning, arrangement and marking of the hiking
trail Bukovica – Bobovac
New Scholarships for Vares, Kakanj and Breza
Municipalities
During 2022 and into 2023, 29 scholarships are being
awarded to students from both secondary schools
and higher education institutions, with the objective of
providing assistance to children who have achieved
exceptional results and who face severe social
barriers, including financial hardship.
New Project
The latest initiative is the funding of a cultural centre in
Vares that is dedicated to linking and developing local
projects, collaborating and sharing knowledge with
other NGOs, providing cultural events, adult education
courses, and training in small business skills.
75
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Corporate Structure
Building a strong foundation for enduring success
Corporate structure
The corporate structure of the Group
as at 23 March 2023 is as follows:
Adriatic Metals PLC
England & Wales
Company Number: 10599833
Adriatic Metals Jersey Limited
Jersey
Company Number: 138204
Adriatic Metals d.o.o.
Serbia
Company Number: 21609021
Adriatic Metals Holdings BIH Limited
England & Wales
Company Number: 13430806
Adriatik Metali d.o.o.
Bosnia and Herzegovina
Company Number: 61-01-0023-21
Adriatic Metals Services (UK) Limited
England & Wales
Company Number: 03781581
Eastern Mining d.o.o.
Bosnia and Herzegovina
Company Number: 43-01-0404-13
Adriatic Metals Trading & Finance B.V.
Netherlands
Company Number: 863359577
Adriatic Metals Trading & Finance Ltd.
Jersey
Company Number: 145475
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
Hybrid holding and operating company
Adriatic Metals Trading and Finance Ltd was
incorporated on 28 September 2022 to act as a
trading and finance company for the Group and is the
borrower under the Orion Debt Finance Package.
which it may acquire the entire share capital of Deep
Research d.o.o. which holds the Suva Ruda licence in
Serbia though has no equity interest in that entity at
present.
the Company’s related party balances with Serbian
entities being transferred to Adriatic Metals d.o.o. the
new licence holder. This reorganisation is ongoing as
at the signing date.
Adriatic Metals Trading & Finance B.V. was
incorporated on 14 December 2021 but remains
inactive and is expected to be liquidated during 2023.
Adriatik Metali d.o.o. was incorporated on 8 April 2021
and has had limited operating activity during the year
to 31 December 2022.
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 Adriatic Metals d.o.o.
occurred on 22 February 2021.
Adriatic Metals Services (UK) Ltd provides consultancy
and procurement services to other members of the
Group and also has an option agreement pursuant to
The Group is carrying out an internal reorganisation
of its Serbian entities to simplify the Group structure.
Currently there are four wholly owned Serbian
operating entities within the Group, namely: Global
Mineral Resources d.o.o., Tethyan Resources d.o.o.,
TAOR d.o.o. and Adriatic Metals d.o.o. The Group’s
intention is to merge these entities into the existing
entity Adriatic Metals d.o.o. leaving this as the sole
operating entity.
As part of the reorganisation, an application has been
submitted to the Serbian Ministry of Licences to allow
the Kremice and Kaznovice licences to be transferred
from Global Mineral Resources d.o.o. and TAOR d.o.o.
to Adriatic Metals d.o.o., respectively, and permission
has been granted. The transfer process will result in
The strategic report of Adriatic Metals PLC on the
preceding pages was approved and authorised for
publication by the Board of Directors on 30 March
2023 and was signed on its behalf by:
Michael Rawlinson
Chairman of the Board
76
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 d.o.o. (formerly RAS
Metals d.o.o.) which comprise the Raska Project in
Serbia.
Eastern Mining d.o.o. was registered in Bosnia and
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 Holdings BIH Limited was incorporated
on 1 June 2021 and acquired the entire 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 | From developer to producer | Annual Report for the Year Ended 31 December 2022 Governance
Delivering
responsibly
developed value
to all stakeholders
Company Directory
Corporate Governance Report
Audit & Risk Committee Report
Environmental, Social & Governance
Committee Report
Remuneration & Nominations Committee Report
Directors’ Report
Statement of Directors’ Responsibilities
78
79
89
93
94
102
105
Adriatic Metals | Annual Report 2022
77
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 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)
* Determined by the Board to be independent in accordance with the Quoted Company
Alliance’s Corporate Governance Code (QCA Code).
Chief Financial Officer
Stock Exchange Listings
Mike Norris
Company Secretary
Jonathan Dickman, Gabriel Chiappini
(joint secretaries)
Registered Office
Regent House, 65 Rodney Road,
Cheltenham GL50 1HX
+44 (0) 20 7993 0066
Australian Office
Level 1, 10 Outram Street, West Perth WA 6005,
Australia
+44 (0) 20 7993 0066
Brokers
Canaccord Genuity Limited, 88 Wood Street,
London EC2V 7QR
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
London Stock Exchange (LSE:ADT1)
Australian Securities Exchange (ASX:ADT)
OTC Market (OTCQX:ADMLF)
Share Registrars
Computershare UK:
The Pavilions, Bridgwater Road, Bristol BS13 8AE
+44 (0) 370 702 0003
Computershare Australia:
Level 11, 172 St George’s Terrace, Perth, WA 6000
+61 08 9323 2000
Country of Incorporation
England and Wales
Registered Number
10599833
Web site
www.adriaticmetals.com
78
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Corporate governance report
Corporate Governance Code – QCA disclosure statement
The Board believes in the value of good corporate
governance in improving performance and
mitigating risk and acknowledges its duty to take
into account all of Adriatic’s stakeholders in its
decision making and not just the shareholders.
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;
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.
Meet legal and other requirements applicable to it;
Foster positive relationships in the local
community;
Protect the health and wellbeing of employees and
encourage positive relationships in the workplace;
and
Ensure the sustainability of the business for
shareholders and other stakeholders.
The Board firmly believes that a corporate
culture based on sustainability and ethical values
and behaviour is in the best interests of the
shareholders. The Company maintains a Code
of Conduct which underpins its commitment to
integrity and fair dealing in its business affairs
and to a duty of care to all employees, clients
and stakeholders. The document sets out the
principles covering appropriate conduct in a
variety of contexts and outlines the minimum
standard of behaviour expected from employees.
The Code of Conduct is included in the Corporate
Governance Manual on the Company’s website.
79
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Corporate governance report
a. Board Composition
At 31 December 2022, the Board comprised a
Non-Executive Chairman, a Managing Director and
Chief Executive Officer, and four other Non-Executive
Directors (“NEDs”), three of whom are considered
independent. As part of its annual performance
evaluation process the Board, in conjunction with
the Remuneration & Nomination 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 year to have been independent: Peter Bilbe,
Julian Barnes, Sandra Bates and Michael Rawlinson.
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 (or previously held)
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.
2
2
0
2
r
e
b
m
e
v
o
N
2
2
0
2
r
e
b
m
e
c
e
D
b. Board Performance Effectiveness Review
The interviews were structured to seek the Directors’ views on a number of subject areas including those
outlined below.
Board discussion on evaluation
and design
Skills matrix and discussion
sheet distributed
One-to-one interviews
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
workings of the main Board Committees was
evaluated.
Discussion around risk management including evaluation and reporting
Findings documented by Chairman
and Company Secretaries
As part of the board’s performance evaluation and within the remit of the Nomination Committee, the Adriatic
Board undertook a skills self-assessment matrix review. The skills categories chosen were all discussed and
noted as likely to be required as Adriatic completes its construction phase and moves into production/steady
state. The outcome of the self-assessment was as follows:
Findings discussed with Independent
Non-Executive Directors
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
Adriatic Board Skills Matrix Self Assessment Dec-22
Findings discussed with CEO
Board discussion of findings and
action plan for implementation
The most recent board performance effectiveness
review was undertaken internally during November
and December 2022 through one-to-one interviews
conducted by the Chairman, Michael Rawlinson,
supported by one of the Company Secretaries.
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
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Corporate governance report
Board composition
Directors were generally broadly happy with the size of
the Board and skills on the Board at the moment (local/
mining/exploration/financial/corporate/legal). Three
potential areas were identified where another skill
could be added:
ESG. No deep sustainability experience from industry
or regulatory side on the Board. Not especially an
issue if are planning to upgrade expertise in the
Company at an executive level or through the use of
consultants.
2022 Board Performance Effectiveness
Review Findings
The findings of the Chairman’s board
performance effectiveness review were collated
and considered amongst 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 2022 board performance
effectiveness review process were as follows:
M&A. Should the Company acquire a material
asset in another jurisdiction or commodity, it may
be appropriate to seek requisite additional skills
(depending e.g. on the jurisdiction).
Non-mining/continental European perspective. It was
noted we have a Board that is primarily UK/Australian/
Bosnian in focus with a heavily mining oriented career
history. A director with perspectives away from the
industry and with a different but relevant relationship
network in regulatory/political spheres might add good
value. This might be especially relevant if the de-
globalisation initiative gains momentum and regional
natural resource policies become more muscular.
In summary, the Board felt that there was no immediate
need to make changes to board composition quickly
but there should be a watching brief to move in the
next 12 months or so. Once the Company is in
production and/or has made a major strategic move, it
will be clearer how board size and composition should
be progressed.
Overview
The Company has had another very successful year of
growth in 2022:
It has achieved its major milestones at the Vares
Project to keep it on budget and on schedule during a
difficult operating environment;
It has done this through some very good HR initiatives
– onboarding some great new hires and providing
ongoing development for personnel;
Safety and culture have been a priority and it has been
good to see such good progress on LTIs (lost-time
injuries) and other metrics in this area. The Company
continues to have excellent relationships with its local
stakeholders;
It has made substantial progress strategically - in
resource growth at Vares, in its understanding of its
Raska asset and in the development of its multi-mine
strategy; and
It has made great progress in the financial markets –
with the share price outperforming in absolute terms
and relative to peers. This has been assisted by a
strong investor relations and social media presence
which has helped secure the acquisition of some key
new shareholders.
As the Company enters the final construction phase
of the Vares Project, it is clear that both the complexity
of the business and the overall level of risks it faces will
rise. This will imply a need for a greater focus from the
Board and management.
Value and role of the Board
Strategic insight
The Board appreciated the strategic deep dive held
in 2022 and was overwhelmingly positive about
the contribution from the new Head of Business
Development. Whilst there is agreement with the
strategy as set out in early 2022, it was felt the Board
should revisit the broad approach annually to re-test
its applicability (commodity focus, target scale and
stage of development, country focus).
Recommendations:
Head of Business Development to refresh
corporate strategy to Board during 2023, re-
testing the hypothesis of a European focus with
base, precious and critical minerals. Specifically
update in the context of the de-globalisation
debate, critical mineral availability in Europe and
related European policy.
There remains a good level of understanding regarding
the Board and its role. The Board has high confidence
in the management team and understands that it is
management’s role to manage the business. The
Board is there to help management set the standards
and agenda and provide mentorship and support. The
relationship with the Board has matured over the last
couple of years and Board members report that they
feel more valued and engaged now that on-site visits
have become more possible post-Covid.
Focus on major challenges
There was a strong sense that the Board was
spending the appropriate time and focus on the issues
that mattered most. It is appropriate that it is focusing
mainly on the issues affecting the immediate delivery
of the Project but it was also noted that the initiatives
in the past year to develop a business development
strategy were well timed.
There is a realisation that the immediate focus will
change from construction/skills acquisition and
financing to the optimising of systems – continuous
improvement in production, reporting, safety, training,
working capital etc.
The Board was broadly happy with the areas of
immediate focus (including e.g. safety, budgeting,
HR systems which received positive mention), but
noted that tighter control was needed over contractor
management (in drilling, civils and mining).
Areas where the Board felt it should focus more on
in 2023 include contractor management, optimising
information systems for production, incident reporting,
haul road vulnerability (slippages etc) and overall
readiness for incidents and emergencies (evacuation
drills etc).
Recommendations:
Management to report back on learnings from
issues beyond just safety – including areas such
as contractor issues - in order to institutionalise
Adriatic as a learning corporation.
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Insight into the business and information flows
The Board felt there was very good information flow
from management. The CEO is very transparent
around the key issues and opportunities and the
monthly updates were highly valued, which is key to
building trust with the Board.
Information contained in the board materials have
been increasingly comprehensive in 2022 and covers
all the key data but remains concise, which is highly
appreciated by the Board. Individual presentations
from department heads are valued and as the
Company grows the Board felt it important to allocate
more time to the board meetings in order to consider
all the material provided by management.
Recommendations:
Improve board planning for board content to make
the process more efficient as the quantity of
information ramps up. This will involve:
1. Grouping committees with quarterly board
meetings to make a 1.5 to 2 day board meeting,
with committee Chairs to report key findings to
full Board.
2. Workflow planning so the focus of each
quarterly board meeting is known a year ahead
(e.g. results/strategy/budgeting).
3. Managing the agenda for each board meeting
more carefully. The UK-based Company
Secretary, Chairman and CEO to work on main
focus and key management presentations
for each board session. To assist with this,
management needs to summarise key risks and
opportunities in their presentations in order to
highlight these for the Board.
4. Making use of Diligent for committee materials
as well.
Need regular updates from the UK-based Company
Secretary on legal context and governance
environment, including a potential move to the
premium segment of the main board of LSE.
This may involve training for the Company Secretary
and/or individual NEDs.
Risk discussion
Culture and behaviours
The Board recognises this has been a key area of
focus in 2022 with the CEO leading from the front. The
internal and external representation of the Company’s
vision and values has been first class. There have been
clear messages supported by the Board, including
regarding safety, diversity, empowerment, up-skilling,
communities.
The Board felt it should revisit the successes in
relation to culture and assess where more work was
needed. The Board had the impression the Company
seemed to have had more success internally than with
external contractors – therefore the Board considered
it should revisit what more needed to be done in that
regard.
The Board considered that thought should be given to
appropriate team-building opportunities and activities
for senior management in the year ahead.
Recommendations:
Revisit approach to senior managers’ leadership
and culture training.
Revisit and refresh way we promote and maintain
our culture and values with contractors.
The risk discussion has improved markedly over 2022
with a good risk register involving the whole Company.
The CEO’s very close eye on the business is seen as a
real asset in terms of risk management. The Company
has also responded well to risks as they evolve –
quickly, transparently and with integrity.
There needs to be more consistency of focus on risk
in every quarterly board meeting - to look at the top
10 risks more often and update them as risks evolve
(political/operational/people/contractors etc.).
The Board members have been most focused
on evolving risks with construction; the haul road
(construction and post-construction risks e.g.
accident/landslide/blockade); skills acquisition and
training; ERP and systems reporting; and contractor
management.
The Board noted that producing companies often
have a risk tolerance matrix, including matters such as
maximum leverage, minimum liquidity, and also some
strategic/operational/geopolitical metrics which are
used to guide strategy e.g. AISC, LTIFR, resource life,
country exposure.
Recommendations:
Management to report back to Board on
preparedness for prospective risks including ERP
systems for production, haul road vulnerability,
skills availability in key departments.
Develop a risk tolerance matrix at some stage -
especially for post-production and if M&A under
consideration.
Include risk matrix as standing item for each
quarterly board meeting.
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People
Board dynamics
The Board has been impressed with the quality of the
senior managers this year and is happy to see that
the CEO is better supported as the Company enters
into a critical year in its development. Adding quality
senior managers incrementally de-risks the Project
and also makes for a better and sustainable working
environment for all.
There has been good work on succession planning
and talent development. Whilst HR updates have been
long and detailed, the focus of board reporting should
be more on key hires, addressing skills deficiencies
and succession planning for a mine without expats,
taking into account the views of the new General
Manager Operations.
Regarding succession planning, the Board felt
it premature to discuss given the executive
management team was so new – but emergency plans
should be in place in the case of sudden departures
and a three-year development plan for nationalisation
of key executive roles would be welcome.
Board dynamics have improved markedly during
2022 with a return to more face to face meetings
post-Covid. The monthly informal updates (via calls)
complement the longer formal face to face quarterly
board meetings well. As a result, Board members feel
engaged and included.
Engagement is especially good where all Board
members can be present for the twice-yearly on-site
meetings. Board members are encouraged to stay
on to get to know key team members after board
meetings and/or visit the team in London if they are
passing through. Supporting management can only
be possible if Board members know the key people
and are across the key issues. More personal contact
means better advisory outcomes.
For good governance the Board felt that NED
meetings should be held more often, e.g. twice a year,
perhaps at the end of each site visit.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Corporate governance report
c. Board Terms of Reference and Powers (see
d. Director Commitments (also see
Remuneration & Nomination Committee
Report)
The services of the Managing Director and 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.
Board Charter in Schedule 1 to Corporate
Governance Manual on the Company
website)
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 and 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.
e. Board Meetings
The Board meets formally once per quarter, with
additional meetings held as required to review the
corporate and operational performance of the Group
and address any other issues that need to be dealt
with before the next scheduled meeting. The Directors
also hold informal conference calls on average once
per month (during those months where there is no
quarterly Board meeting) in order to receive regular
updates from the Managing Director and Chief
Executive Officer.
During the year, following the ending of the Covid-19
restrictions, the majority of the Board met physically
on a quarterly basis, with those unable to attend
physically participating remotely by video-conference.
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 year.
The Chairman is responsible, with the help of
the Company Secretaries, for ensuring that the
Directors receive Board briefings that are accurate,
comprehensive and timely enough to allow them
to make proper use of them 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 board
meeting.
A summary of attendance at board meetings in the year ended 31 December 2022 is set out below:
Director
Michael Rawlinson
Peter Bilbe
Paul Cronin
Julian Barnes
Sandra Bates
Sanela Karic
Independent
Maximum
possible attendance
Actual
attendance
Yes
Yes
No
Yes
Yes
No
4
4
4
4
4
4
4
4
4
4
4
4
f. Board Committees
The Board has delegated specific responsibilities
to the Audit & Risk, Sustainability and Remuneration
& Nomination 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 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.
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g. Audit & Risk Committee
The Audit & Risk Committee’s overall goal is to ensure
that the Company adopts and follows a policy of
proper and timely disclosure of material financial
information and reviews all material matters affecting
the risks and financial position of the Company. The
Committee meets the Company’s external auditors
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 auditors, reviews their fees and
discusses the nature, scope and results of the audit
with the auditors.
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 independent throughout the
year.
The Committee has unrestricted access to the
Group’s auditors. The CFO, Company Secretary and
other executives are invited to attend Committee
meetings, as necessary. The Committee meets at
least twice a year and met four times during the year
with all committee members attending each meeting.
The Audit & Risk Committee Report contains more
detailed information on the Committee’s deliberations
during the year.
Committee attendance during the year:
h. Sustainability Committee
The Environmental, Social & Governance Committee
was renamed the Sustainability Committee in the
spring of 2022 to reflect the Company’s appreciation
of the holistic nature of all aspects of corporate
and operational sustainability. The role of the
Sustainability 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 ESG Policy annexed to the ESG
Committee Charter), 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
licence 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 year and at the date of the Annual Report
the composition of the Sustainability Committee was
Sanela Karic (Chair), Michael Rawlinson and Peter Bilbe.
In accordance with the Committee Charter, all of its
members are Non-Executives and the majority were
independent throughout the year. The Committee met
four times during the year with all Committee members
attending each meeting.
Dominic Roberts, Head of Corporate Affairs and
executive lead for environmental, social and
governance compliance acts as the Committee’s
secretary. Critical Resources, the Company’s
sustainability consultants, continued to provide direct
support to the Committee until Q2 of the year when
they had completed the final mentoring stage of their
contract.
In 2023 the Company will publish its first stand-
alone Sustainability Report, containing more detailed
information on the Company’s sustainability activity
and the Committee’s deliberations during the year.
Committee attendance during the year:
Director
Independent
Maximum
possible attendance
Actual
attendance
Director
Independent
Maximum
possible attendance
Actual
attendance
Sandra Bates (Chair)
Michael Rawlinson
Julian Barnes
Yes
Yes
Yes
4
4
4
4
4
4
Sanela Karic (Chair)
Michael Rawlinson
Peter Bilbe
No
Yes
Yes
4
4
4
4
4
4
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i. Remuneration & Nomination Committee
The Remuneration & Nomination 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 & Nomination Committee also
assumes general responsibility for assisting the
Board in respect of remuneration policies for the
Company and to review and recommend remuneration
strategies for the Company and proposals relating
to compensation for the Company’s Directors
and employees. The Committee reviews the
performance of 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 & Nomination 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 & Nomination Committee
Report contains more detailed information on the
Committee’s role and the Directors’ remuneration and
fees.
Director
Peter Bilbe (Chair)
Julian Barnes
Sandra Bates
Independent
Maximum
possible attendance
Actual
attendance
Yes
Yes
Yes
2
2
2
2
2
2
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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 Chairman
Peter Bilbe
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 Andrada Mining Limited.
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 Non-
Executive Chairman 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
Sandra Bates
Non-Executive Director
Dr. Barnes is a geologist with
extensive experience in major
exploration and development
Projects. Previously, he was
Executive Vice President of 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. He is
also Non-Executive Director of Zinc
of Ireland N.L. and Thor Explorations
Limited.
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
General Counsel & Corporate
Secretary for Elemental Altus
Royalties Corp, a Non-Executive
Director of ASX Listed Predictive
Discovery Limited and a member of
Women in Mining UK.
Sanela Karic
Non-Executive Director and
Consultant
Ms.Karic, a Bosnian national, brings
a wealth of experience, with 20
years of experience as a lawyer
and a career spanning corporate
affairs, mergers and acquisitions,
and human resources. Ms Karic
is a graduate of the University of
Sarajevo. After passing the bar exam,
she built her career as a lawyer,
public notary deputy, and for five
years as an Executive Director for
Legal Affairs at the Prevent Group,
Bosnia’s largest diversified industrial
corporation with businesses in the
EU. Currently, she is the shareholder
and CEO of Legal Solutions d.o.o.
a law firm in Bosnia, providing legal
and consultancy services mainly for
foreign investors. Ms Karic has also
provided consultancy services to
Eastern Mining d.o.o. providing advice
in the year in respect of permitting the
haul road.
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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.
i) Succession Planning
The Board has an emergency succession plan for the
senior management team. Succession planning is
considered as part of the Remuneration & Nomination
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.
l. Board Advice During the Year
Critical Resource, a subsidiary of the ERM Group,
was engaged until Q2 of the year to support the
development of the Sustainability Committee.
H2Glenfern was engaged to advise the Remuneration
Committee on its remuneration policy.
m. Internal Advisory Roles
i) Company Secretary
The joint Company Secretaries during the year
were Gabriel Chiappini (Australia) and, until 30 April,
Geoff Eyre (UK), the latter of whom combined the
role with that of CFO. From July, Jonathan Dickman
replaced Geoff Eyre as joint Company Secretary (UK),
combining the role with that of General Counsel. 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 each Committee. In line with
the QCA Code Principles, the evaluation is based on
clear and relevant objectives, seeking continuous
improvement. A summary of the findings from the
2022 Board evaluation is set out in section b above.
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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 and Company
Secretary are invited to attend together with the external auditors. During the
2022, four meetings of the Committee were held during the year, and the following
significant issues were considered:
Significant issue
Summary of Significant Issue
Actions and Conclusion
Going concern
Assessment of the Group’s 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 Vares Feasibility Study was completed in August 2021 with a Project NPV of
$1.1 billion and build cost of $168.2m. An equity raise was successfully closed on
29 October 2021 and Orion debt finance documents were executed to provide the
Group with sufficient funds to complete the Vares Project construction and cover
ongoing owner costs until production commences in Q3 FY23 and the business
becomes self-sustaining from cash flows from operations.
The assessment of going concern covers a period of at
least 12 months from the date of signing the financial
statements.
Sandra Bates
Chair of the Audit & Risk Committee
“I am pleased to present this
report on the activities of the
Audit & Risk Committee for the
year ended 31 December 2022.”
Definitive documentation executed for the $142.5m Debt Finance Package with
Orion was announced on 10 January 2022. Of this total, $30m was drawn down
prior to 31 December 2022 and $52.5m was drawn down in February 2023,
leaving $60m currently undrawn at the signing date of these consolidated financial
statements. The Committee has considered each of the conditions precedent to
the remaining draw downs and is confident that the Company will be able to satisfy
them when required for the Vares Project development.
As announced in the Company’s Quarterly Activity Report for the quarter ended 31
December 2022, the Project cost estimate has increased to $183m including an
unutilised contingency of $10m. Sensitivity analysis of uncommitted construction
costs and potential project delay indicates that the Group and Company have
sufficient cash resources to continue in operation for a period in excess of 12
months from the date of signing the consolidated and Parent Company financial
statements.
A Debt-Service Coverage Ratio (“DSCR”) covenant is included in the Orion debt
finance package, with the first DSCR testing period expected to be mid-2024. The
DSCR is required to be above 1.25x and the Company’s forecasts show substantial
headroom above this.
The Directors therefore believe there is not a material uncertainty regarding going
concern and that it is appropriate to prepare the financial statements on a going
concern basis.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Audit & risk committee report
Significant issue
Summary of Significant Issue
Actions and Conclusion
Property, plant
and equipment
carrying amount
The Group’s total property, plant and equipment,
including mine under construction of $77.9m (31
December 2021: $29.9m) is 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.
Rehabilitation
provision
Calculation of the rehabilitation provision is complex
requiring estimates of future cost to be incurred.
Actual operations and life of mine may not be in line
with the original plan and Feasibility Study design, and
the rehabilitation estimate will therefore need to be
updated on a regular basis as construction and mining
progresses.
QRC convertible
debt
The accounting and disclosure of the convertible
debt of $16.3m (31 December 2021: $16.1m) and
its embedded derivative liability valued at $6.4m (31
December 2021: $2.5m) is a complex area and should
be accounted for at fair value in accordance with IFRS 9.
The value in use of an asset is the total of 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, based on its post-tax NPV 8% of $1,062m.
Analysis of sensitivities such as changes to metals price, operating costs, initial
capital cost and head grade, shows that significant headroom exists over the Vares
Project’s mine under construction carrying amount.
The carrying amount of property, plant and equipment appears to be supported.
The overall cost to be incurred is subject to change. Management has used Wardell
Armstrong’s conceptual mine closure plan prepared at the Feasibility Study stage to
estimate total future costs using current restoration standards and techniques.
Management assessed the progress of the Vares Project to date to determine the
estimated outstanding rehabilitation work required, as well as assess any changes
from the original conceptual mine closure plan.
To determine an appropriate discount rate and calculate the provision to recognise,
management considered risk free rates and long term inflation projections in order
to discount expected cashflows over the life of the Project.
The rehabilitation provision of $4.4m recognised represents the net present value of
the best estimate of the expenditure required to settle the obligation for future close
down, restoration and environmental obligations caused by construction activities at
31 December 2022.
Management engaged the services of independent valuation experts to assist
in determining the appropriate fair value of the debt including the fair value of the
derivative liability which was revalued at 31 December 2022.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Audit & risk committee report
Significant issue
Summary of Significant Issue
Actions and Conclusion
Adriatic
Foundation
assessment of
control
The Adriatic Foundation (the “Foundation”) is a
not-for-profit trust which was created in Bosnia
and Herzegovina with the objective of supporting
the communities around the Vares Project. Adriatic
Metals PLC provided the initial funding required for the
formation of the Foundation.
For the purposes of consolidation and related party
disclosure, consideration needs to be given to whether
the Group controls this entity and if so, at what point did
this control pass to the Group.
For the purposes of consolidation, an assessment has been performed to
determine whether the Company controls the Adriatic Foundation in accordance
with IFRS 10. The conclusion of this assessment is that whilst the company is able
to yield significant administrative influence over the Foundation, it is not able to
affect returns to the Company. The Foundation statute prevents the Company as
the founder, and any other person associated with the Foundation, from directly or
indirectly deriving profit, or any other material or financial benefit, from the activities
of the Foundation. For the purposes of IFRS 10, the Directors have therefore
concluded that the Company does not control the Foundation and as a result the
Foundation is not included in the consolidated financial statements of the Group.
The Company has the ability to appoint the Board of Trustees of the Foundation
and transactions between the Company and the Foundation have therefore been
classified as related party on the basis of the company exercising significant
influence.
Functional
currency
The functional currency of each legal entity needs to be
assessed on an ongoing basis to determine whether its
base currency remains appropriate.
The Group 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.
The US$244.5m Project Finance Package provides
the Group with sufficient funding through construction
to first concentrate production at the flagship Vares
Project.
The package included US$142.5m Debt Finance
Package from Orion Mining, comprising US$120.0m of
Senior Secured Debt, and a US$22.5m copper stream
both denominated in USD.
The results of this review determined that the functional currency of each of Adriatic
Metals plc, Eastern Mining d.o.o. and Adriatic Metals Jersey Ltd should be changed
to USD based on the primary economic environment in which they operate.
The Group exercised judgement in determining the date of change to be 1 January
2022, to coincide with the start of the year, as well as the imminent signing of the
Orion Debt Finance Package and the mining services contract, which are both
based in USD.
Share-based
payments
Determining share-based payments expense is
complex and the expense is stated at fair value at the
time of grant, calculated using the Black-Scholes option
pricing model which requires a number of inputs.
Management used inputs from impartial external sources, including risk-free interest
rate, expected volatility, and expected life in order to appropriately calculate share-
based payments reserve postings and share-based payments expense during the
year.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Audit & risk committee report
Significant issue
Summary of Significant Issue
Actions and Conclusion
Raska Project
carrying amount
Management is 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.
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 amount of
the Raska Project USD 31.9m arising on acquisition
remained appropriate.
In late 2022 the Company carried out a strategic review of the Raska Project which
resulted in changes to the development plan for the project. Focusing its resources
on Vares Project construction and on exploration at Rupice and Rupice NW means
that resources available for exploration in Serbia will be more focused and limited in
the coming year. The Company therefore plans to develop the Raska Project over
a longer horizon, including advancing new prospects in the Company’s tenement
area during 2023 to complement Kizevak and Sastavci. Although the Company
remains positive about the future prospects for Raska, it has determined that the
longer development horizon now envisaged makes it appropriate at this time to
recognise an impairment of $23.2m against the project’s carrying amount, reducing
the carrying amount to $8.5m at 31 December 2022. The carrying amount has
been determined by a benchmarking exercise using industry standard valuation
measures.
External Auditors’ 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 17 to
the consolidated financial statements.
Objectivity and Independence
The Committee continues to monitor the auditors’
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 Auditors
The Committee recommends to the Board the re-
appointment of BDO as auditors at the forthcoming
2023 annual general meeting (AGM), and BDO has
expressed its willingness to continue in office.
Internal Auditors
The requirement for the appointment of an internal
auditor is continually assessed by the Committee,
taking into account the level of spending and
complexity of the Group’s operations. To date, the
Committee has decided that an internal audit function
is not required but will continue to assess the situation
on a regular basis.
Going Concern
The Directors considered it appropriate to continue
to adopt the going concern basis of accounting
in preparing the financial statements. The going
concern statement is detailed in full in note 2c to the
consolidated financial statements.
Conclusion
The Committee is satisfied with the quality,
independence and objectivity of the external
audit and believes that on the basis of the audit
it can make a proper assessment of the quality
of financial and other systems of reporting and
control within the Company.
In respect of its own performance, the Committee
considers that it has given appropriate challenge
and direction to management, concentrating on
the areas that are relevant to the risks facing the
Company.
Sandra Bates
Chair of the Audit & Risk Committee
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Environmental, Social & Governance committee report
During development balancing the needs of the
sustainability strategy and the pressure of the
construction programme is not an easy task.
Competing priorities can put significant pressure on
the team, but they have consistently demonstrated
the courage of their convictions to do the right thing
and not shortcut the Company’s properly demanding
standards. I am proud of the way in which they have
worked through challenges and achieved solutions
that respect both important aspects of the Company’s
strategy. This has required increasingly close
cooperation between all staff members, and through
a challenging and busy year it is gratifying to see how
closely, and collegiately, they are working. This gives
me huge confidence for the future.
One of the principal challenges during development
is contractor management. So many vital aspects of
the Company’s sustainability strategy are delegated
to third-party contractors. Many of whom are not
used to operating within the strict environmental and
social management plans that the Company has
implemented. This has required significant education,
mentoring, and monitoring by our staff to ensure that
the Company’s standards and values are adhered
to by all our contractors, and the multitude of their
subcontractors. This is particularly the case with the
main mining contractor. This is not only the largest
contract the Company has awarded, but also the most
complex and the one with the most crossover into our
communities and their environment. I have been very
pleased by their willingness to conform and particularly
the way in which they have integrated into the
community. Bringing a large number of internationals
into a small town carries with it a lot of potential for
friction and even conflict. The main mining contractor
has navigated this carefully and their international staff
have approached the local population with friendliness
and openness. And accordingly, they have been
received well.
The hard work of the previous years, and in particular
the thoroughness of the ESIA and its resulting
environmental and social management plans is paying
off. By investing so much effort into determining both
the community’s wishes and their concerns, and
addressing many of them ahead of development, the
Company established the conditions for success
before earthworks commenced. There have been
a number of isolated issues, particularly from the
pressure of outsize deliveries on the mountain access
roads temporarily connecting Rupice. These have been
addressed and I am proud of the way in which both the
Sustainability and Operational teams have addressed
the community’s concerns.
Moreover, the Company has not just managed the
development works successfully, it has continued to
realise its longer term strategy and this year saw the
realisation of a sustainable Community Development
Plan. Critical to the concept of “Shared Prosperity”
this initiative brings together community, municipality,
external NGOs and international partners to provide the
local population with the skills to enjoy a mutual future
prosperity. The take up of a free English language
course was well above expectations. External partners
are running business plan development courses.
Financial NGOs are providing seed-capital and micro-
funding, and our bankers will provide access to the
credit required for existing businesses to expand.
The Procurement Team are working hard, both to let
contracts to local companies and to require national
and international suppliers to establish operations
in the wider municipality. Our drilling contract has
opened an office in Vares, and the Mining Contractor is
integrating superbly into the local town.
The opening of the Eurofarm medical centre in the
summer was a very important part of the sustainability
progress the Company has made. From the feedback
received during the Health Impact Assessment (the
first to be conducted for a natural resources project
in the county) a significant gap in the provision of
primary health care was identified. By partnering with
Eurofarm and opening this centre, the Company has
supplemented the state offering. Significantly reducing
waiting times and often the requirement for the local
population to travel to the wider canton for treatments.
The medical centre is a magnificent example of
sustainability done well, and I congratulate all who
helped make it happen.
Government support for the Project remains strong,
as does that of the international community. Since the
unfortunate outbreak of the war in Ukraine we have
seen a huge increase in international focus on Bosnia
and Herzegovina, and indeed the entire region. Bosnia
and Herzegovina has been accepted as a candidate
for accession to the European Union. This will help
strengthen the country’s political base and improve
the international business community’s perceptions of
the country. Further the European Union has recently
published a critical raw materials policy, requiring the
continent to increase production of the raw materials
necessary to both underpin its manufacturing base
and supply the critical metals required for a carbon free
future including copper which the Company will shortly
be exporting. Taking all these factors into account
it is not unrealistic to see greatly increased foreign
investment and an economic revival of the country.
In the weeks following the publication of this Annual
Report which includes TCFD compliance disclosures,
the Company will publish its first stand-alone
Sustainability Report. This will both capture the
work completed to date and set out the Company’s
ambitions, including net-zero targets, over the coming
years.
The Sustainability Committee met four times in the
period. Deciding with Critical Resources in the spring
that their mentoring services were no longer required,
the Committee was renamed and has operated without
external assistance since the spring. 2023 will be
challenging for all of the Company, but I am confident
that the groundwork has been laid to successfully
continue our journey of Shared Prosperity.
Sanela Karic
Chair of the Sustainability Committee
93
Sanela Karic
Chair of the Sustainability Committee
The renaming of the Committee in the spring
of 2022 reflected the growing maturity of
the Company’s approach to all aspects of
its environmental, social and governance
responsibilities.
The Committee recognises that these critical
components of its operational philosophy are not
siloed workstreams, but part of an integrated and
holistic approach to developing and sustaining the
approval of all stakeholders, including our staff, so as
to prosper together. The concept of shared prosperity
being a key tenet of the Company’s Visions and Values.
As the Company entered its development year, it
also entered a new phase in its relations with its key
stakeholders, and particularly its host communities
and environment. Whilst development brings with
it wider economic opportunities, and the impact of
this is tangible in the municipality of Vares, it also
brings increased pressure on host infrastructure,
environmental challenges and therefore the potential
for friction.
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Remuneration & nomination committee report
Peter Bilbe
Chairman of Remuneration Committee
PART 1
SUMMARY STATEMENT FROM THE CHAIRMAN
Dear Shareholder
On behalf of the Board, I am pleased to present
the Remuneration & Nomination Committee
Report, which sets out the Directors’
remuneration report for the year ended 31
December 2022.
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). It is
also now the third year since we had our first Directors’
remuneration policy approved in November 2020, and
at our May 2023 AGM we will be asking shareholders
to renew the policy for a further period of up to three
years.
The Regulations apply to the Company because it is
a UK incorporated company and was admitted to the
Standard Segment of the Official List of the Financial
Conduct Authority and to trading on the London
Stock Exchange’s Main Market (Standard Segment)
on 12 December 2019. The Company has resolved to
comply with the provisions of the Quoted Companies
Alliance Corporate Governance Code (QCA Code)
so far as is practicable given the Company’s size,
nature and stage of development. 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 contains
the Annual Statement on Remuneration covering
the year ended 31 December 2022, reflecting the
arrangements in place during that year.
As we say above, we will be seeking shareholders’
approval to renew our Directors’ remuneration policy at
the 2023 AGM. We are currently undertaking a review
of the share plans provision within our policy and,
accordingly, we intend to include our proposed revised
policy with explanatory notes in our AGM notice. This
will highlight any changes from the current policy.
An important point to note is that, as required by
ASX rules, all share incentive awards to Directors are
required to be approved by shareholders at a general
meeting. Share awards are a key part of Adriatic’s
Directors’ remuneration policy.
At our 2023 AGM there will therefore be a number of
resolutions on pay matters:
1. The normal annual advisory vote to approve this
Directors’ remuneration report;
2. The three-yearly vote to renew our Directors’
remuneration policy; and
3. Votes to approve share awards to Paul Cronin.
Remuneration policy – application in 2022
As has been the case since our admission to the
London Stock Exchange’s main market, the Directors’
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.
Paul Cronin, our CEO, is our only main board executive
director. Mr Cronin receives base remuneration split
between Director’s fees and consultancy fees paid by
the Company and its wholly owned subsidiary Eastern
Mining d.o.o. He receives no pension or benefits.
Mr Cronin participated in the Company’s STIP during
2022. As detailed later in this report, his STIP payment
in respect of 2022 was US$279,887, being 90% of
the maximum of 100% of salary, reflecting strong
performance across the target metrics.
In 2022 the Company operated a structured long
term incentive plan which allowed for awards of
performance rights following the year end, subject
to the attainment of relative shareholder return and
corporate targets in 2022.
Based on 2022 relative shareholder return and
corporate objectives performance targets, Mr Cronin
will be granted 142,778 performance rights with a
value of $294,400 (based on a share price of £1.70p
being the volume weighted average share price over
the final 30 days of 2022), being approximately 95% of
his 2022 salary. The grant of these performance rights
is subject to a separate shareholder resolution to be
put to the 2023 AGM in line with ASX requirements.
The performance rights will vest 3 years from the
award date, subject to continuing employment and be
subject to a further two year holding period.
Having considered the Company’s overall
performance in 2022, the Committee decided that
the outcomes for our CEO under the 2022 STIP and in
respect of the performance rights to be awarded for
2022 performance were appropriate and should apply
without further moderation.
Historically, the Chairman’s and Non-Executive
Directors’ remuneration has been pitched at modest
levels with one-off option awards. As an ASX listed
company, all share awards to Directors have been
approved by shareholders. However, as we explained
last year, the Company does not intend to grant further
share options to our Chairman or Non-Executive
Directors.
Remuneration policy – proposed application
in 2023
As we have said consistently in past Directors’
remuneration reports, 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.
We will seek shareholders’ approval to renew our
three year authority for our Directors’ remuneration
policy at our 2023 AGM, and the full policy will be set
out in our 2023 AGM Notice of Meeting. However, we
expect the revised policy to be largely consistent with
the current policy. Our CEO will again have fixed pay
94
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Remuneration & nominations committee report
arrangements which we regard as appropriate and our
STIP plan will continue, with its operation being largely
consistent with how the plan operated in 2022.
The one area which we are reviewing is our long term
share plan provision. While our current long term
incentive plan measures performance over a one-year
period prior to the grant of share plan awards (which
are then subject to continuing employment only until
vesting), as the Company has developed and moved
closer to production, we are considering whether a
more standard LTIP structure with forward-looking
three year performance measures from the time of
LTIP award might now be more appropriate for the
Company’s current stage of development. Should
we make this change, we will only do so if we can be
satisfied that robust performance measures (which are
in the best long term interests of shareholders) can be
set over the three year performance period.
Also we will be mindful regarding the potential
individual quantums available under a revised LTIP
programme. We would be effectively moving from
a retention based “restricted stock” form of award
(the current maximum award to our CEO is 100% of
salary per annum) to a more traditional LTIP, and so
should we decide that we will move to a new LTIP, we
would expect to apply the “conversion ratio” which
UK investors have tended to accept of one restricted
stock award equating to two LTIP awards subject to
on-going performance conditions.
In terms of actions which we have already taken for
2023, we have reviewed our CEO’s fixed pay. Mr
Cronin’s effective salary continues to comprise two
elements: board fees of BAM94,904 and consultancy
fees. Mr Cronin does not receive a pension
contribution or other fixed pay. While the board fees
for 2023 remain unchanged, the consultancy fees
element has been increased to £328,000 (2022:
£225,000, an increase of 45.8%). At the exchange
rate on 31 December 2022, the total amount was
approximately $448,000. Even with this increase,
our CEO’s total fixed pay remains at levels which are
modest for a company of our scale.
Remuneration & Nomination Committee
Remuneration & Nomination Committee meetings are
normally held at least once a year and the Committee
met twice during the year ended 31 December
2022. 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 & Nomination Committee
comprises Peter Bilbe (Chair), Julian Barnes and
Sandra Bates, all of whom have been 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. In particular, construction at the Vares Project
is now 70% complete and with the construction of
the Vares Processing Plant well underway the Project
remains on schedule for first concentrate production
in Q3 2023.
Principal actions and decisions during the year
The principal decisions in respect of remuneration
taken during the year were:
Approving the Annual STIP bonus outcomes and
associated bonus payments to the CEO and senior
management in respect of the prior year, as well as
setting the KPI targets for the 2022 Annual STIP
bonus;
Assessing performance in 2021 relating to LTIP and
ad-hoc performance rights grants to staff in February
2022, none of whom were Directors; and approving
the issue of the corresponding performance rights;
Awards of performance rights to the following senior
staff during the year: Chief Financial Officer and Chief
Operating Officer, neither of whom are Directors;
Exercising discretion to approve the exercise of
performance rights granted in the prior year by the
outgoing Project Director;
The normal annual advisory vote to approve this
Directors’ remuneration report;
Reviewing the outcomes from the annual board
effectiveness review and making recommendations to
the Board.
The three-yearly vote to renew our Directors’
remuneration policy; and
Votes to approve share awards to Paul Cronin.
Principal actions and decisions after the
year end
The Remuneration & Nomination Committee have
taken the following principal actions and made the
following principal decisions after the year end:
Approving the salary increase for the CEO for 2023
and salary increases for certain other staff at all levels
across the Group.
Approving the Annual STIP bonus outcomes and
associated bonus payments to the CEO and senior
management in respect of 2022, as well as setting
the KPI targets for the 2023 Annual STIP bonus.
Approving the proposal to offer senior executives
and management recipients of STIP bonuses the
opportunity to convert and reinvest their cash
bonuses into shares of the Company.
Assessing performance in 2022 relating to LTIP and
ad-hoc performance rights grants to staff in February
2023, none of whom were Directors; and approving
the issue of the corresponding performance rights.
Reviewing relative shareholder return and corporate
objectives performance in 2022 and determining the
number of performance rights to be granted to the
CEO in H1 2023 (subject to shareholder approval).
AGM
At our AGM held on 30 May 2022, the annual advisory
resolution to approve our 2021 Annual Remuneration
Report was supported by 97.16%. We thank our
shareholders for their continued support.
As we explained in the introduction to this statement,
at our 2023 AGM we will be asking shareholders to
approve:
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
PART 2 – REMUNERATION POLICY
The Company’s Directors’ remuneration policy seeks
to provide a strong and clear link between business
strategy and incentive arrangements.
The current Directors’ remuneration policy for
executive and non-executive Directors was approved
by shareholders at our 6 November 2020 AGM and
can be found within our 30 June 2020 Annual Report
and Accounts which is available on our website at:
www.adriaticmetals.com/investors.
As is explained in the Summary Statement from the
Chairman, we will seek a renewal of authority from our
shareholders for the Directors’ remuneration policy at
our 2023 AGM and the full policy for approval will be
set out as part of our AGM notice.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Remuneration & nominations committee report
PART 3 – REMUNERATION REPORT (AUDITED)
The Group paid the following remuneration to each Director:
Year ended 31 December 2022
Total salaries
and fees
STIP (b)
Share awards
vesting in
year (c)
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
(In USD)
Executive Directors
Paul Cronin
328,706
272,597
Non-Executive Directors
Michael Rawlinson
123,146
68,684
62,007
67,730
115,724
-
-
-
-
-
765,997
272,597
-
-
-
-
-
-
-
601,303
328,706
272,597
123,146
123,146
68,684
62,007
67,730
68,684
62,007
67,730
115,724
115,724
-
-
-
-
-
1,038,594
765,997
272,597
Year ended 31 December 2021
Total salaries
and fees
STIP (b)
Share awards
vesting in
year (c)
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
334,829
228,094
1,497,409
2,060,332
334,829
1,725,503
68,780
40,532
41,268
41,268
25,922
-
-
-
-
-
-
-
-
-
-
68,780
40,532
41,268
41,268
25,922
68,780
40,532
41,268
41,268
25,922
-
-
-
-
552,599
228,094
1,497,409
2,278,102
552,599
1,725,503
Peter Bilbe
Julian Barnes
Sandra Bates
Sanela Karic(1)
Total Directors’
Remuneration
(In USD)
Executive Directors
Paul Cronin(2)
Non-Executive Directors
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates
Sanela Karic(3)
Total Directors’
Remuneration
Notes:
a. There were no taxable benefits or pensions in either the current year or prior year.
b. Cash bonus for Paul Cronin comprised of $279,887 of accrued 2022 STIP bonus for the current year which
was paid in January 2023. This compares to the prior year accrued 2021 STIP bonus awarded of $131,802
(measured at 31 December 2021 GBP:USD rate), of which $65,560 was paid in January 2022 and $58,952
paid in January 2023, with an unrealised foreign exchange loss in USD terms of $7,290 at 31 December 2022
which has been recognised in the current year cash bonus. Also during 2021, the performance conditions
associated with the KPI cash bonus were met and a cash bonus of $96,252 was paid. This bonus related to
the issuance of exploitation permits at Veovaca and Rupice.
c. 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. No options
or performance rights held by Directors vested during 2022. In 2021, 750,000 performance rights granted
on 29th November 2019 with a £0.013355 exercise price vested on meeting the vesting conditions of (a)
completion of the JORC compliant definitive feasibility study and (b) the Volume Weighted Average Market
Price per CDI (as quoted on ASX) exceeding A$1.25 for the 5 consecutive trading days immediately prior to
31 December 2021. The share price on the vesting date was A$2.71. The value on vesting was $1,497,409 of
which $800,081 was attributable to share price appreciation.
1. The Company will benefit from Sanela Karic’s increased involvement providing legal expertise to the Group.
Whilst providing these services, Ms. Karic can no longer be classified as an independent board member. Out
of the total remuneration to Ms. Karic in 2022 set out above, $63,888 was paid in respect of director’s fees
and $51,836 was paid in respect of the separate consulting arrangement with Ms. Karic.
2. Paul Cronin donated 250,000 of his personal shares in Adriatic Metals to the Foundation during the prior year.
3. 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 donate the equivalent amount to the Adriatic Foundation. As a result
Sanela Karic waived $13,037 of fees (equivalent to four months of fees) which were paid over to the Adriatic
Foundation during the prior year.
96
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Remuneration & nominations committee report
No payments for loss of office were made to Directors in the current year or in the prior year.
There were no gains on the exercise of performance rights by Directors during the year ended 31 December 2022.
Gains on the exercise of share options by Directors during the year ending 31 December 2022 were as follows:
Salary of the Executive Director
The fixed remuneration of the Executive Director was US$328,706 (equivalent to £267,000) during 2022
made up of a board fee of BAM 94,904 and consultancy fees of £225,000 (the basis of conversion being
monthly average USD rates throughout the year).
Date of
Grant
Vesting
date
Date of
exercise
Exercise
price
Number of
share options
exercised
Net shares
received post
any cashless
exercise
Share price
on date of
exercise
Gain on
exercise
Michael
Rawlinson
Michael
Rawlinson
Sandra
Bates
Paul Cronin/
Dwellstone
29 Nov
2019
29 Nov
2019
29 Nov
2019
27 Apr
2018
29 Nov
2019
29 Nov
2019
29 Nov
2019
1 Apr
2019
26 Sept
2022
26 Sept
2022
26 Sept
2022
26 Sept
2022
A$1.00
100,000
100,000
A$2.01
US$64,961
A$1.00
900,000
496,878
A$2.01
US$584,652
A$1.25
1,000,000
437,574
A$2.01
US$488,818
A$0.20
5,000,000
5,000,000
A$2.01 US$5,820,797
Gains on the exercise of share options by Directors during the year ended 31 December 2021 were as follows:
Date of
Grant
Vesting
date
Date of
exercise
Exercise
price
Number of
performance
rights exercised
Net Shares
received post
any cashless
exercise
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
8 June
2021
A$0.30
900,000
900,000
A$2.75
US$1,658,401
A$0.30
1,000,000
1,000,000
A$2.75
US$1,842,668
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.
No share awards granted to Non-Executive Directors without performance measures or targets included in total
salaries and fees vested during years ended 31 December 2021 and 2022.
97
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Remuneration & nominations committee report
Annual STIP bonus in respect of 2022 performance (un-audited)
Mr. Cronin’s maximum opportunity under the STIP was set as 100% of base salary for 2022.
Objectives for the 2022 STIP bonus were set by the Remuneration & Nomination Committee at the beginning of the year and assessment of performance during the year was undertaken at the January 2023 Committee meeting.
Details of the bonus paid to the CEO for 2022, including the specific performance metrics, weightings and performance against each of the metrics, are provided below:
Target Details
Weighting
Low
25%
Expected
75%
High
100%
Achievement
Achievement Notes
Global Resource
Growth
At least 10,000m of exploration drilling and
expansion of targets that will likely lead to extension
of reserves at Vares
Project Cost Control
31/10/22 Project Report shows cost to completion
of no greater than 10% negative variance to
Agreed Construction Budget.
10.0%
10,000m
12,500m
15,000m
High
10.0%
20.0%
<10% Variance
<7.5% Variance
<5% Variance
High
20.0%
Project Delivery
Permitting
OH&S
OH&S
31/10/22 Project Report shows timing to
commencement of commissioning in line with
Construction Schedule
All required permits for amendments to project
plan delivered without impact on project delivery
schedule. Compliance with permits.
Rollout of integrated H&S plan including all systems
and procedures before 30/6/22
Total Recordable Injury Frequency
20.0%
10.0%
5.0%
20.0%
< 3 months behind
Schedule
0-2 months behind
Schedule
On or ahead of
Schedule
High
20.0%
Cause 1 month delay
in Schedule
Cause 0-1 month
delay in Schedule
No Delay in Schedule
High
10.0%
Before 31/7/22
Before 30/6/22
Before 30/5/22
Not Met
0.0%
<8
<5
<3
Expected
15.0%
4.10 Includes LTI, MTI & RWI
Project Finance
Compliance with all Covenants
5.0%
No Event of Default
1 Event of Review
No Events of Review
High
5.0%
Staff Satisfaction
The results of a general staff satisfaction survey on
a scale of 1-10
Diversity
Bonus payable (as a
percentage of)
Ensure that at least 20% of all staff are female
excluding contractors
5.0%
5.0%
<7
>10%
>7 <8.5
>15%
>8.5
>20%
High
High
5.0%
5.0%
90%
First draw of SFA occurred in
December 2022. No events
of review
New system out of 100. 80%
favourable and 14% Neutral =
94% or 9.4
29% of all ADT Staff are
female
Based on combined weighting
and achievement of KPI’s
The determination of the bonus pay out is at the discretion of the Remuneration & Nomination Committee, taking into account performance during the year against the above scorecard.
In 2022, the CEO’s on-target and maximum potential STIP bonus was 75% and 100% of base salary respectively. The Remuneration & Nomination Committee’s actual assessment of the CEO’s performance resulted in a STIP bonus
of 90% of base salary ($279,887) being achieved which was paid in January 2023.
98
16,107m in Vares and 4,046 in
Raska as of end of week 48
CAC currently at $183m
less $10.2m contingency
vs $168.2m budget = 2.7%
variance
Draw not occurred, but
regardless Project Delivery in
line with schedule
No Permits have had an im-
pact on the Project Schedule.
System rolled out in October
2022
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Remuneration & nominations committee report
Long term equity incentives
There were no grants or vesting of options or performance rights to Directors of the Company during the year
ended 31 December 2022.
Statement of the Directors’ shareholdings and share interests (audited)
The interests in the Company’s shares and other securities directly or indirectly held by Directors at 31 December
2022 who served during the year is set out below:
The Company will make first LTIP awards to the CEO in 2023 as referred to in the Summary Statement from the
Chairman.
The LTIP award to be made is based on the attainment of relative total shareholder return and corporate
performance targets in 2022, with the maximum award being 100% of base salary.
The performance condition for 50% on total shareholder return measured the company’s TSR relative to a peer
group of 15 international mining production and development companies, being Atalaya, Trilogy, Bear Creek,
Discovery Silver, Chaarat Gold, Aurelia Metals, Sandfire, Silvercrest, Mag Silver, New Pacific, Dundee Precious
Metals, Osisko, Horizonte, Central Asia Metals and Bellevue Gold. Peer group median and upper quartile TSR
were -19% and 0.1%, respectively. Adriatic’s TSR at +29.5% was above the upper quartile and this component
vested at 100% of maximum.
Paul Cronin
Peter Bilbe
Michael Rawlinson
Julian Barnes
Sandra Bates
Sanela Karic
Number of
Ordinary Shares
Percentage
of Issued
Share Capital
Number
of Options
Number of
Performance
Rights
17,301,332
1,050,000
411,960
1,000,000
-
-
19,763,292
6.34%
0.38%
0.15%
0.37%
-
-
-
-
-
-
-
1,000,000
1,000,000
5,174,300
-
-
-
-
-
-
-
941,594
The corporate objectives were applied consistently with the STIP corporate objectives and these were achieved
at 90% (as shown above), making a 95% of base salary award overall.
Total in issue at 31 December 2022
272,746,292
Mr Cronin will accordingly be awarded 142,778 performance rights with a value of $294,400 (based on a
share price of £1.70p being the volume weighted average share price over the final 30 days of 2022), being
approximately 95% of his 2022 salary.
The performance rights will vest 3 years from the award date, subject to Mr. Cronin’s continued employment, and
be subject to a further two-year holding period.
The grant of these performance rights is subject to a separate shareholder resolution to be put to the 2023
AGM. This value is not included in the table above because the award is subject to shareholder approval and the
performance rights have yet to be granted. The value will be included in the Single Figure Table for 2023.
At 31 December 2022, all options in the table above held by Directors had vested.
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 indices in similar
industry classification on exchanges in which the Group is 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
120%
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
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99
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Remuneration & nominations committee report
Cash remuneration for the CEO role decreased in 2022 by 3% compared to the year ended 31 December 2021
and the total monetary value of all remuneration to the CEO decreased by 73% compared to the year ended
31 December 2021.
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 2022 compared to the preceding year for the CEO in comparison to the wider workforce.
Annual bonus payment
level achieved (% of
maximum opportunity)
LTIP vesting level
achieved (% of maximum
opportunity)
A. Staff engaged via the Group’s UK or Jersey entities only includes representative 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.
Two comparator groups were chosen as the most appropriate comparators as follows:
Lead Executive’s historical remuneration (audited)
Period end
Dec 2022 (12m)
Dec 2021 (12m)
Dec 2020 (6m)
June 2020 (12m)
Total
remuneration
$’000
601
2,060
140
1,083
Fixed
329
335
140
262
90%
50%
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
The Company has operated a structured annual bonus plan since 2021. Before this, the Company used key
performance indicator bonuses which did not correspond to specific one year periods. KPI bonuses totaling
$96,262 were paid in cash during year ended December 2021 in respect of the issue of exploitation permits for
Veovaca and Rupice, and $37,812 in year ended June 2020 in respect of the achievement of the London Stock
Exchange Listing.
As at 31 December 2022, the Company had not made awards to the Executive Director under an annual LTIP
programme. Prior to 1 January 2021, the Company’s policy was 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 the Company’s annual financial cycle. Performance rights held
by the Executive Director vested on completion of a JORC compliant feasibility study and the meeting of the
share price performance condition during year ended December 2021 and had a value at vesting of $1,497,409.
Performance rights held by the Executive Director vested during year ended June 2020 and had a value at
vesting of $782,369.
Average remuneration of the two comparator groups compared to that of the CEO in the current year and
previous year were as follows:
Comparator group A
- Senior management
and international
employees
(excluding CEO)
Comparator Group B
- All employees of the
Group (excluding CEO)
2022 (1)
%
74.6%
32.5%
(100%)
2022 (1)
%
67.6%
(4.3%)
(100%)
CEO
2022 (1)
%
(1.8%)
106.8%
(100%)
Increase / (decrease) in average
remuneration
Cash remuneration:
Fixed base salary
Variable - Annual STIP bonus(2)
Variable – Non-annual KPI bonus
Notes:
1. Year ended 31 December 2022 compared to the year ended 31 December 2021
2. Variable - Annual STIP bonus increases/decreases not available prior to 2022 because the STIP programme
commenced 1 January 2021
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.
100
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Remuneration & nominations committee report
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. These items are included because they are important items for the Company.
The Company made no distributions to shareholders during 2021 or 2022.
(In USD)
Cash remuneration
Monetary value of vested share awards
Total remuneration
Average number of employees
G&A expenses*
Exploration expenses*
Year ended 31
December 2022
Year ended 31
December 2021
7,148,757
569,633
7,718,390
158
5,183,317
1,361,548
3,871,054
1,996,546
5,867,600
109
3,498,102
3,962,900
9,993,357
2,972,247
Property, plant and equipment additions*
39,262,082
Exploration & evaluation capitalised*
-
Exploration and capex*
40,623,630
16,928,504
+140%
* Adjusted where necessary to exclude remuneration
Advice on remuneration
During the year, h2glenfern Remuneration Advisory provided limited advice to the Company in relation to
benchmarking advice and its remuneration report disclosures. Fees of £10,000 ($11,470) 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 2022
No payments were made to Directors for loss of office during the year. There were no payments during the year to
past Directors.
Remuneration policy in 2023
Executive Director’s Fixed Remuneration
Effective 1 January 2023, the fixed remuneration of the Executive Director will comprise board fees at BAM 94,904
unchanged from 2022) and Consultancy Fees of £328,000 (increased by 45.8% from £225,000 in 2022). At the
exchange rate on 31 December 2022, the total amount was approximately $448,000.
2023 Short Term Incentive Plan (STIP) and KPIs
The target areas for 2023 and their weightings within the bonus are:
% change
Target Area
Demonstrate Exploration Potential
Demonstrate Rupice Expansion Potential
+37%
Project Cost Control
Project Delivery
Project Ramp Up
Occupational Health & Safety
+48%
Compliance with financing covenants
Gender Diversity in the workplace (excluding contractors)
Staff satisfaction
Weighting
5.0%
15.0%
15.0%
15.0%
15.0%
20.0%
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 2023
remuneration report.
The potential maximum percentage of base salary
achievable as a bonus under the STIP for the Executive
Director is 100% of salary, for Executive Management
is 70% of salary, and for Senior Managers is 30% of
salary. The Executive Directors bonus is based solely on
corporate objectives. Executive managements bonus
is based 70% on corporate objectives and 30% on
personal objectives. Senior Managers bonus is based
50% on corporate objectives and 50% on personal
objectives.
2023 STIP bonuses earned are expected to be paid in
either cash or equity during January 2024.
Long Term Incentive Plan (LTIP)
As explained in the Summary Statement from the
Chairman at the beginning of this report, we are currently
reviewing our LTIP provision and full details of LTIPs for
2023 will be included in the new Directors’ remuneration
policy which will form part of the Notice of Meeting for
the 2023 AGM.
Chairperson and Non-Executive Directors
There are no proposed changes to the annual base fees
payable to each non-Executive Director which remain
at £50,000 p.a. The role of Chairperson of the Board
includes an additional fee of £50,000 p.a. Directors
serving as the chairperson of a board committee
receive an additional fee of £5,000 for each committee
that they chair.
Peter Bilbe
Chairman of Remuneration Committee
101
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 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 year ended 31 December 2022.
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 year and to the date of this report are:
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 joint company secretaries are Jonathan Dickman and Gabriel Chiappini.
Results and dividends
The Group results for the year ended 31 December 2022 are set out in the Financial Review on page 37.
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 2022.
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 £1,185,832, (equivalent to 88,793,111 shares) in accordance with Section 551
of the Companies Act 2006. Details of the Company’s share capital are set out in note 14b to the consolidated
financial statements, including details of the movements in the Company’s issued share capital during the year.
The Company’s issued ordinary share capital ranks pari passu in all respects and carries the right to receive all
dividends and distributions declared, made or paid on or in respect of the ordinary shares. There are currently no
redeemable non-voting preference shares or subscriber shares of the Company in issue.
Directors’ and Officers’ Insurance
The Company has arranged appropriate Directors’ and Officers’ insurance to indemnify the Directors and Officers
against liability in respect of proceedings brought about by third parties. Such provisions remain in place at the
date of this report.
Auditors
BDO LLP (Chartered Accountants) have been auditors of Adriatic Metals PLC since 2020 and will be proposed for
re-appointment at the 2023 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 & Nomination Committee Report.
Substantial shareholdings
The Company’s issued share capital as at 31 December 2022 was 272,746,292 ordinary shares and at
22 March 2023 was 273,863,593 ordinary shares with each share carrying the right to one vote.
No shares are held in treasury.
At 31 December 2022, 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.
Shareholder
Helikon Investments
Orion Asset Management
Paul Cronin
Milos Bosnjakovic
FIL investment
T Rowe Price (Baltimore)
Number of
ordinary shares
Percentage of
issued share capital
46,468,120
24,191,000
17,301,232
13,300,000
9,999,993
8,422,201
119,682,546
17.04
8.87
6.34
4.88
3.67
3.09
43.89
At 15 March 2023, 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 2023 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/.
102
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ report
Additional disclosures
For the purposes of LR 9.8.4C R, the information required to be disclosed by LR 9.8.4 R, where applicable, can be
found in the following parts of this Annual Report:
Section Matter
Interest capitalised
Publication of unaudited financial information
Details of long term incentive scheme
Waiver of emoluments by a Director
Location
Not applicable
Not applicable
Remuneration & Nomination Committee
Report page 94
Remuneration & Nomination Committee
Report page 94
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
No applicable.
Not applicable
As item (7) in relation to major subsidiary undertakings
Not applicable
Parent participation in a placing by a listed subsidiary
Not applicable
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)(a)
Contract of significance in which a Director is interested
Not applicable
(10)(b)
Contract of significance with controlling shareholder
Not applicable
(11)
(12)
(13)
(14)
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreement with controlling shareholder
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 to the consolidated financial
statements, and in the sections on Corporate Governance and Internal Control on page 77 and Risk Management
on page 42.
Political donations
Neither Adriatic Metals PLC nor its subsidiaries have made any political donations during the year.
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 will be set out in the Notice of the AGM.
Going concern
The Vares Definitive Feasibility Study was completed in August 2021 with a Project NPV of $1.1 billion and build
cost of $168.2m. An equity raise was successfully closed on 29 October 2021 and Orion debt documents
were executed to provide the Group with sufficient funds to complete the Vares Project construction and cover
ongoing owner costs until production commences in Q3 FY23 and the business becomes self-sustaining from
cash flows from operations.
Definitive documentation executed for the $142.5m Debt Finance Package with Orion was announced on 10
January 2022. Of this total, $30m was drawn down prior to 31 December 2022 and $52.5m was drawn down in
February 2023, leaving $60m currently undrawn at the signing date of these consolidated financial statements.
The Board has considered each of the conditions precedent to the remaining draw downs and is confident that
the Company will be able to satisfy them when required for the Vares Project development.
As announced in the Company’s Quarterly Activity Report for the quarter ended 31 December 2022, the
Project cost estimate has increased to $183m including an unutilised contingency of $10m. Sensitivity analysis
of uncommitted construction costs and potential project delay indicates that the Group and Company have
sufficient cash resources to continue in operation for a period in excess of 12 months from the date of signing the
consolidated and Parent Company financial statements.
A Debt-Service Coverage Ratio (“DSCR”) covenant is included in the Orion Debt Finance Package, with the first
DSCR testing period expected to be mid-2024. The DSCR is required to be above 1.25x and the Company’s
forecasts show substantial headroom above this.
The Directors therefore believe there is not a material uncertainty regarding going concern and that it is
appropriate to prepare the financial statements on a going concern basis.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Directors’ report
Post balance sheet events
Please refer to note 27 in the consolidated financial statements for a detailed report on major events that
occurred after 31 December 2022.
Likely future developments
Project development is continuing with the aim of entering into concentrate production in Q3 2023.
Annual General Meeting (“AGM”)
The date and location of the 2023 AGM will be announced in due course. At the AGM, shareholders will have the
opportunity to put questions to the Board, including the Chairs of the Board Committees.
Full details of the AGM, including explanatory notes, will be contained in the Notice of the AGM, which will be
distributed at least 28 days before the meeting. The Notice will set out the resolutions to be proposed at the
AGM and an explanation of each resolution. All documents relating to the AGM will be available on the Company’s
website at www.adriaticmetals.com.
Corporate Governance Statement
The Disclosure Guidance and Transparency Rules (DTR 7.2) require certain information to be included in a
Corporate Governance Statement set out in a Company’s Directors’ Report. In common with many companies,
Adriatic Metals PLC has an existing practice of issuing, within its Annual Report, a Corporate Governance Report
that is separate from its Directors’ Report.
Electronic communications
A copy of the 2022 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.
SEDAR Reporting
The Company is subject to the regulatory requirements of the ASX and the Australian Securities and Investments
Commission. It is also a reporting issuer under the securities laws of certain provinces of Canada. The Company
is a “designated foreign issuer” as defined under Canadian National Instrument 71-102 - Continuous Disclosure
and Other Exemptions Relating to Foreign Issuers (“NI 71-102”), and, as such, is generally permitted to meet
certain Canadian disclosure requirements by complying with the disclosure requirements of the ASX and the
Australian Securities and Investments Commission. The Company files documents required by NI 71-102 in
Canada on its profile at www.sedar.com.
Share rights
Without prejudice to any rights attached to any existing shares, the Company may issue shares with rights or
restrictions as determined by either the Company by ordinary resolution or, if the Company passes a resolution,
the Directors.
Voting rights
There are no 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 2023 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.
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 auditors
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 30 March 2023.
By order of the Board
Michael Rawlinson
Chairman of the Board
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Statement of directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the
Directors have elected to prepare the Group and Company Financial Statements 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 year. 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.
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.
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.
105
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Financial Statements
Strong capital
control & cash
position
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
Notes to the Parent Company Financial
Statements
Additional ASX information
107
113
114
115
116
117
149
150
151
156
NPV8
Cash position
US$1,062m
$60.6m
IRR
134%
Net Assets
$107.9m
Adriatic Metals | Annual Report 2022
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Independent auditors’ 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 2022 and of the Group’s loss for the year then ended;
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:
the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
Verifying the opening cash position used in the cash flow forecast. The cash flow forecast started from March
2023, and covered more than 12 months from the date of these financial statements.
the Parent Company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; 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
(together the ‘Group’) for the year ended 31 December 2022 which comprise the consolidated statement of
financial position, the consolidated statement of comprehensive income, the consolidated statement of changes
in equity, the consolidated statement of cash flows, notes to the consolidated financial statements, including
a summary of significant accounting policies, the parent company statement of financial position, the parent
company statement of changes in equity and notes to the parent company financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is
applicable law and UK adopted international accounting standards. The financial reporting framework that has
been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United
Kingdom Generally Accepted Accounting Practice FRS 101 “Reduced Disclosure Framework”), as applied in
accordance with the provisions of the Companies Act 2006.
Performing checks on the arithmetical accuracy of the cash flow forecasts approved by the Directors’.
Assessing the committed spend on the Vares project that is contractual and other spend under the Group’s
license arrangements and the general and administrative costs (G&A) within the forecast and checking that this is
consistent with other information obtained during the audit.
Obtaining and reviewing stress test scenarios including scenarios relating to production slippage and capital and
operating expenditure.
Reviewing and recalculating forecast covenants.
Reviewing the adequacy of going concern disclosures against the requirements of the relevant accounting
framework as disclosed in Note 2 of the financial statements, based on the evaluation performed above.
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.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report.
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.
Overview
Coverage
97% (2021: 99%) of Group loss before tax
99% (2021: 97%) of Group total assets
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 4 years,
covering the period ended 30 June 2020 and the years ended 31 December 2021 to 31 December 2022. 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.
Key audit matters
Carrying value and impairment of development, exploration and evalua-
tion assets, and license compliance
Valuation of subsidiary investment balances in the Parent Company
accounts
2022
2021
Yes
Yes
Yes
Yes
Materiality
Group financial statements as a whole
$2,600,000 (2021: $1,200,000) based on 1.5% (2021: 1.5%) of total assets
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Independent auditor’s report to the members of Adriatic Metals PLC
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, Adriatic Metals Plc (the Parent Company), 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 audit team. A full-scope audit of Eastern Mining d.o.o was performed by a BDO network firm in Bosnia &
Herzegovina. Additionally, the Group audit team performed specific procedures on all significant risk areas.
The financial information of the remaining non-significant components was subject to analytical review
procedures, performed by the Group audit team.
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. 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.
Climate change
Our work on the assessment of potential impacts on climate-related risks on the Group’s operations and financial
statements included:
Making enquiries of management and their external consultants to understand the actions they have taken to
identify climate-related risks and their potential impacts on the financial statements and adequately disclose
climate-related risks within the annual report.
Performing qualitative risk assessments taking into consideration the sector in which the Group operates and
how climate change affects this particular sector.
Reviewing minutes of Board and Audit Committee meeting and other papers related to climate change and
performed a risk assessment as to how this impacts the Group’s financial statements and our audit.
Reviewing climate-related disclosures in the front-half for consistency with other disclosures made in the back-
half of the Annual Report.
Based on procedures performed above, we did not identify there to be any climate-related risks that impacted the
financial statements.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Independent auditor’s report to the members of Adriatic Metals PLC
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 8 of the financial statements
represent a significant asset on the
consolidated statement of financial
position. See Note 3 M(ii) and Note
4a for details of the accounting
policy and critical accounting
estimate and judgements relating to
this key audit matter.
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 2022 may not be
recoverable.
In late 2022, the Group carried out a strategic review of the Raska
project which resulted in changes to the development plan for the
project. This has been considered to be an indicator of impairment.
Management has undertaken a market based valuation and
determined that the recoverable amount of the assets did not exceed
$8.5m and an impairment of $23.2m has been recognised.
Given the materiality of the E&E assets in the context of the Group’s
statement of financial position, the recognised impairment loss
and the significant judgement involved in making the impairment
assessments, we have considered this to be a key audit matter.
Valuation of subsidiary
investment in the Parent
Company Accounts
Note (I) to the Parent Company
financial statements
During the year ended 31 December 2022, impairment indicators
were noted in relation to the underlying Raska exploration assets
in Serbia. This resulted in an impairment of $22.2m against the
investment in RAS Metals d.o.o., writing this investment down to a
carrying amount of $8.5m.
The recoverability of the investments is 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 license.
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
construction, as well as the assessment of the commercial viability of
the Group’s other exploration assets.
The value of the investments in subsidiary companies and the
inherent judgement involved in determining impairment indicators
makes this a significant audit risk and a key area of focus for our audit.
How the scope of our audit addressed the key audit matter
Our specific audit testing in regard to this included:
Considered publicly available information and other information obtained during our audit in order to assess whether there were
any other potential indicators of impairment that have not been identified by Management.
Reviewed Management’s impairment assessment for reasonableness when compared to future strategic plans, noting that
Management considered a slowdown of exploration activity as an impairment indicator.
Held meetings with Management to understand the methodology used to value the E&E assets and engaging an auditor expert to
assist us to assess the appropriateness of the valuation methodology and the judgements applied.
Reviewed licence agreements, correspondence with regulatory authorities, and confirmed that the Group has complied with the
requirements to renew the exploration licences and legal title is maintained.
Made inquiries of the Group’s independent lawyers in Serbia to confirm that the Group has complied with the legal requirements
and verified the relevant documentation to renew the relevant exploration licences.
Reviewed the financial statement disclosures regarding any impairment assumptions and sensitivities to check such disclosures
are appropriate and in accordance with the accounting framework.
Key observations:
Based on the procedures performed, we found the judgement and estimates made by Management regarding the determination
of the recoverable amount of the exploration and evaluation assets, and with regards to the compliance with license terms, to be
reasonable.
Our specific audit testing in regard to this included:
Reviewed Management’s impairment assessment of the underlying development and exploration assets. Please refer to the KAM
above for further details relating to the Serbian assets held in Ras Metals d.o.o.
Assessing the Vares project in Bosnia for indicators of impairment in line with the requirements of the accounting framework.
Reviewed the terms and conditions of the signed shareholder agreement in place to confirm that the Parent Company still holds
the shares in the subsidiaries.
Reviewed the minutes of Board meetings and correspondence with regulatory authorities to identify any information that may
impact the recoverability of investments in subsidiaries.
Key observations:
Based on the procedures performed we found the judgement and estimates made by management in their impairment
assessment of the investments held in subsidiaries are reasonable.
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Independent auditor’s report to the members of Adriatic Metals PLC
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence
the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Materiality
Group financial statements
Parent company financial statements
2022 $
2,600,000
2021 $
1,200,000
2022 $
1,040,000
2021 $
480,000
Basis for determining materiality
1.5% of total assets
Rationale for the benchmark
applied
Performance materiality
Basis for determining
performance materiality
Rationale for the percentage
applied for performance
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.
1.5% of total assets, adjusted for amounts
received as part of the equity raise in the
current year not yet utilised.
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.
40% of Group materiality
Capped at 40% of Group materiality given the assessment of the
components aggregation risk.
1,820,000
70%
780,000
65%
728,000
70%
310,000
65%
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. In 2022 we increased the percentage from 65% to
70% because previously we did not encounter any material non-adjusted misstatements during our prior audits.
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Independent auditor’s report to the members of Adriatic Metals PLC
Component materiality
For the purposes of our Group audit opinion, we set materiality for each significant component of the Group,
based on a percentage of between 40% and 60% (2021: 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 $1,040,000 to $1,560,000 (2021: $480,000 to $730,000)). In the audit of each component, we further
applied performance materiality levels of 70% (2021: 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 & Risk Committee that we would report to it all individual audit differences in excess of
$52,000 (2021: $24,000). We also agreed to report differences below this threshold that, in our view, warranted
reporting on qualitative grounds.
Strategic report and
Directors’ report
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.
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.
Matters on which we
are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements and the part of the Directors’
remuneration report to be audited are not in agreement with the accounting records
and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
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.
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Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is
detailed below:
Discussing with management and the Audit & 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 network, the Companies Act 2006, tax legislation, mining laws, LSE listing rules and ASX listing
rules, QCA corporate governance code and environmental regulations.
Reviewing minutes of meeting of those charged with governance, RNS announcements and holding discussions
with management and the audit and risk committees regarding their knowledge of any known or suspected
instances of fraud;
Discussing amongst the engagement team as to how and where fraud might occur in the financial statements;
and
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 laws and regulations.
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.
Based on our risk assessment, we considered the areas most susceptible to fraud to be the inappropriate
capitalization of expenses into exploration and evaluation assets, and management override of controls.
Our procedures in respect of the above 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
noted above; and
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.
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
30 March 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
112
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
(In USD)
Assets
Current assets
Cash and cash equivalents
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Exploration and evaluation assets
Total non-current assets
Total assets
Liabilities and equity
Current liabilities
Accounts payable and accrued liabilities
Lease liabilities
Deferred Consideration
Borrowings
Total current liabilities
Lease liabilities
Provisions
Borrowings
Derivative liability
7
11
8
10
11
9
6
11
23
6
6
Consolidated statement of financial position
At 31 December 2022
Note
31 December
2022
Restated*
31 December
2021
Restated*
1 January 2021
(In USD)
Note
31 December
2022
Restated*
31 December
2021
Restated*
1 January 2021
Capital and reserves attributable to shareholders of the parent
Other receivables and prepayments
5
18,830,315
2,219,562
894,317
60,585,277
112,506,468
40,418,257
79,415,592
114,726,030
41,312,574
Share capital
Share premium
Merger reserve
Warrants reserve
Share-based payment reserve
77,860,563
29,877,774
1,324,657
8,953,835
733,246
322,943
Other equity
8,500,000
31,901,709
48,353,880
Foreign currency translation reserve
95,314,398
62,512,729
50,001,480
Retained earnings
174,729,990
177,238,759
91,314,054
Non-controlling interest
Total equity
14b
14b
14b
14d
14e
9
14h
9
5,376,349
5,279,546
4,217,209
143,829,631
143,259,675
43,946,114
23,497,730
23,019,164
22,392,879
2,743,303
4,943,436
2,743,303
5,778,882
3,629,619
7,465,235
-
-
(3,436,991)
1,260,333
1,073,214
2,221,383
(73,747,756)
(28,735,675)
(18,385,993)
107,903,026
152,418,109
62,049,455
-
-
-
107,903,026
152,418,109
64,789,770
5,341,740
2,379,000
-
-
4,318,794
2,596,730
141,674
48,657
1,161,269
3,436,991
-
144,173
7,720,740
5,621,737
6,226,551
5,807,741
4,431,212
625,424
300,235
-
-
42,498,052
16,071,066
15,836,580
6,369,219
2,502,423
4,160,918
Total liabilities and equity
174,729,990
177,238,759
91,314,054
*See note 2b for details of the restatement of the prior year comparatives.
The accompanying notes on pages 117 - 148 are an integral part of these consolidated financial statements.
The consolidated financial statements of Adriatic Metals PLC, registered number 10599833, were approved and
authorised for issue by the Board of Directors on 30 March 2023 and were signed on its behalf by:
Paul Cronin
Managing Director & Chief Executive Officer
Mike Norris
Chief Financial Officer
113
Total non-current liabilities
59,106,224
19,198,913
20,297,733
Total liabilities
66,826,964
24,820,650
26,524,284
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Consolidated statement of comprehensive income
For the year ended 31 December 2022
(In USD)
Note
Year Ended
31 December
2022
Restated *Year Ended
31 December
2021
(In USD)
Note
Year Ended
31 December
2022
Restated *Year Ended
31 December
2021
Exploration costs
General and administrative expenses
Share-based payment expense
Exploration and evaluation impairment
Other income
Operating loss
Finance income
Finance expense
Revaluation of external borrowing and
derivative liability
Revaluation of deferred consideration
Loss before taxation
Tax charge
Loss for the year
16
17
14
8
20
18
18
6
9
15
(1,361,548)
(10,639,784)
(1,295,293)
(23,186,959)
9,024
(3,962,900)
(7,265,290)
(1,978,880)
-
85,699
Other comprehensive gain/(loss) that might be reclassified to profit or loss in subsequent years:
Exchange gain/(loss) arising on translation of foreign
operations
187,119
187,119
(1,148,169)
(1,148,169)
Total comprehensive expense for the year
(46,955,699)
(15,338,981)
(36,474,560)
(13,121,371)
Loss for the year attributable to:
334,497
(7,072,693)
Owners of the parent
-
Non-controlling interest
(2,860,469)
(4,081,401)
1,763,318
151,339
27,710
(47,142,818)
(14,190,812)
-
-
Total comprehensive expense attributable to:
Owners of the parent
Non-controlling interest
(47,142,818)
(13,922,876)
-
(267,936)
(47,142,818)
(14,190,812)
(46,955,699)
(15,071,045)
-
(267,936)
(46,955,699)
(15,338,981)
(47,142,818)
(14,190,812)
Net loss per share
Basic and diluted
(pence)
14g
(17.59)
(6.32)
See note 2b for details of the restatement of the prior year comparatives.
The accompanying notes on pages 117 - 148 are an integral part of these consolidated financial statements.
114
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Consolidated statement of changes in equity
For the year ended 31 December 2022
(In USD)
Note
Share
Capital
Share
Premium
31 December 2020 Restated*
4,217,209
43,946,114
Merger
Reserve
22,392,879
Share Based
Payment
Reserve
Warrants
Reserve
Other
Equity
Foreign Currency
Translation
Reserve
Retained
Earnings
Capital and Reserves
Attributable to Owners of
the Parent
Non-
Controlling
Interest
Total
Equity
7,465,235
3,629,619 (3,436,991)
2,221,383
(18,385,993)
62,049,455
2,740,315
64,789,770
Comprehensive income for the prior year:
Loss for the year
Other comprehensive income
Total comprehensive expense
Contributions by and distributions to owners:
-
–
-
-
–
-
Issue of share capital
Settlement Placement
Share issue costs
14b
14b
14b
893,946 100,072,041
23,868
1,173,991
-
(4,486,027)
Exercise of options and performance rights
14e
120,143
990,975
Issue of options and performance rights
Exercise of Warrants
Expiry/Cancellation of options and
performance rights and warrants
14e
14b
-
-
18,248
1,562,581
-
-
-
Acquisition of subsidiary
9,14b
6,132
-
-
-
-
-
-
-
-
-
-
-
–
-
-
-
-
(3,665,232)
2,861,858
-
-
-
-
-
-
-
-
-
(655,786)
(882,979)
(230,530)
-
-
-
-
-
-
-
-
-
-
626,285
-
-
3,436,991
-
(13,922,876)
(13,922,876)
(267,936)
(14,190,812)
(1,148,169)
-
(1,148,169)
-
(1,148,169)
(1,148,169)
(13,922,876)
(15,071,045)
(267,936)
(15,338,981)
-
-
-
-
-
-
-
-
-
-
-
3,665,232
-
655,786
230,530
100,965,987
1,197,859
(4,486,027)
1,111,118
2,861,858
1,580,829
(882,979)
-
-
-
-
-
-
-
100,965,987
1,197,859
(4,486,027)
1,111,118
2,861,858
1,580,829
(882,979)
(978,354)
3,091,054
(2,472,379)
618,675
31 December 2021 Restated*
5,279,546 143,259,675
23,019,164
5,778,882
2,743,303
-
1,073,214 (28,735,675)
152,418,109
-
152,418,109
Comprehensive income for the year:
Loss for the year
Other comprehensive income
Total comprehensive expense
Contributions by and distributions to owners:
Share issue costs
-
–
-
-
-
–
-
(86,199)
Exercise of options and performance rights
14e
91,224
656,155
Issue of options and performance rights
2022 STIP awards
Expiry/Cancellation of options and
performance rights
Acquisition of subsidiary
31 December 2022
14e
14e
14e
14b
-
-
-
5,579
-
-
-
-
-
–
-
-
-
-
-
-
-
–
-
(2,130,739)
873,155
576,000
(153,862)
478,566
-
-
-
-
-
-
-
-
-
-
5,376,349 143,829,631
23,497,730
4,943,436
2,743,303
*See note 2b for details. The accompanying notes on pages 117 - 148 are an integral part of these consolidated financial statements.
-
-
-
-
-
-
-
-
-
-
-
(47,142,818)
(47,142,818)
187,119
-
187,119
187,119
(47,142,818)
(46,955,699)
-
-
-
-
-
-
-
2,130,737
-
-
-
-
(86,199)
747,377
873,155
576,000
(153,862)
484,145
1,260,333 (73,747,756)
107,903,026
-
-
-
-
-
-
-
-
-
-
(47,142,818)
187,119
(46,955,699)
(86,199)
747,377
873,155
576,000
(153,862)
484,145
107,903,026
115
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Consolidated statement of cash flows
For the year ended 31 December 2022
Net cash used in investing activities
(58,664,242)
(13,761,598)
(In USD)
Cash flows from operating activities
Loss for the year
Adjustments for:
Loss on disposal of fixed asset
Depreciation of property, plant and equipment
Amortisation of exploration & evaluation assets
Depreciation of right-of-use assets
Share-based payment expense
Finance Income
Finance expense
Movement in external borrowing and derivative liabilities
Revaluation of deferred consideration
Exploration and evaluation asset impairment
Changes in working capital items:
Note
Year Ended
31 December
2022
Restated* Year
Ended
31 December
2021
(In USD)
(47,142,818)
(14,190,812)
Purchase of property, plant and equipment
Cash flows from investing activities:
7
8
11
14
18
18
6
9
8
-
232,206
-
1,059,717
1,295,293
(334,497)
7,072,693
4,081,401
(151,339)
23,186,959
(229)
102,247
39,562
78,599
1,978,880
-
(1,763,318)
(27,710)
-
Purchase of exploration & evaluation assets
Sale of Property, plant and equipment
Prepaid property, plant and equipment
Cash flows from financing activities:
Gross proceeds from the issue of ordinary shares
2,860,469
Transaction costs arising from equity financing
Proceeds from draw down of borrowings
net of transaction costs
Settlement of Deferred Consideration
Interest paid on loans and borrowings
Interest received on cash holdings
Capital payments on leases
Note
7
8
Year Ended
31 December
2022
Restated* Year
Ended
31 December
2021
(42,231,895)
-
-
(16,432,347)
(9,993,357)
(3,770,726)
2,485
-
14b,
14i
14b,
14i
6
9
6
5
11
11
747,379
104,869,535
(86,199)
(4,486,027)
26,176,885
(525,785)
(1,700,000)
277,383
(1,890,191)
(589,377)
-
(1,635,268)
(1,841,667)
-
(59,465)
(33,302)
Increase in receivables and prepayments
(171,789)
(1,297,385)
(Decrease)/increase in accounts payable and
accrued liabilities
(360,894)
1,802,608
Interest paid on leases
Net cash used in operating activities
(11,233,068)
(10,417,089)
Net cash flows from financing activities
22,410,095
96,813,806
Net (decrease) / increase in cash and cash equivalents
(47,487,215)
72,635,119
Exchange losses on cash and cash equivalents
(4,433,976)
(546,908)
Cash and cash equivalents at beginning of the year
112,506,468
40,418,257
Cash and cash equivalents at end of the year
60,585,277
112,506,468
The accompanying notes on pages 117 - 148 are an integral part of these consolidated financial statements.
*See note 2b for details.
116
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
1. Corporate information
The consolidated financial statements present the financial information of Adriatic Metals PLC and its subsidiaries
detailed in note 3 (collectively, the “Group”) for the year ended 31 December 2022. Adriatic Metals PLC (the
Company or the parent) is a public company limited by shares and incorporated in England and Wales. The
registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham GL50 1HX, United
Kingdom.
The foreign exchange reserve was set to zero as of 30 June 2019, the earliest practical date from which
to present the consolidated financial statements in USD. Cumulative currency translation adjustments are
presented as if the Group had used USD as the presentation currency of its consolidated financial statements
since that date.
In addition, compared with the prior year, the functional currencies of certain Group companies have changed,
including the Company, which has changed from GBP to USD, and Eastern Mining d.o.o., owner of the Vares
Project, which has changed from Bosnian Marks (“BAM”) to USD. See note 4Ba for further details.
The Group’s principal activity is precious and base metals exploration and development. The Group owns the
Vares Project in Bosnia and Herzegovina and the Raska Project in Serbia.
Unless otherwise stated, all amounts indicated by “$” represent USD.
Bosnia and Herzegovina and Serbia are well-positioned in central Europe and boast strong mining history, pro-
mining environment, highly skilled workforce as well as extensive existing infrastructure and logistics.
2. Basis of preparation
A. Statement of compliance
The consolidated financial statements have been prepared in accordance with UK-adopted International
Accounting Standards in conformity with the requirements of the Companies Act 2006 (the “Companies Act”).
The consolidated financial statements were authorised for issue by the Board of Directors on 30 March 2023.
B. Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except for certain financial
instruments that have been measured at fair value.
The current financial year encompasses the 12 months ended 31 December 2022 while the comparative
financial year represents the 12 months ended 31 December 2021.
The consolidated financial statements are presented in United States Dollars (“USD” $) compared with the
prior financial statements which were presented in Great British Pounds (“GBP”, £). This change in presentation
currency reflects the fact that the USD is a more widely recognised currency for the mining sector in which the
Group operates and that its Project Finance Debt Package, offtake agreements and mining services contract are
denominated in USD. The Company considers that this change will give investors and other key stakeholders a
clearer understanding of the Group’s performance over time.
Following this change in accounting policy the impact was applied retrospectively and comparative amounts have
been restated in United States Dollars, as required by IAS 8. The procedures used for this restatement are based
on the requirements of IAS 21 as follows:
Share capital, share premium and other reserves are translated at historic rates prevailing at the dates of
transactions;
Other assets and liabilities are translated into USD at closing rates of exchange;
Trading results are translated into USD at the average rate for the financial period;
Foreign exchange differences resulting between the closing balances and the results for the period have been
presented in the foreign exchange reserve, a component within shareholders’ equity; and
C. Going concern
The Vares Feasibility Study was completed in August 2021 with a Project NPV of $1.1 billion and build cost
of $168.2m. An equity raise was successfully closed on 29 October 2021 and Orion Debt Finance Package
documents were executed to provide the Group with sufficient funds to complete the Vares Project construction
and cover ongoing owner costs until production commences in Q3 FY23 and the business becomes self-
sustaining from cash flows from operations.
Definitive documentation executed for the $142.5m Debt Finance Package with Orion was announced on 10
January 2022. Of this total, $30m was drawn down prior to 31 December 2022 and $52.5m was drawn down in
February 2023, leaving $60m currently undrawn at the signing date of these consolidated financial statements.
The Company has considered each of the conditions precedent to the remaining draw downs and is confident
that it will be able to satisfy them when required for the Vares Project development.
As announced in the Company’s Quarterly Activity Report for the quarter ended 31 December 2022, the
Project cost estimate has increased to $183m including an unutilised contingency of $10m. Sensitivity analysis
of uncommitted construction costs and potential project delay indicates that the Group and Company have
sufficient cash resources to continue in operation for a period in excess of 12 months from the date of signing
the consolidated and Parent Company financial statements.
A Debt-Service Coverage Ratio (“DSCR”) covenant is included in the Orion Debt Finance Package, with the first
DSCR testing period expected to be mid-2024. The DSCR is required to be above 1.25x and the Company’s
forecasts show substantial headroom above this.
The Directors therefore believe there is not a material uncertainty regarding going concern and that it is
appropriate to prepare the financial statements on a going concern basis.
117
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
3. Significant accounting policies
The consolidated financial statements comprise the financial statements of the Company and its following
subsidiaries at 31 December 2022:
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 entity, 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 Company 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 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.
Name of subsidiary
Eastern Mining d.o.o.
Adriatik Metali d.o.o
Country of
incorporation
Bosnia and
Herzegovina
Bosnia and
Herzegovina
Adriatic Metals Jersey Ltd
(formerly Tethyan Resource
Corp)
Jersey
(formerly
Canada)
Shareholding
at 31 Dec.
2022
Shareholding
at 31 Dec.
2021
Nature of
business
100%
100%
Mineral exploration &
development
100%
100%
Mineral exploration &
development (incorporated
during year ended 31 December
2021)
100%
100%
Holding company - financing
mining exploration of subsidiary
Adriatic Metals Services (UK)
Limited (formerly Tethyan
Resources Limited)
England and
Wales
100%
100%
Adriatic Metals Trading and
Finance Ltd
Jersey
100%
n/a
Adriatic Metals Trading &
Finance B.V.
The
Netherlands
100%
100%
Adriatic Metals Holdings BIH
Limited
England and
Wales
100%
100%
Tethyan Resources Jersey
Ltd
Taor d.o.o.
Jersey
Serbia
Tethyan Resources d.o.o.
Serbia
Global Mineral Resources
d.o.o.
Tethyan Resources Bulgaria
EOOD (liquidated during year
ended 31 December 2022)
Serbia
100%
100%
100%
100%
100%
100%
100%
100%
Bulgaria
n/a
100%
Ras Metals d.o.o.
Serbia
100%
100%
Holding company and
management services company
- financing mining exploration of
subsidiary and providing services
to other group companies.
Trading and finance company
(incorporated during year ended
31 December 2022)
Trading and finance company
(incorporated during year ended
31 December 2021)
Holding company - financing
mining exploration of subsidiary
(incorporated during year ended
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
Mineral exploration and
development
118
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
B. Standards, amendments and interpretations adopted
During the year, there was no material impact on the consolidated financial statements resulting from the
adoption of new standards and amendments.
D. Foreign currency transactions and translations
The Group determines the functional currency of each entity as set out in note 4Ba and items included in the
consolidated financial statements are measured using that functional currency.
C. Standards, amendments and interpretations effective in future years
At the date of authorisation of these consolidated financial statements, the following amendments to existing
standards had been published and had not been adopted early by the Group:
i ) Transactions and balances
Transactions in foreign currencies are initially recorded using the spot exchange rates between the functional
currency and the foreign currency, at the date the transaction first qualifies for recognition.
The following amendments are effective for the year beginning 1 January 2023:
Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
Definition of Accounting Estimates (Amendments to IAS 8);
Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12); and
IFRS 17 Insurance Contracts (Amendments to IFRS 17)
The following amendments are effective for the year beginning 1 January 2024:
IFRS 16 Leases (Amendment – Liability in a Sale and Leaseback)
IAS 1 Presentation of Financial Statements (Amendment – Classification of Liabilities as Current or Non-current)
IAS 1 Presentation of Financial Statements (Amendment – Non-current Liabilities with Covenants)
The Group anticipates that the above amendments will be adopted in its accounting policies for the first period
beginning after their effective date and does not expect them to have a material impact on the consolidated
financial statements.
Monetary assets and liabilities denominated in foreign currencies are translated at the spot rates at the reporting
date.
Foreign exchange differences arising on settlement or translation of monetary items are recognised in profit or
loss.
ii ) Group companies
On consolidation, the assets and liabilities of foreign operations are translated into USD at the rate of exchange
prevailing at the reporting date and their income statements are translated at average exchange rates prevailing
during the year. The exchange differences arising on translation for consolidation are recognised in other
comprehensive income.
E. Cash and cash equivalents
Cash and cash equivalents are comprised of cash held on deposit and other short term, highly liquid investments
with original maturities of three months or less. These deposits and investments are readily convertible to known
amounts of cash and subject to an insignificant risk of change in value.
F. Receivables
All receivables are held at amortised cost less any provision for impairment. A loss allowance for expected credit
losses is made to reflect changes in credit risk since the initial recognition.
G. Exploration and evaluation assets
Pre-licence costs
Pre-licence costs relate to costs incurred before the Group has obtained legal rights to explore in a specific area.
Such costs may include the acquisition of exploration data and the associated costs of analysing that data. These
costs are expensed in the year in which they are incurred.
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Exploration and evaluation expenditure
H. Property, plant and equipment
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.
licence costs paid in connection with a right to explore;
researching and analysing historical exploration data;
gathering exploration data through geophysical studies;
exploratory drilling and sampling;
determining and examining the volume and grade of the resource;
surveying transportation and infrastructure requirements; and
conducting market studies.
Exploration and evaluation costs include directly attributable employee remuneration, materials and fuel used,
surveying costs, drilling costs and payments made to contractors.
i ) Land
Land is held at cost less accumulated impairment losses. Once a JORC-compliant reserve is established
and development is sanctioned, land is tested for impairment and transferred to mine under construction
and depreciated in line with the useful economic life of the mine or on a unit of depletion basis. Land is not
depreciated during the exploration and evaluation phase and is considered to have an indefinite life until
determined to be part of a mine plan.
ii ) Short lived property, plant and equipment
Short lived property, plant and equipment consists of buildings, plant and machinery, office furniture and
equipment, transportation assets and computer equipment. Short lived property, plant and equipment are carried
at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of short lived
property, plant and equipment consists of the purchase price and any costs directly attributable to bringing the
asset to the location and condition necessary for its intended use. Short-lived property, plant and equipment
depreciation is provided at rates calculated to expense the cost, less estimated residual value, using the straight-
line method over the estimated useful life of the asset at the following rates:
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.
Buildings & Leasehold improvements
Plant and equipment
Shorter of 10% or lease term
15% - 33%
Exploration and evaluation expenditure in the year for activity on licences where a JORC-compliant resource has
not yet been established is expensed as incurred until sufficient evaluation has occurred to establish a JORC-
compliant resource. Costs expensed during this phase are included in exploration expenses and other operating
expenses in the statement of profit or loss and other comprehensive income.
Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that
economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the
licence as exploration and evaluation assets up to the point when a JORC-compliant reserve is established.
Capitalised exploration and evaluation expenditure is considered to be an intangible asset and measured at cost
less accumulated impairment.
Exploration and evaluation assets acquired in a business combination are initially recognised at fair value,
including resources and exploration potential that is considered to represent value beyond proven and probable
reserves. Similarly, the costs associated with acquiring an exploration and evaluation asset (that does not
represent a business) are also capitalised and subsequently measured at cost less accumulated impairment.
Once a JORC-compliant reserve is established and development is sanctioned, exploration and evaluation
assets are tested for impairment and transferred to mine under construction and amortised in line with the useful
economic life of the mine or on a unit of depletion basis. Exploration and evaluation assets are not amortised
during the exploration and evaluation phase and are considered to have an indefinite life until determined to be
part of a mine plan.
iii ) Mine under construction
Mine under construction includes construction costs as well as exploration and evaluation and land balances
transferred as noted above once a JORC-compliant reserve is established and development is sanctioned.
Expenditure which is necessarily incurred whilst commissioning the mine is also capitalised as a mine under
construction cost. Development costs incurred after the commencement of production are capitalised to the
extent they are expected to give rise to a future economic benefit.
Mine under construction costs are amortised in line with the useful economic life of the mine or rate of depletion
of resources once the mine enters into production. The method of amortisation is determined taking into account
all relevant factors at the point at which the mine enters into production.
Expenditure which is necessarily incurred whilst commissioning the mine under construction, in the period prior
to being capable of operating in the manner intended by management, are capitalised. Development costs
incurred after the commencement of production are capitalised to the extent they are expected to give rise to a
future economic benefit.
iv ) Depreciation and amortisation
The assets’ residual values, useful lives and methods of depreciation and amortisation are reviewed at each
financial year-end and adjusted prospectively if appropriate.
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I. Leases
The Group assesses at contract inception whether a contract is, or contains, a lease, based on whether it
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
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.
i ) Transition method and practical expedients applied
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional
adjustments on the date of initial application of 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 at the date of initial application; and
apply the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of
lease term remaining as of the date of initial application.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of
whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group
recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to
recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the
underlying asset when new or for short term leases with a lease term of 12 months or less.
ii ) Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short term leases
and leases of low-value assets which, are either expensed as incurred though the income statement or
capitalised. 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 from which
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.
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 amount of lease liabilities is similarly revised when the variable element of future lease payments
dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent
adjustment is made to the carrying amount of the right-of-use asset, with the revised carrying amount being
amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to
zero, any further reduction is recognised in profit or loss.
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J. Rehabilitation provision
The Group recognises provisions for contractual, constructive or legal obligations, including those associated
with the reclamation of mineral interests and property, plant and equipment, when those obligations result
from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the
rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition of the
liability, an amount equal to the corresponding provision is added to the carrying amount of the related asset and
the cost is amortised as an expense over the economic life of the asset. Following the initial recognition of the
rehabilitation provision, the carrying amount of the liability is increased for the passage of time as the discount
is unwound, and adjusted for changes to the current market-based discount rate and amount or timing of the
underlying cash flows needed to settle the obligation. The increase in the provision due to the passage of time is
recognised as interest expense.
K. Finance income and finance expense
Finance income and Finance expense are recorded on an accrual basis using the effective interest method.
L. Financial instruments
Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of
the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the
financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial
liability is derecognised when it is extinguished, discharged, cancelled or expired.
Except for trade and other receivables which do not contain a significant financing component, financial assets
and financial liabilities are measured initially at fair value plus or minus, in the case of a financial asset or financial
liability not at fair value through profit or loss, transactions costs that are directly attributable to the acquisition
or issue of the financial instrument. Trade receivables which do not contain a significant financing component
are recognised at their transaction price. Financial assets and financial liabilities are subsequently measured as
described below.
i ) Financial assets
A financial asset is subsequently recognised at amortised cost under IFRS 9 if it meets both the hold to collect
and contractual cash flow characteristics tests. A financial asset is measured at fair value through other
comprehensive income if the financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give
rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount
outstanding.
If neither of the above classifications are met the asset is classified as fair value through the profit and loss,
with changes in fair value recognised in the profit and loss statement. Even if an asset meets the above two
requirements to be measured at fair value through other comprehensive income, IFRS 9 contains an option to
designate, at initial recognition, a financial asset as measured at fair value through the profit and loss provided the
classification eliminates or significantly reduces a measurement or recognition inconsistency.
Cash and cash equivalents and trade and other receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. After initial recognition these are measured at
amortised cost using the effective interest method, less provision for impairment, if any.
ii ) Financial liabilities
Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for
financial liabilities designated at fair value through profit or loss, that are carried subsequently at fair value with
gains and losses recognised in the profit and loss statement.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Where the movement in fair value is due to a change in the entity’s credit risk, such gain or loss is recognised in
other comprehensive income.
iii ) Convertible debt
The proceeds received on issue of the Group’s convertible debt are allocated to their debt and derivative liability
components. The amount initially attributed to the debt component equals the discounted cash flows using
a market rate of interest that would be payable on a similar debt instrument that does not include an option
to convert. Subsequently, the debt component is accounted for as a financial liability measured at amortised
cost until extinguished on conversion or maturity of the debt. The remainder of the proceeds is allocated to the
conversion option and is recognised as a derivative liability.
M. Impairment of assets
i ) Financial assets
A financial asset that is not carried at fair value through profit or loss is assessed at each reporting date to
determine a loss allowance for expected credit losses. If the credit risk on a financial instrument has increased
significantly since initial recognition, the loss allowance is equal to the lifetime expected credit losses. If the credit
risk has not increased significantly, the loss allowance is equal to the twelve month expected credit losses.
The expected credit losses are measured in a way that reflects the unbiased and probability weighted amount
that is determined by evaluating a range of possible outcomes, the time value of money and reasonable and
supportable information that is available about past events, current conditions and forecasts of future economic
conditions.
ii ) Non-financial assets
The carrying amounts of capitalised exploration and evaluation expenditure for undeveloped mining projects
(projects for which the decision to mine has been not yet been deemed commercially viable and development
has not yet been authorised) are reviewed at each reporting date for indicators of impairment in accordance with
IFRS 6, and when indicators are identified are tested in accordance with IAS 36 Impairment of Assets.
Property, plant and equipment and intangible assets with finite lives are reviewed for impairment if there is an
indication that the carrying amount may not be recoverable.
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is an indication that the assets are impaired. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where
the asset does not generate largely independent cash inflows, the Group estimates the recoverable amount of
the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest identifiable group of
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assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of
assets.
The recoverable amount is the higher of fair value less costs to sell, and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessment of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount,
the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised in the profit and loss statement. All assets are subsequently reassessed for indications that an
impairment loss previously recognised may no longer exist. Where an impairment loss is subsequently reversed,
the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable
amount, but to an amount that does not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset (or cash-generating unit) in prior periods. A reversal of an
impairment loss is recognised in the profit and loss statement.
N. Income taxes
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in
respect of previous years.
Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets
and liabilities and their tax bases. However, deferred tax is not recognised on the initial recognition of goodwill, on
the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss at the time of the transaction, or on temporary differences relating to
investments in subsidiaries and jointly controlled entities where the reversal of these temporary differences can
be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.
Deferred income tax assets and liabilities are measured, without discounting, at the tax rates that are expected
to apply when the assets are recovered, and the liabilities settled, based on tax rates that have been enacted or
substantively enacted by the reporting date.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow the related tax benefit to be utilised.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets
against current tax liabilities, and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis,
or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts
of deferred tax liabilities and assets are expected to be settled or recovered.
The Group has not recognised any deferred tax assets or liabilities.
O. Earnings or loss per share
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 and merger reserve
Ordinary shares are classified as share capital. Share premium represents the excess of proceeds received over
the nominal value of new shares issued.
Incremental costs directly attributable to the issuance of new shares are shown in share premium as a deduction,
net of tax, from the proceeds.
Merger reserve represents the difference between the value of shares issued by the Company in exchange for
the value of shares acquired in respect of the acquisition of subsidiaries. Merger reserve only arises where the
issuing company takes its interest in another body corporate from below a 90% equity holding to a 90% or above
equity holding.
Q. Share-based payments and warrants payments
i ) Share-based payment transactions
The Company grants share options and performance rights to Directors, officers, consultants and employees
(“equity-settled transactions”). The Company may grant warrants to institutions in relation to an equity raise
or other transaction. The Board of Directors determines the specific grant terms within the limits set by the
Company’s share option plans.
ii ) Equity-settled transactions
The costs of equity-settled transactions are measured by reference to the fair value at the grant date and are
recognised, together with a corresponding increase in equity, over the period in which the performance and/
or service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled to the
award (the “vesting date”). The cumulative expense recognised for equity-settled transactions at each reporting
date until the vesting date reflects the Company’s best estimate of the number of equity instruments that will
ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense
recognised at the beginning and end of that period and the corresponding amount is represented in share option
reserve. No expense is recognised for awards that do not ultimately vest.
Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if
the terms had not been modified. An additional expense is recognised for any modification which increases the
total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured
at the date of modification.
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Where equity-settled transactions are awarded to employees, the fair value of the options at the date of grant is
charged to the profit and loss statement over the vesting period. Non-market performance vesting conditions
are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so
that, ultimately, the cumulative amount recognised over the vesting period is based on the number of the options
that will eventually vest. Market performance vesting conditions are incorporated into the fair value of the equity
instrument at the grant date.
Where equity-settled transactions are entered into with non-employees and some or all of the goods or services
received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the
equity instruments issued. Otherwise equity-settled transactions with non-employees are measured at the fair
value of the goods or services received.
Upon exercise of share options or warrants, the proceeds received are allocated to share capital, and share
premium if applicable, and any associated balance in share-based payments reserve is transferred to retained
earnings. The dilutive effect of outstanding options is reflected as additional dilution in the computation of diluted
earnings per share.
The Group utilises the Black-Scholes option pricing model to estimate the fair value of share options and
performance rights granted to Directors, officers and employees. The use of this model requires management to
make various estimates and assumptions that impact the value assigned to the share options and performance
rights including the forecast future volatility of the share price, the risk-free interest rate, dividend yield, the
expected life of the share options and performance rights and the expected number of options and performance
rights which will vest. See note 14f for further details regarding these inputs.
iii ) STIP equity scheme
The Group operates an STIP scheme which runs on a calendar year basis, with employees receiving either cash
or shares subsequent to year end based on to their performance during the year. An option pricing model is used
to measure the Group’s liability at each reporting date, taking into account the terms and conditions on which the
bonus is awarded and the extent to which employees have rendered their service. Movements in the liability (other
than cash payments) are recognised in the consolidated statement of comprehensive income.
R. 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 either at 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 recognises an other equity account for the deferred
consideration payable under any option agreements.
S. Other reserve accounts
Foreign currency translation reserve include gains or losses arising on retranslating the net assets of entities from
their functional currencies into the Group presentation currency.
Retained earnings include all other net gains and losses and transactions with owners, including dividends, not
recognised elsewhere.
T. Segmental reporting
The reportable segments represent all of the Group’s activities. The reportable segments are an aggregation of
the operating segments within the Group as prescribed by IFRS 8. The reportable segments are based on the
Group’s management structures and the consequent reporting to the chief operating decision maker, the Board
of Directors. These reportable segments also correspond to geographical locations such that each reportable
segment is in a separate geographic location. Income and expenses included in profit or loss for the period are
allocated directly or indirectly to the reportable segments.
The Group’s operating segments are as follows:
Bosnia and Herzegovina (principally the Vares Project);
Serbia (principally the Raska Project); and
Corporate (which supports the activities of the other two segments, principally the UK).
The Vares and Raska Projects operate in two separate distinct jurisdictions and are at different points in their
respective project life cycles.
Segment assets are those used directly for segment operations. Inter-company balances comprise transactions
between operating segments making up the reportable segments. These balances are eliminated to arrive at the
figures in the Consolidated Financial Statements.
U. Adriatic Foundation
The Adriatic Foundation (the “Foundation”) is a not-for-profit trust which was created in Bosnia and Herzegovina
with the objective of supporting the communities around the Vares Project. The Company provided the initial
funding required for the formation of the Foundation.
The Company has the ability to appoint the Board of Trustees of the Foundation and hence transactions between
the Company and the Foundation have been classified as related party on the basis of the company yielding
significant influence.
An assessment has been performed to determine whether the Company controls the Adriatic Foundation in
accordance with IFRS 10. The conclusion of this assessment is that whilst the company is able to yield significant
administrative influence over the Foundation, it is not able to affect returns to the Company. The Foundation
statute prevents the Company as the founder, and any other person associated with the Foundation, from directly
or indirectly deriving profit, or any other material or financial benefit, from the activities of the Foundation. For the
purposes of IFRS 10, the Directors have therefore concluded that the Company does not control the Foundation
and as a result the Foundation is not included in the consolidated financial statements of the Group.
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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. The significant judgements, estimates,
and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities,
income and expenses are highlighted below.
d. Convertible debt
The Group issued $20m 8.5% convertible debt through a deed of covenant dated 30 November 2020. The debt
is 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. The valuation of the debt holder’s call option embedded within this
agreement is carried out by a third party expert using management’s estimates and assumptions. See note 6 for
further details.
A. Estimates
a. Exploration and evaluation asset impairment testing
The Group reviews and tests the carrying amount of assets when its judges that an indicator of impairment
has occurred, including events or changes in circumstances that suggest that the carrying amount may not be
recoverable.
When such indicators exist, management determines the recoverable amount by performing value in use and fair
value calculations. These calculations require the use of estimates and assumptions. When it is not possible to
determine the recoverable amount for an individual asset, management assesses the recoverable amount for the
cash generating unit to which the asset belongs. The key estimates include discount rates, including the Group’s
weighted average cost of capital, future prices, future exploration and evaluation costs, production levels and
foreign currency exchange rates.
Exploration and evaluation assets at 31 December 2021 comprised the Raska Project of $31,901,708, at a value
based on consideration paid for the combined Tethyan group.
In late 2022 the Company carried out a strategic review of the Raska Project which resulted in an impairment of
$23,186,959, reducing the project’s carrying amount to $8,500,000 at 31 December 2022. See note 8 for details
of the estimates made in establishing the revised carrying value.
b. Mine under construction impairment testing
The mine under construction asset refers to the Vares Project in Bosnia and Herzegovina.
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. No changes in circumstances or other indicators of
impairment occurred during the year in respect of the Vares Project mine under construction and therefore no
impairment review or estimates of value in use and fair value were required.
c. Deferred consideration
The Group accounts for deferred consideration within financial liabilities at fair value through profit and loss. See
note 9 for further details of the deferred consideration in respect of the acquisition of Tethyan Resource Corp.
B.
Judgements
a) Functional currency
The Group transacts in multiple currencies. The assessment of the functional currency of each entity within the
consolidated Group involves the use of judgement in determining the primary economic environment in which
each entity operates.
The Group first considers the currency that mainly influences sales prices for its concentrates, goods and
services, and the currency that mainly influences labour, materials and other costs of providing goods or services.
In determining functional currency, the Group also considers the currency from which funds from financing
activities are generated, and the currency in which receipts from operating activities are usually retained.
When there is a change in functional currency, the Group exercises judgement in determining the date of change.
This assessment is driven by the primary economic environment of each entity including products, labour,
materials and professional services and the currency in which they are primarily transacted.
The Group 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. The results of this review
determined that the functional currency of each of Adriatic Metals plc, Eastern Mining d.o.o. and Adriatic Metals
Jersey Ltd should be changed to USD based on the primary economic environment in which they operate. The
Group exercised judgement in determining the date of change to be 1 January 2022 to coincide with the start
of the year, as well as the imminent signing of the Orion Debt Finance Package and the mining services contract,
which are both based in USD.
125
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
Country of
Incorporation
Functional
currency at 31
December 2022
Functional
currency at 31
December 2021
The Group uses its judgement to determine whether costs meet the capitalisation requirements in accordance
with IFRS 6 and its accounting policy on exploration and evaluation assets, including whether the activities
performed are directly attributable to increasing the value of the project.
b) Capitalisation of exploration costs
Name of Equity
Adriatic Metals plc
Eastern Mining d.o.o.
Adriatik Metali d.o.o
Adriatic Metals Jersey Ltd
England and Wales
Bosnia and
Herzegovina
Bosnia and
Herzegovina
Jersey (originally
Canada)
Adriatic Metals Services (UK) Limited
England and Wales
Adriatic Metals Trading and Finance Ltd
(incorporated during the year to
31 December 2022)
Jersey
Adriatic Metals Trading & Finance BV
Netherlands
Adriatic Metals Holdings BIH Limited
England and Wales
Tethyan Resources Jersey Ltd
RAS Metals d.o.o.
Taor d.o.o.
Tethyan Resources d.o.o.
Global Mineral Resources d.o.o.
Tethyan Resources Bulgaria EOOD
(liquidated during year to
31 December 2022)
Kosovo Resource Company (liquidated
during year to 31 December 2021)
Jersey
Serbia
Serbia
Serbia
Serbia
Bulgaria
Kosovo
USD
USD
BAM
USD
USD
USD
USD
USD
GBP
RSD
RSD
RSD
RSD
N/A
N/A
GBP
BAM
BAM
CAD
USD
N/A
USD
USD
GBP
RSD
RSD
RSD
RSD
€
€
Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that
economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the
licence as exploration and evaluation assets. There is an element of judgement involved by management as to
which costs are directly attributable to increasing the value of the project. Broadly, activities in relation to scoping,
exploration and development are deemed directly attributable, whilst activities in relation to supporting and
administrative duties are deemed not to be directly attributable.
c)
Indicators of impairment
The Group uses its judgement in assessing whether indicators of impairment have occurred.
The Group reviews and tests the carrying amount of exploration and evaluation assets when events or changes in
circumstances suggest that the carrying amount may not be recoverable in accordance with IFRS 6. Indicators of
impairment are as follows:
i.
the period for which the entity has the right to explore in the specific area has expired or will expire in the near
future, and is not expected to be renewed;
ii. substantive expenditure on further exploration for, and evaluation of, mineral resources in the specific area is
neither budgeted nor planned;
iii. exploration for and evaluation of mineral resources in the specific area have not led to the discovery of
commercially viable quantities of mineral resources and the entity has decided to discontinue such activities
in the specific area; and
iv. sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the
carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful
development or by sale.
The Group also reviews property, plant and equipment and intangible assets with finite lives for impairment if there
is an indication that the carrying amount may not be recoverable.
In assessing whether an indicator of impairment has occurred, the Group considers external sources of
information including observable indications of decline in market value, actual or expected negative changes
in the technological, market, economic or legal environment, changes in market interest rates or other market
rates of return on investments, and whether the carrying amount of its net assets is greater than its market
capitalisation. As external sources of information will typically be broader and less clearly linked to a specific asset
or cash generating unit, for example, a decline in market capitalisation below the carrying value of the entity’s net
assets. This may then require the use of judgement to determine which assets or cash generating unit should be
tested in response to an external source of information.
The Group also considers internal sources of information including changes in planned development of the
assets, evidence of obsolescence or damage, changes in the expected use or life of an asset, and evidence from
internal reporting that an asset’s economic performance is, or will be, worse than expected.
126
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
In late 2022 the Company carried out a strategic review of the Raska Project involving changes in the project’s
development plan that the Group judged to be an indicator of impairment. See note 8 for details of the resulting
impairment of $23,186,959, reducing the project’s carrying amount to $8,500,000 at 31 December 2022.
No changes in circumstances or other indicators of impairment occurred during the year in respect of the Vares
Project mine under construction.
d) Rehabilitation Provision
The Group recognises provisions for contractual, constructive or legal obligations, including those associated
with the reclamation of mineral interests and property, plant and equipment, when those obligations result
from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the
rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition of the
liability, an amount equal to the liability is added to the carrying amount of the related asset and this amount is
amortised as an expense over the economic life of the asset. Following the initial recognition of the rehabilitation
provision, the carrying amount of the liability is increased for the passage of time by unwinding the discount, and
adjusted for changes to the current market-based discount rate and to the amount or timing of the underlying
cash flows needed to settle the obligation.
Management uses its judgement and experience to determine the potential scope of closure rehabilitation work
required to meet the Group’s legal, statutory and constructive obligations, and any other commitments made to
stakeholders, and the options and techniques available to meet those obligations and estimate the associated
costs and the likely timing of those costs.
Significant judgement is also required to determine both the costs associated with that work and the other
assumptions used to calculate the provision. External experts support the cost estimation process where
appropriate but there remains significant estimation uncertainty. The key judgement in applying this accounting
policy is determining when an estimate is sufficiently reliable to make or adjust a closure provision.
Management engaged with experts Ausenco and Wardell Armstrong as part of the feasibility study to determine
total costs of closure, restoration and environmental costs over the life of the mine. Management applied
judgement to determine the impact of activity on the Vares Project in the year ended 31 December 2022, which is
a key factor in calculating the provision, and the Group recorded a provision based on the discounted value of the
expected cashflows. See note 23 for further details.
e) Entities not consolidated
The Adriatic Foundation has not been consolidated, for reasons set out in note 3u.
Deep Research d.o.o. (DR) is determined to be outside of the control of the Group because although Adriatic
Metals Jersey Ltd (the option agreement holder) has the ability to control DR via exercise of the option it does not
have the intent to do so at present until further exploration work has been completed to determine the economic
value of DR to the Group relative to the consideration that would be payable on exercise of the option.
31 December 2021
Prepayments and deposits
Debt issuance costs prepayment
Taxes receivable
Other receivables
Total
5. Receivables and prepayments
(In USD)
Accrued interest income
Vares Project prepayments and deposits
Debt issuance costs prepayment
Taxes receivable
Other receivables
Total
31 December 2022
31 December 2021
57,114
17,119,197
-
1,618,066
35,938
18,830,315
-
612,155
561,079
1,040,532
5,796
2,219,562
Accrued interest income relates to interest earned on cash holdings. Of the total interest income recognised
during the year to 31 December 2022 of $334,497, $277,383 was received in cash during the year and the
remaining $57,114 is recognised as accrued interest income.
Vares Project prepayments and deposits represent advance payments in respect of equipment purchases, as
well as mobilisation costs paid in respect of the mining services contractor equipment that had not reached site
prior to 31 December 2022.
The debt issuance costs prepayment in the Prior year reflected legal and other transaction fees incurred by the
Group while the Senior Secured Debt facility remained subject to conditions precedent, and forms part of the
$2,056,040 fees recognised at 31 December 2022 as a deduction from the value of borrowings in accordance
with IFRS 9, as set out in note 6.
The segmental analysis of receivables and prepayments is as follows:
31 December 2022
Bosnia
Serbia
Corporate
Accrued interest income
Prepayments and deposits
Taxes receivable
Other receivables
Total
-
16,802,323
1,468,539
608
18,271,470
Bosnia
421,563
-
728,760
1,168
1,151,491
-
114,756
75,343
3,105
193,204
Serbia
37,882
-
126,619
2,322
166,823
57,114
202,118
74,184
32,225
Total
57,114
17,119,197
1,618,066
35,938
365,641
18,830,315
Corporate
152,710
561,079
185,153
2,306
901,248
Total
612,155
561,079
1,040,532
5,796
2,219,562
127
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
6. Borrowings and Derivative Liability
A. Total borrowings and derivative liability
Year end balances are analysed below:
(In USD)
At 31 December 2021
Current liability
Non-current liability
Orion Senior
Secured Debt
QRC
Convertible Debt
Total
Borrowings
Derivative
Liability on QRC
Convertible Debt
-
-
-
-
-
-
-
-
-
-
(16,071,066)
(16,071,066)
(2,502,423)
(16,071,066)
(16,071,066)
(2,502,423)
Orion Senior
Secured Debt
QRC
Convertible Debt
Total
Borrowings
Derivative
Liability on QRC
Convertible Debt
-
-
-
(15,839,082)
(15,839,082)
(4,160,918)
(141,671)
(141,671)
-
(15,980,753)
(15,980,753)
(4,160,918)
(1,699,740)
(1,699,740)
-
-
-
-
-
-
-
-
-
-
(232,240)
(232,240)
(104,823)
(In USD)
1,841,667
1,841,667
-
At 31 December 2022
-
-
1,763,318
(16,071,066)
(16,071,066)
(2,502,423)
Current liability
Non-current liability
Orion Senior
Secured Debt
QRC
Convertible Debt
Total
Borrowings
Derivative
Liability on QRC
Convertible Debt
-
-
-
-
-
-
-
-
(26,212,369)
(16,285,683)
(42,498,052)
(6,369,219)
(26,212,369)
(16,285,683)
(42,498,052)
(6,369,219)
(26,176,885)
-
(26,176,885)
(35,484)
(1,700,012)
(1,735,496)
-
-
-
-
-
-
-
214,605
B. Orion Senior Secured Debt
1,700,000
1,700,000
(214,605)
(214,605)
-
-
On 10 January 2022, the Group announced the completion of a $142.5m debt financing package (“Orion Debt
Finance Package”), with Orion Resource Partners (UK) LLP (“Orion”) comprising:
-
-
(4,081,401)
$120m Senior Secured Debt; and
(In USD)
At 30 June 2020
Additions
Interest expense
At 31 December 2020
Interest expense
Foreign Exchange gain
Payment of Interest
Revaluation of fair value embedded
option
At 31 December 2021
Additions
Interest expense
Foreign Exchange gain
Payment of Interest
Revaluation on modification
Revaluation of fair value embedded
option
At 31 December 2022
(26,212,369)
(16,285,683)
(42,498,052)
(6,369,219)
$22.5m Copper Stream
The Senior Secured Debt maturity date is 30 June 2027. Interest accrues daily at an annual rate equal to a margin
of 7.5% plus the greater of (i) a floor of 0.26161% plus the CME Term SOFR for a period equal to three months and
(ii) the floor of 0.26161%.
Secured Overnight Financing Rate (“SOFR”) is a secured interbank overnight interest rate used as a reference
rate by parties in commercial contracts, as an alternative to LIBOR which was discontinued in 2021. The CME
SOFR is administered by the CME Group. At 31 December 2022 the applicable CME Term SOFR was 4.560740%,
meaning that the total interest rate applicable was 12.32235% for the few days of interest following the first draw
down funds being drawn.
128
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
The First Repayment Date is the earlier of the Project Completion Longstop Date being 30 June 2024 and the last
business day of the quarter following the quarter in which the Project Completion Date falls.
The repayment schedule provides for the repayment of the loan in 10 equal quarterly installments in each of the
10 successive quarters, with the first such quarterly repayment occurring on the First Repayment Date and the
repayment in each successive quarter occurring on the last Business Day of the relevant quarter.
The carrying amount of the liability was adjusted to the present value of the modified cashflows and a loss was
recognised in the profit or loss in the year ended 31 December 2022. Subsequent interest expense will be
calculated based on the updated internal rate of return.
Key terms and conditions of the debt agreement dated 30 November 2020 between the Company and Queens
Road Capital (“QRC”) are provided below.
Interest accrues daily and is payable on each interest repayment date, on the final maturity date, and on any earlier
date on which a loan is prepaid in full or in part.
Voluntary conversion
The Orion Debt Finance Package contains covenants and restrictive covenants typical for a project financing,
including in relation to financial reporting. It also contains security customary for a project financing, principally
security over the assets of Eastern Mining and material project-related contracts held by the Adriatic Group.
A Debt-Service Coverage Ratio (“DSCR”) covenant is included in the Orion Debt Finance Package, with the first
DSCR testing period expected to be mid-2024, and six monthly thereafter. The DSCR is required to be above
1.25x and the Company’s forecasts show substantial headroom above this.
The Orion Senior Secured Debt first tranche of $30,000,000 was drawn net of associated $1,767,075 legal
and other fees incurred by Orion as lender, with a net amount of $28,232,925 received. At 31 December 2022,
these Orion fees and a further amount of transaction fees totalling $2,056,040 incurred by the Group have
been recognised as a deduction from the value of borrowings in accordance with IFRS 9, on the basis that they
represent transaction costs directly attributable to the acquisition of the borrowings. As a result of the total IFRS
9 deduction of $3,823,115, which will be amortised over the life of the facility using the effective interest rate
method, the Orion Senior Secured Debt balance is reduced from $30,000,000 drawn down to $26,176,885.
This impact will be reversed over the life of the facility as the deduction is unwound through amortisation of the
deduction.
The Group is entitled to deduct the amount of any payment it makes to the Adriatic Foundation on behalf of the
Lenders from any interest accrued in the last quarter of each year.
C. QRC convertible debt
The Group issued $20m 8.5% convertible debt through a deed of covenant dated 30 November 2020. The debt
is convertible into fully paid equity securities in the share capital of the issuer, subject to the conditions of the
debt issue.
Modification
In December 2022, concurrently with the first draw down of the Orion Senior Secured Debt, Adriatic and QRC
executed an amendment to the 30 November 2020 deed of covenant, advising that the cash coupon has been
increased from 8.5% to 9.5% per annum effective from 10 January 2023. The amendment also confirmed that
Adriatic was not required to redeem the debt following completion of the Orion project financing. This is a change
from the original conditions of the debt issue which stated that where the Company secures a project financing
before the final maturity date of the debt, the bondholder can require the issuer to redeem the debt at its principal
amount together with the accrued but unpaid interest to such date. All other terms of the original deed remain
unchanged.
Management considered the quantitative and qualitative nature of the amendment and concluded the changes
constituted a non-substantial modification under IFRS 9 accounting standards.
The debt shall be convertible into equity securities of the Company at the option of the bondholder at any time
from the issue date 1 December 2020 until 30 November 2024. The number of equity securities to be issued will
be determined by the conversion price in effect on the relevant conversion date. The initial conversion price is
AUD 2.7976 per ordinary share.
Redemption and Purchase
a) Final redemption: Where the debt is not converted, redeemed, purchased, or cancelled by the Company
prior to the final maturity date, the debt shall be redeemed by the Company at its principal amount;
b) Redemption at the option of the issuer: Option to the issuer to redeem all the debt outstanding, prior to the
final maturity date, at its principal amount together with accrued but unpaid interest to such date if:
At any time prior to maturity date, the volume weighted average price of the equity securities for 20
consecutive days has exceeded 125% of the conversion price; or
The issuer delivers an optional redemption notice that contains an optional redemption date which falls on or
after the third anniversary of the issue date;
c) Redemption at the option of bondholder if a change of control event occurs: the bondholder receives an
option to require the issuer to redeem the debt prior to the final maturity date. In the event of a change of
control, the debt shall be redeemed at:
130% of the principal amount, if the change of control event occurs on or prior to the second anniversary of
the issuance date, together with accrued and unpaid interest till such date. This redemption ratio is no longer
applicable as no change of control event occurred on or prior to the second anniversary of the issuance date;
or
115% of the principal amount, if the change of control event occurs after the second anniversary of issuance
date, together with accrued and unpaid interest till such date
d) Redemption at the option of the debt holder in the event of project financing: In any event where the
Company secures a project financing before the final maturity date of the debt, the debt holder can require
the issuer to redeem the debt at its principal amount together with the accrued but unpaid interest to such
date. The amendment in December 2022 removed this option.
129
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
D. Derivative liability on QRC convertible debt
QRC’s option to convert the debt into equity and the associated potential issue of shares give rise to a variable
amount of cash receivable by the Company and therefore the debt fails to meet the requirements to be classified
as equity. The conversion feature of the debt has therefore been accounted for as a derivative liability, with the
value of the conversion feature dependent on factors as set out below.
Management engaged external experts to review the terms of the agreement and perform a valuation. It was
concluded that the call option in the hands of the bondholder satisfied the conditions stipulated by IFRS 9
Financial Instrument – Recognition and Measurement for the recognition of a derivative liability in the Group and
Company accounts and required a separate fair valuation.
The redemption options in the hands of the bondholder were concluded to fall outside the exemptions of IFRS
9 and to be closely related to the debt host contract. Therefore, the redemption options need not be separated
from the debt host contract and hence need not be valued separately. The Group has elected to account for both
the embedded option and debt liability at amortised cost.
Valuation Model
Sensitivity Analysis
Inputs to the Black Scholes model are based on management estimates regarding probabilities of future events.
The results are sensitive to changes in key assumptions, namely the expected term of the debt and the volatility
of the Company’s share price.
Sensitivity of the debt value to reasonably possible changes in the assumptions of expected term and volatility of
the Company’s share price are as follows:
Change in volatility of Company’s share price
Change in
expected term
26 Weeks
Unchanged
(49 weeks)
91 Weeks
40%
Unchanged (49.88%)
65%
$2.32m Decrease
$1.79m Decrease
$0.96m Decrease
$0.84 Decrease
-
$1.3m Increase
$0.01 Decrease
$0.99m Increase
$2.5m Increase
The Black Scholes model was chosen as the most appropriate pricing model to value QRC’s option to convert the
debt into equity and the valuation was updated at 31 December 2022. The main assumptions and inputs used in
the options pricing model were as follows:
7. Property, plant and equipment
Dividend yield – assumed to be nil because the Company has not declared or paid any dividends in prior years on
ordinary shares.
Strike price – The initial conversion price of AUD 2.7976 per ordinary share.
Expected term – Judgement applied to assign probability to the various redemption and put options in the
contract. Expected term of redemption calculated as 1.23 years from the valuation date.
Expected volatility – Weekly volatility over the 1.23 years (64 weeks) was calculated as 49.88% prevailing on ASX
as of the valuation date.
Risk-free rate – Risk free yield obtained from Australian Treasury bond issues converted into continuous
compound yields.
Value of underlying common stock price – The closing price of ordinary shares AUD 3.15 on the valuation date on
the ASX.
Using the assumptions set out above, the Black Scholes value of the call option in the hands of the debt holder is
$6,369,219.
Cost (In USD)
Land &
Buildings
Plant &
Machinery
Mine under
Construction
Total
31 December 2020
1,032,290
524,198
-
1,556,488
Transfer from exploration and evaluation
Asset
Additions
Disposals
Foreign exchange difference
-
-
19,633,211
19,633,211
148,860
364,818
9,479,679
9,993,357
-
(70,923)
(6,693)
(29,692)
-
(6,693)
(666,284)
(766,899)
31 December 2021
1,110,227
852,631
28,446,606
30,409,464
Additions
3,670,590
1,170,962
38,926,044
43,767,596
Recognition of Rehabilitation provision
Foreign exchange difference
-
-
-
4,431,212
4,431,212
2,546
-
2,546
31 December 2022
4,780,817
2,026,139
71,803,862
78,610,818
Additions of $43,767,569 include creditor balances of $1,535,702 at 31 December 2022 (31 December 2021:
nil). The investment in purchase of property, plant and equipment of $42,231,895 in the consolidated statement
of cash flows excludes these creditor balances.
130
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
Depreciation (in USD)
31 December 2020
Transfer from exploration and
evaluation Asset
Charge for the year
Disposals
Foreign exchange difference
31 December 2021
Charge for the year
Foreign exchange difference
31 December 2022
Net Book Value (in USD)
31 December 2020
31 December 2021
31 December 2022
Land &
Buildings
Plant &
Machinery
Mine under
Construction
Total
28,661
203,170
-
231,831
Cost (In USD)
Land &
Buildings
Plant &
Machinery
Mine under
Construction
Total
The segmental analysis of property, plant and equipment net book value is as follows:
-
21,109
-
(1,824)
47,946
13,173
-
61,119
Land &
Buildings
1,003,629
1,062,281
-
184,239
184,239
31 December 2021
81,138
(3,587)
10,949
291,670
219,033
(13,641)
497,062
-
-
7,835
192,074
-
-
192,074
Bosnia and Herzegovina
1,043,567
459,637
28,254,532
29,757,736
102,247
(3,587)
Serbia
Corporate
16,960
Total
-
18,714
1,062,281
73,536
27,788
-
-
73,536
46,502
560,961
28,254,532
29,877,774
531,690
232,206
(13,641)
750,255
31 December 2022
Bosnia and Herzegovina
4,703,342
1,420,191
71,611,788
77,735,321
Serbia
Corporate
Total
-
16,356
89,837
19,049
89,837
35,405
4,719,698
1,529,077
71,611,788
77,860,563
Plant &
Machinery
Mine under
Construction
Total
The sensitivity of the Vares Project to key project inputs is considered within the Feasibility Study, which showed
a post-tax NPV8 of $1,062m. The chart below includes sensitivities to key inputs, demonstrating that significant
headroom exists over the $71,611,788 net book value of the Vares Project mine under construction:
321,028
-
1,324,657
560,961
28,254,532
29,877,774
Chart x: Sensitivity chart of Post-Tax NPV 8% (US$ million) to inputs
Metals Price (+/1%)
Discount Rate (+/1%)
Operating Cost (+/1%)
4,719,698
1,529,077
71,611,788
77,860,563
Initial CAPEX (+/1%)
Head Grade (+/1%)
Mine under construction amounts relate to the Vares Project, located in Bosnia and Herzegovina. The balance of
exploration and evaluation asset was transferred to mine under construction at the completion of the Feasibility
Study in 2021.
$1,600
$1,400
$1,200
$1,000
$800
)
M
$
S
U
(
%
8
V
P
N
x
a
T
-
t
s
o
P
$600
(20.0%)
(10.0%)
--
10.0%
20.0%
131
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Notes to the consolidated financial statements
8. Exploration and evaluation assets
Cost (In USD)
31 December 2020
Additions
Foreign exchange difference
Vares Project in Bosnia
and Herzegovina
Raska Project
in Serbia
Exploration &
Evaluation Assets
16,592,993
31,923,450
48,516,443
3,770,726
(730,508)
-
(21,741)
3,770,726
(752,249)
Transfer to Mine under Construction
(19,633,211)
-
(19,633,211)
-
-
-
31,901,709
31,901,709
(214,750)
(214,750)
(23,186,959)
(23,186,959)
8,500,000
8,500,000
The Raska exploration and evaluation balance at 31 December 2021 of $31,901,709 mainly reflects the
$31,804,990 value recorded on the acquisition of the Tethyan group, by which the Company acquired the
Kremice, Kizevak and Sastavci licences (see note 9 for further details).
In late 2022 the Company carried out a strategic review of the Raska Project which resulted in changes to the
development plan for the project. Focusing its resources on Vares Project construction and on exploration at
Rupice and Rupice NW means that resources available for exploration in Serbia will be more focused and limited
in the coming year. The Company therefore plans to develop the Raska Project over a longer horizon, including
advancing new prospects in the Company’s tenement area during 2023 to complement Kremice, Kizevak and
Sastavci. Although the Company remains positive about the future prospects for Raska, it has determined that
the longer development horizon now envisaged makes it appropriate at this time to recognise an impairment of
$23,186,959 against the project’s carrying amount, resulting in a carrying amount of $8,500,000 at 31 December
2022. The recoverable amount has been determined by a benchmarking exercise using industry standard
valuation measures to determine a fair value less cost to dispose in line with the requirements of IAS 36. The
benchmarking involved value analysis of more than twenty single project listed mining companies with similar
project attributes (silver-zinc-lead) to derive an appropriate value for the estimated Raska Project resource. This is
considered to be a Level 3 valuation approach.
The Raska Project is managed as a single project and if advanced to the production stage, it is anticipated that
there would be a single processing plant. The project is therefore treated as a single cash generating unit, with the
post-impairment value of $8,500,000 attributed to the Raska Project as a whole instead of to specific tenements.
162,563
39,562
(17,886)
(184,239)
-
-
-
-
-
-
-
-
162,563
39,562
(17,886)
(184,239)
-
-
9. Acquisition note
On 8 October 2020 the Company finalised the acquisition of Tethyan Resource Corp. (“Tethyan”). Prior to its
acquisition Tethyan entered into an option agreement with EFPP d.o.o. the holder of the Kizevak and Sastavci
licences in Serbia, with first closing 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 and Sastavci licences were
spun out to a newly formed company called Ras Metals d.o.o. (“Ras”) in which Tethyan also held a 10% equity
interest. The spin out was a condition precedent to closing of the Tethyan acquisition.
At any time within 12 months of the Ras transaction first closing, the Company was able to acquire the remaining
90% ownership stake in Ras by:
31 December 2021
Foreign exchange difference
Impairment
31 December 2022
Amortisation
31 December 2020
Charge for the year
Foreign exchange difference
Transfer to Mine under Construction
31 December 2021
31 December 2022
Net Book Value
31 December 2020
31 December 2021
31 December 2022
16,430,430
31,923,450
48,353,880
-
-
31,901,709
8,500,000
31,901,709
8,500,000
Exploration and evaluation assets relate to the Vares Project, prior to its transfer to mine under construction in
2021, and the Raska Project in Serbia.
making a payment of €1,365k to the sellers of Ras;
granting a 2% NSR over the licences
issuing 664,000 shares of the Company to the sellers in four equal tranches every six months commencing on
second closing; and
making a €0.5m payment on the two-year anniversary of the first closing.
With the exception of the 2% NSR grant over the licences which could not be reliably estimated at that time, the
fair value of remaining consideration payable under the Ras Option agreement was estimated at $3,436,991 at 31
December 2020.
132
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Notes to the consolidated financial statements
On 23 February 2021, the Company completed the acquisition of the remaining issued share capital of Ras
making payment of €1,365k to the sellers and issuing the first tranche of 166,000 shares. Upon the acquisition of
the remaining 90% of the shares in Ras that the Company did not already hold on 23 February 2021 the balance
of the non-controlling interest was transferred to Retained Earnings.
On 24 August 2021 the second tranche of 166,000 shares was issued in line with the agreement. The third
tranche of 166,000 shares was issued on 2 March 2022 and €0.5m was also paid to sellers on 11 May 2022. The
fourth and final tranche of 166,000 shares was issued on 22 August 2022.
The fair value of the 2% NSR over the licences, which is the remaining element of deferred consideration,
continues to be estimated at the balance sheet date to be nil, on the basis that it will not be possible to make a
reliable estimate until a feasibility study has been prepared. The Company has not yet defined a JORC-compliant
resource.
Measurement of assets and liabilities at acquisition
IFRS 10 requires assets acquired to be recorded at cost, with cost 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 licences acquired).
The Kremice licence was historically accounted for as an asset acquisition by Tethyan when originally acquired.
The fair value of the consideration paid was determined and allocated to exploration and evaluation assets as
€250,000 cash plus 12,000,000 shares issued in Tethyan, equating to £1,587,934 ($2,051,262). The net liability
position of 100% owned Tethyan companies when acquired was $227,002 which includes the aforementioned
exploration and evaluation assets.
The Kizevask and Sastavci licences held by Ras were assigned a value equal to the total consideration payable of
$29,753,728 less Tethyan net liabilities of $227,002, being $29,526,726.
(In USD)
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 at acquisition
29,753,728
2,051,262
31,804,990
As part of the agreement to acquire Tethyan Group, the Company provided a convertible loan facility to Tethyan
and had advanced €1.8m under the facility to the date of acquisition on 8 October 2020. Effective the same
date this loan was amended, removing the convertible option from the loan and the conversion value $426,425
was released to the profit and loss in the period to 31 December 2020. At 31 December 2020, this financial
instrument was eliminated on consolidation for the Group.
Asset Acquisition
The net book value of assets acquired and liabilities assumed on the acquisition date is detailed below:
(In USD)
Cash and cash equivalents
Receivables and prepayments
Property, plant and equipment
Exploration & evaluation asset
Accounts payable and accrued liabilities
Related party borrowings
Total net assets acquired
Book Value
403,323
72,803
22,780
2,051,262
(655,386)
(2,121,784)
(227,002)
Management determined there was no present access to returns in Ras owing to the variable consideration
included in the exercise price at 31 December 2020. The Group therefore recognised a 90% non-controlling
interest in Ras totaling $3,436,991 measured as the balancing figure between the fair value of the acquisition,
fair value of Tethyan assets acquired, and the investment recognised in the Company accounts. Other Equity
balance of $3,436,991 was recognised. The fair value of the remaining consideration to be paid of $3,436,991
was recognised as deferred consideration, which has reduced as amounts have been settled and any difference
arising from changes in the fair value of the deferred consideration has been recognised in the profit & loss.
The total loss attributable to the non-controlling interest between the 8 October 2020 acquisition and 31
December 2020 was $696,676, which, combined with the amount recognised on acquisition of $3,436,991,
resulted in a balance of non-controlling interest at 31 December 2020 of $2,740,315.
Further losses of $267,936 were incurred by Ras Metals under the option agreement, reducing the non-
controlling interest to $2,472,379. Upon the acquisition of the remaining share capital on 23 February 2021, this
balance of the non-controlling interest and other equity was transferred to Retained Earnings.
133
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Notes to the consolidated financial statements
Movements in the deferred consideration and non-controlling interest are shown below:
10. Accounts payable and accrued liabilities
(In USD)
30 June 2020
Deferred
Consideration
Non-Controlling
Interest
Other Equity
-
Acquisition first close 8 October 2020
3,436,991
(3,436,991)
3,436,991
Ras Metals d.o.o. loss for the period
-
696,676
-
(In USD)
Trade payables
Accrued liabilities
Other payables
31 December 2022
31 December 2021
2,585,755
2,617,585
138,400
5,341,740
526,523
2,769,549
1,022,722
4,318,794
31 December 2020
Payments to sellers
Ras Metals d.o.o. loss for the period
Acquisition second close 23 February
2021 – transfer to Retained Earnings
Value of shares issued to sellers
Revaluation of fair value liability
31 December 2021
Value of shares issued to sellers
Payments to sellers
Revaluation of fair value liability
31 December 2022
3,436,991
(2,740,315)
3,436,991
(1,635,268)
-
-
(612,744)
(27,710)
1,161,269
(484,145)
(525,785)
(151,339)
-
-
267,936
-
-
2,472,379
(3,436,991)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other payables include amounts payable in relation to PAYE, prior year balance of $1,022,722 includes amounts
in relation to performance right exercises in December 2021, with resulting PAYE settled in January 2022.
11. Right-of-use assets and lease liabilities
Set out below are the carrying amounts of right-of-use assets accounted for in accordance with IFRS 16 and the
movements during the year:
Land & buildings
Plant & Machinery
(In USD)
31 December 2020
Additions
Depreciation
Foreign exchange difference
31 December 2021
Additions
Modification
Depreciation
Foreign exchange difference
31 December 2022
322,943
490,970
(78,599)
(2,068)
733,246
297,468
26,404
(155,602)
(107,937)
793,579
-
-
-
-
-
9,064,201
-
Total
322,943
490,970
(78,599)
(2,068)
733,246
9,361,669
26,404
(904,115)
(1,059,717)
170
8,160,256
(107,767)
8,953,835
The largest right-of-use asset relates to mining equipment delivered prior to 31 December 2022 under a five
year mining services contract with Nova Mining & Construction d.o.o. Remaining leases relate to administrative
buildings and coresheds for the Group.
Modification during the year relates to updated terms in respect of Serbia administrative lease, additional $26,404
recognised as right-of-use asset.
134
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Notes to the consolidated financial statements
Set out below are the carrying amounts of lease liabilities and the movements during the year:
12. Financial instruments
(In USD)
31 December 2020
Additions
Interest expense
Payments
Foreign exchange difference
31 December 2021
Additions
Modification
Interest expense
Payments
Foreign exchange difference
31 December 2022
Land & buildings
Plant & Machinery
348,892
493,250
33,302
(92,767)
(15,579)
767,098
297,468
16,850
130,771
(270,236)
(57,590)
884,361
-
-
-
-
-
-
9,062,598
458,606
(2,209,332)
(9,492)
7,302,380
Total
348,892
493,250
33,302
(92,767)
(15,579)
767,098
9,360,066
16,850
589,377
(2,479,568)
(67,082)
8,186,741
Of the total amount at 31 December 2022, $2,379,000 (prior year; $141,674) is recognised as a current liability
and the remainder $5,807,741 is shown within non-current liabilities (prior year; $625,424). See maturity analysis
in note 15b.
Modification during the year relates to updated terms in respect of Serbia administrative lease, additional $16,850
recognised as right-of-use liability.
The following are the amounts recognised in statement of comprehensive income:
Cost (In USD)
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Total amount recognised in profit or loss
12 months to
December 2022
12 months to
31 December 2021
1,059,717
589,377
1,649,094
78,599
33,302
111,901
IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy,
depending on whether the fair value measurements are derived from:
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices) (level 2); or
inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
Fair value is the amount at which a financial instrument could be exchanged in an arm’s length transaction. Set out
below are the financial instruments held at amortised cost and fair value through profit or loss and their fair value
measurement hierarchy.
See note referenced for further detail on inputs to fair value for each financial instrument.
At
amortised
cost
At fair value
through profit
or loss
Note
Total
Fair Value
Hierarchy
At 31 December 2022
(In USD)
Financial assets
Cash and cash equivalents
Accrued interest receivable
Total financial assets
Financial liabilities
Accounts payable and accrued
liabilities
Borrowings
Derivative liability
Lease liabilities
10
6
6
11
60,585,277
35,938
60,621,215
5,341,740
42,498,052
–
–
-
–
-
60,585,277
35,938
60,621,215
N/A
N/A
5,341,740
N/A
42,498,052
-
6,369,219
6,369,219
8,186,741
–
8,186,741
The following are the amounts recognised in statement of cashflow:
Net financial assets/(liabilities)
4,594,682
(6,369,219)
(1,774,537)
Total financial liabilities
56,026,533
6,369,219
62,395,752
Cost (In USD)
Capital payments on lease liabilities
Interest paid on leases liabilities
Total amount paid in respect of lease liabilities
12 months to
December 2022
12 months to
31 December 2021
(1,890,191)
(589,377)
(2,479,568)
(59,465)
(33,302)
(92,767)
Level 3
Level 3
Level 3
135
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Notes to the consolidated financial statements
At 31 December 2021
(In USD)
Financial assets
Cash and cash equivalents
Total financial assets
Financial liabilities
Accounts payable and accrued
liabilities
Borrowings
Derivative liability
Deferred Consideration
Lease liabilities
At
amortised
cost
At fair value
through profit
or loss
Note
Total
Fair Value
Hierarchy
112,506,468
112,506,468
10
4,318,794
112,506,468
112,506,468
N/A
-
4,318,794
N/A
-
-
-
-
6
6
9
11
16,071,066
16,071,066
-
-
2,502,423
2,502,423
1,161,269
1,161,269
767,098
-
767,098
Level 3
Level 3
Level 1
Level 3
Total financial liabilities
21,156,958
3,663,692
24,820,650
Net financial assets/(liabilities)
91,349,510
(3,663,692)
87,685,818
13. Financial risk management
A. Credit risk
Credit risk arises from the risk that a counter party will fail to perform its obligations. Financial instruments
that potentially subject the Group to concentrations of credit risk consist of cash and cash equivalents and
receivables (excluding prepayments).
Due to the nature of the business, the Group’s exposure to credit risk arising from routine operating activities is
currently inherently low. However, the Audit & Risk Committee considers the risks associated with new material
counterparties where applicable to ensure the associated credit risk is of an acceptable level.
The total carrying amount of cash and cash equivalents and receivables represents the Group’s maximum credit
exposure.
The Group’s cash is held in major UK, Jersey, Australian, Serbian and Bosnian financial institutions, and as such
the Group is exposed to credit risks of those financial institutions. The Group’s main cash holdings are located in
UK and Jersey A1 or A2 rated institutions and as such are considered to have low credit risk.
The Group’s receivables primarily relate to value added tax receivables due from governments in the UK and
Bosnia and Herzegovina. These amounts are excluded from the definition of financial instruments in the accounts
and in any event are considered to have low credit risk. Of the remaining receivables and prepayments, any
changes in management’s estimate of the recoverability of the amount due will be recognised in the period of
determination and any adjustment may be significant.
The Board of Directors, with input from the Audit & Risk Committee, is ultimately responsible for monitoring
exposure to credit risk on an ongoing basis and does not consider such risk to be significant at this time. As such,
the Group considers all of its financial assets to be fully collectible.
B. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The
Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to
meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses.
The following table illustrates the maturity analysis of the Group’s contractual gross financial liabilities based on
exchange rates at the reporting date. The contractual gross financial liabilities shown below are undiscounted
estimated cash outflows which, where applicable, include estimated future interest payments, and certain
amounts therefore differ from the amounts presented in the consolidated financial statements and elsewhere in
the accompanying notes.
As at 31 December 2022
(In USD)
Within
30 days
30 days to
6 months
6 to 12
months
Accounts payable and accrued liabilities
5,341,740
-
-
–
-
-
-
-
-
198,250
991,250
1,189,500
7,995,030
5,539,990
991,250
1,189,500
60,680,738
Borrowings
Derivative liability
Lease liabilities
As at 31 December 2021
(In USD)
Within
30 days
30 days to
6 months
6 to 12
months
Accounts payable and accrued liabilities
4,126,979
Borrowings
Derivative liability
FV Option Liability on acquisition
Lease liabilities
-
-
-
4,126,979
–
-
-
864,867
70,837
935,704
–
-
-
296,401
70,837
Over 12
months
-
46,316,489
6,369,219
Over 12
months
191,815
16,071,066
2,502,423
-
854,183
367,238
19,619,487
136
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
C. Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and
interest rates will affect the value of the Group’s financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable limits, while maximising long term returns.
The Group conducts development and exploration projects in Bosnia and Herzegovina and in Serbia. As a result,
a portion of the Group’s expenditures, receivables, cash and cash equivalents, accounts payable and accrued
liabilities are denominated in Bosnian Marks, Serbian Dinar, Great Britain Pounds, Australian Dollars, and Euros and
are therefore subject to fluctuation in exchange rates.
At 31 December 2022, a 10% change in the exchange rate between USD and the Euro, Bosnian Mark and Serbian
Dinar, which is a reasonable estimation of volatility in exchange rates, would have an impact of approximately
$0.7m on the Group’s total comprehensive loss, and approximately $0.8m on the balance of cash and cash
equivalents.
D. Fair values
The fair value of cash, receivables, accounts payable and accrued liabilities approximate their carrying amounts
due to the short term nature of the instruments.
As set out in note 12, fair value measurements recognised in the consolidated statement of financial position
subsequent to their initial fair value recognition can be classified into Levels 1 to 3 based on the degree to which
fair value is observable.
There were no transfers between any levels of the fair value hierarchy in the current or prior years.
E. Capital management
The Group’s objectives in managing capital are to safeguard its ability to operate as a going concern while
pursuing exploration and development and opportunities for growth through identifying and evaluating
potential acquisitions of assets or businesses. The Company defines capital as the equity attributable to
equity shareholders of the Company which at 31 December 2022 was $107,903,026 (31 December 2021:
$152,418,109).
The Group sets the amount of capital in proportion to its risk and corporate growth objectives. The Group
manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics
of the underlying assets.
See note 6 for details of the Group’s borrowings and derivative liability.
14. 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
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 USD)
Share Premium
In USD)
Merger Reserve
(In USD)
207,576,675
4,217,209
43,946,114
22,392,879
49,350,000
893,946
100,072,041
-
332,000
6,132
-
626,285
1,287,236
23,868
1,173,991
-
-
(4,486,027)
6,542,958
120,143
990,975
-
-
-
-
Shares issued on exercise of warrants
984,371
18,248
1,562,581
31 December 2021
266,073,240
5,279,546
143,259,675
23,019,164
Shares issued as consideration for
acquisition of subsidiary
332,000
5,579
-
478,566
Share Issue costs
-
-
(86,199)
Shares issued on exercise of options
and performance rights
6,341,052
91,224
656,155
-
-
31 December 2022
272,746,292
5,376,349
143,829,631
23,497,730
The average price paid for shares issued in the year was $0.19 per share (31 December 2021: $1.82 per share).
The settlement placement during 2021 related to a Deed of Settlement and Release with Sandfire Resources
Limited (“Sandfire”) announced by the Company on 3 November 2020, whereby both parties agreed to settle
a dispute announced by the Company on 31 July 2020 regarding a Collaboration and Strategic Partnership
Deed previously entered into between them. Sandfire chose to exercise its anti-dilution right in respect of issues
of equity by the Company subsequent to the settlement, up to the point of the Orion Equity Subscription as
announced on 13 October 2021, and subsequently sold its entire holding in the Company.
137
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
C. Share options and performance rights
All share options and performance rights are issued under the Group’s share option plan.
The following table summarises movements of the Company’s share option plan:
Options outstanding:
At 31 December 2022
Weighted average
exercise price
of options (USD)
Number of
options
31 December 2020
0.41
17,369,779
Number of
performance
rights
3,735,000
1,657,259
-
Granted
Exercised
Expired
N/A
0.33
0.31
(3,140,699)
(3,402,259)
(2,016,600)
(1,000,000)
31 December 2021
0.39
12,212,480
Granted
Exercised
Expired
31 December 2022
N/A
0.12
1.28
0.46
-
(7,016,600)
(21,580)
5,174,300
990,000
548,012
(290,000)
(306,418)
941,594
21,104,779
1,657,259
(6,542,958)
(3,016,600)
13,202,480
548,012
(7,306,600)
(327,998)
6,115,894
Total options and
performance rights
Grant date
Options
outstanding
Exercise
price
4,000,000
A$0.20
0.5
1 July 2023
4,000,000
27 April 2018
8 October 2020 (1)
8 October 2020
8 October 2020
8 October 2020
8 October 2020
3,320
29,880
91,300
24,900
24,900
£1.06
£1.06
£1.80
£2.22
£1.20
Weighted
average
remaining
contractual
life (Years)
Expiry date
Number
exercisable
-
5 December 2022
3 January 2023
28 February 2024
7 March 2024
19 August 2024
0.1
1.2
1.2
1.6
0.9
3.320
29,880
68,060
14,940
14,940
6 November 2020
1,000,000
A$2.20
5,174,300
7 November 2023
1,000,000
5,131,140
1. The conditions to exercise were met prior to the expiry date of 5 December 2022 and the shares were subsequently
On exercise, holders of performance rights are required to pay £0.013355 for each performance right exercised,
being the nominal value of one ordinary share.
No options were granted during the year or prior year. Performance rights granted in the year were valued using
the Black-Scholes method (see note 14f).
issued on 17 January 2023.
At 31 December 2021
Grant date
27 April 2018
29 November 2019
Options
outstanding
Exercise
price
9,000,000
1,000,000
A$0.20
A$1.00
29 November 2019
1,000,000
A$1.25
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
£1.06
£1.06
£1.80
£2.22
£1.20
6 November 2020
1,000,000
A$2.20
12,212,480
Weighted
average
remaining
contractual
life (Years)
1.5
0.9
0.9
0.9
1.0
2.2
2.2
2.6
1.9
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
138
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
Performance rights outstanding:
At 31 December 2022
D. Warrants reserve
Warrants were issued as part of Tethyan Resource Corp acquisition.
The following table presents movements in the Group’s warrants reserve:
Grant date
6 August 2020
17 February 2022
17 February 2022
17 February 2022
5 April 2022
5 April 2022
5 April 2022
At 31 December 2021
Grant date
29 November 2019
6 August 2020
18 November 2020
30 June 2021
30 June 2021
30 June 2021
01 July 2021
Performance
rights outstanding
Weighted average remaining
contractual life (Years
500,000
100,000
100,000
41,594
100,000
50,000
50,000
941,594
2.0
1.0
1.5
3.0
1.0
2.0
3.0
Expiry date
31 December 2024
31 December 2023
30 June 2024
31 December 2025
31 December 2023
31 December 2024
31 December 2025
Number
exercisable
-
-
-
-
-
-
-
-
(In USD)
31 December 2020
Exercise of warrants
Expired warrants
31 December 2021
Exercise of warrants
Expired warrants
31 December 2022
At 31 December 2022
Warrants reserve
3,629,619
(655,786)
(230,530)
2,743,303
-
-
2,743,303
Performance
rights outstanding
Weighted average remaining
contractual life (Years
Expiry date
Number
exercisable
Grant date
Warrants
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
Expiry date
Number
exercisable
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
28 November 2022
50,000
29 November 2019
2,651,020
A$0.88
1.1
30 January 2024
2,651,020
31 December 2024
31 December 2022
31 December 2022
31 March 2023
31 March 2024
30 June 2023
-
40,000
100,000
-
-
-
2,651,020
2,651,020
At 31 December 2021
Grant date
Warrants
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
Expiry date
Number
exercisable
190,000
29 November 2019
2,651,020
A$0.88
2.1
30 January 2024
2,651,020
2,651,020
2,651,020
139
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Notes to the consolidated financial statements
E. Share-based payment reserve
The following table presents changes in the Group’s share-based payment reserve during the year ended
31 December 2022:
F. Share-based payment expense
During the year ended 31 December 2022; the Group recognised share-based payment expenses of $1,295,293
(31 December 2021: $1,978,880).
(In USD)
31 December 2020
Exercise of share options and performance rights
Issue of performance rights
Expiry/cancellation of share options and performance rights
31 December 2021
Exercise of share options and performance rights
Issue of performance rights
Short term incentive plan awards
Expiry/cancellation of share options and performance rights
31 December 2022
Share-based payment reserve
7,465,235
(3,665,232)
2,861,858
(882,979)
5,778,882
(2,130,739)
873,155
576,000
(153,862)
4,943,436
(In USD)
Awards and expiry/cancellations during the year
Issue of options and performance rights
Short term incentive plan awards
Expiry/cancellation of options
Awards and expiry/cancellations relating to prior years awards
Issue of options and performance rights
Expiry/cancellation of options
Year Ended
31 December 2022
Year Ended
31 December 2021
367,525
576,000
(3,971)
939,554
505,630
(149,891)
355,739
1,295,293
317,318
-
-
317,318
2,544,540
(882,978)
1,661,562
1,978,880
By agreement with the Company, certain members of the Company’s executives elected to reinvest their short
term incentive plan cash bonuses in respect of performance in the year ended 31 December 2022. In lieu of
paying such cash bonuses, on 13 February 2023 the Company issued an aggregate of 258,760 new ordinary
shares at an issue price of £1.70 per share. This transaction falls under the scope of IFRS 2 and for the year
ended 31 December 2022, $576,000 has been recognised in the share-based payment reserve (prior year; nil).
The issue of options and performance rights gives rise to a share-based payment expense which is based on the
fair value of the share-based payment compensation, which is recognised over the expected vesting period.
The fair value of the share-based compensation was estimated on the dates of grant using the Black-Scholes
option pricing model with the following weighted average assumptions:
Risk-free interest rate
Expected volatility (1)
Expected life (years)
Fair value per performance right
Year Ended
31 December 2022
Year Ended
31 December 2021
0.33% -1.31%
0.01%
33% - 36%
44.14% - 44.21%
1.7 – 3.9
1.5 – 2.75
$1.50 – $1.79
$1.68-$1.86
1. Expected volatility is derived from the Company’s historical share price volatility.
All options and performance rights have both market and non-market vesting conditions with the exception
of those issued to Non-Executive Directors in prior periods. Non-market vesting conditions include Group and
individual performance targets such as permitting milestones, exploration drilling rates or completion of business
improvement projects. Details of the vesting condition relating to options and performance rights issued to
executive Directors are included in the Remuneration & Nomination Committee Report.
140
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
G. Per share amounts
Loss for the year attributable to owners of the parent equity
(In USD)
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
Basic loss per share (cents)
Dilluted loss per share (cents)
Year Ended
31 December 2022
Year Ended
31 December 2021
14,142,818
13,922,876
15. Taxation
A. Current taxation
The tax charge for the year comprises:
267,970,085
220,323,937
(In USD)
282,171,511
245,652,425
(17.59)
(16.71)
(6.32)
(5.67)
Current tax expense
Prior year tax expense
Overseas tax
Deferred tax expense
Adjustments to deferred tax liability
Total tax charge
A total of 941,594 (31 December 2021: 990,000) options and performance rights have been excluded from the
calculation of diluted EPS because their exercise was contingent on the satisfaction of certain criteria that had
not been met at the end of the respective year.
H. Foreign currency translation reserve
The table below reconciles the tax charge for the period with the standard rate of corporation tax in the United
Kingdom applied to the loss for the year:
(In USD)
31 December 2020
Other comprehensive income
31 December 2021
Other comprehensive income
31 December 2022
Foreign Currency
Translation Reserve
(In USD)
2,221,383
Loss before tax
(1,148,169)
1,073,214
187,119
1,260,333
Expected income tax recovery – 19% (2021 - 19%)
Expenses not deductible for tax purposes
Different Tax rates applied in overseas jurisdictions
Unrecognised taxable losses and timing differences
Total income taxes
Year Ended
31 December 2022
Year Ended
31 December 2021
47,142,818
8,957,135
(4,405,522)
(525,663)
(4,026,050)
-
14,190,812
2,696,945
(208,793)
(595,873)
(1,892,279)
-
I. Cash flow from financing activities
In the year to 31 December 2022, net cash flow proceeds from the issue of ordinary shares in the year was
$747,379 (31 December 2021: $104,869,535). Transaction costs arising from equity financing activities totals
$86,199 (31 December 2021: $4,486,027), and transaction costs arising from debt financing activities totals
$3,823,115 (31 December 2021: nil).
141
Year Ended
31 December 2022
Year Ended
31 December 2021
–
-
–
–
–
-
–
-
–
–
–
-
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
B. Deferred tax
The Group has not recognised a deferred tax balance or gain/loss for the years ended 31 December 2022 or 31
December 2021 because of uncertainty regarding recoverability against future taxable profits. At each year end,
the Group had the following non-capital losses available to carry forward to future years:
17. General and administrative expenses
(In USD)
Wages and salaries
Consultancy fees
37,864,738
20,206,452
Not applicable
Cash remuneration in respect of qualifying services
31 December
2022
31 December
2021
Expiry
Date
6,808,636
11,377,330
2,903,294
8,855,918
56,050,704
31,965,664
5 years
5 years
(In USD)
UK
Bosnia and Herzegovina
Serbia
Professional fees
Amortisation
Depreciation
Audit fee
Non audit services
Marketing
Stock exchange fees
Property Costs
IT expense
Insurance
Transportation costs
Other costs
The expiry of non-capital losses available to carry forward in Bosnia and Herzegovina and Serbia is as follows:
At 31 December 2022
(In USD)
Within one year
1-2 years
2-3 years
3-4 years
Within 5 years
Bosnia and Herzegovina
297,835
531,128
663,013
1,133,211
4,183,449
6,808,636
Serbia
883,447
977,426
1,696,030
5,232,143
2,588,284
11,377,330
16. Exploration activities expensed
(In USD)
Exploration activities expensed
Year Ended
31 December 2022
Year Ended
31 December 2021
1,361,548
3,962,900
Exploration activities expensed during the year represent costs incurred at the Raska Project, for which a JORC-
compliant resource has not yet been established.
Note
Year Ended
31 December 2022
Year Ended
31 December 2021
8,11
7
4,446,812
1,009,655
5,456,467
892,886
1,059,717
232,206
194,600
45,980
777,612
188,862
412,292
218,407
225,556
324,626
610,573
2,651,487
1,115,700
3,767,187
1,176,342
118,161
102,247
115,233
34,392
433,444
239,955
229,412
128,727
121,184
132,169
666,837
10,639,784
7,265,290
142
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Notes to the consolidated financial statements
18. Finance income and expense
(In USD)
Interest income
Finance income
Interest income relates to interest earned on cash holdings.
(In USD)
Interest expense
Interest expense on lease liabilities
Foreign exchange loss
Finance expense
Year Ended
31 December 2022
Year Ended
31 December 2021
334,497
334,497
-
-
Year Ended
31 December 2022
Year Ended
31 December 2021
1,890,937
589,377
4,592,379
7,072,693
1,809,476
33,302
1,017,691
2,860,469
Interest expense principally relates to the QRC convertible bond. See note 6c for details.
143
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
19. Segmental information
The segmental analysis of the Group’s loss after tax and movement in non-current assets is as follows:
Year ended 31 December 2022
Year ended 31 December 2021
(In USD)
Exploration costs
General and administrative expenses
Share-based payment expense
Exploration and evaluation impairment
Other income
Operating Loss
Finance income
Finance expense
Revaluation of external borrowing and derivative liability
Revaluation of deferred consideration
Bosnia
(775)
(3,444,901)
-
-
(1,360,773)
(1,203,301)
-
Serbia
Corporate
Total
-
(1,361,548)
Bosnia
(601)
(5,991,582)
(1,295,293)
(10,639,784)
(1,211,605)
(1,295,293)
-
(23,186,959)
(23,186,959)
Serbia
Corporate
(3,962,299)
(1,929,522)
-
-
(4,124,163)
(1,978,880)
Total
(3,962,900)
(7,265,290)
(1,978,880)
9,024
9,024
72,210
13,489
85,699
(3,445,676)
(2,564,074)
(30,464,810)
(36,474,560)
(1,139,996)
(5,891,821)
(6,089,554)
(13,121,371)
-
(735,100)
-
-
-
(64,253)
-
-
334,497
(6,273,340)
(4,081,401)
151,339
334,497
(7,072,693)
(4,081,401)
151,339
-
-
-
-
-
-
-
-
-
(2,860,469)
1,763,318
27,710
-
(2,860,469)
1,763,318
27,710
Loss before taxation
Tax charge
Loss for the year
(4,180,776)
(2,628,327)
(40,333,715)
(47,142,818)
(1,139,996)
(5,891,821)
(7,158,995)
(14,190,812)
-
-
-
-
-
-
-
-
(4,180,776)
(2,628,327)
(40,333,715)
(47,142,818)
(1,139,996)
(5,891,821)
(7,158,995)
(14,190,812)
Purchase of mining under construction assets
Purchase of exploration & evaluation assets
37,390,342
-
-
-
-
-
37,390,342
-
9,479,679
3,770,726
-
-
-
-
9,479,679
3,770,726
144
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
20. Other income
Transactions and balances with these related parties were as follows:
(In USD)
Recharge of corporate office facilities and services
Miscellaneous income
Year Ended
31 December 2022
Year Ended
31 December 2021
9,024
-
9,024
13,489
72,210
85,699
Recharge of corporate office facilities and services relates to shared facilities of the Company’s registered UK
office address. See related party disclosures for further details.
Miscellaneous income in the year ended 31 December 2021 related to the sale of scrap metal as part of
preparatory works at the Vares processing plant.
21. Related party disclosures
A. Related party transactions
The Group’s related parties include key management personnel, companies which have directors in common and
their subsidiaries and any entities over which the Company may exert significant influence. The Company has
identified the following related parties:
Swellcap Limited, an entity controlled by Paul Cronin;
Black Dragon Gold Corp, an entity of which Paul Cronin is the Non Executive Chairman and substantial
shareholder;
Legal Solutions d.o.o., an entity of which Sanela Karic is Chief Executive Officer and substantial shareholder;
OMF Fund III (F) Ltd an entity controlled by Orion Resource Partners (UK) LLP, a major shareholder in Adriatic
Metals PLC and provider of the Senior Secured Debt to Adriatic Metals Trading and Finance Ltd.;
Ventura Trustees Limited provides administration and accountancy services to Adriatic Metals Trading and
Finance Ltd. Darren English and Stuart Hodgson are directors, and Paulina Harvey is an employee, of Ventura
Trustees Limited, in which capacity they are also directors of subsidiary Adriatic Metals Trading and Finance Ltd.,
Baccata Secretaries Limited provides company secretarial services to Adriatic Metals Trading and Finance Ltd.
Darren English and Stuart Hodgson are directors of Baccata Secretaries Limited, in which capacity Darren English
is a director, and Stuart Hodgson was a director until his resignation during the year, of Adriatic Metals Trading and
Finance Ltd.; and
The Adriatic Foundation is a not-for-profit trust which was created in Bosnia and Herzegovina with the objective of
supporting the communities around the 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 the Foundation has therefore been classified as a related party on the basis that the Company is in a position
to yield significant influence over it.
Year ended
31 December 2022
Year ended
31 December 2021
Related Party
(In USD)
(Payments to)/
received from
Balance (owed
to)/due from
(Payments to)/
received from
Balance (owed
to)/due from
Nature of
transactions
Swellcap Limited
-
-
(19,293)
-
Black Dragon
Gold Corp
Black Dragon
Gold Corp
Legal Solutions
d.o.o
OMF Fund III (F)
Ltd
Ventura Trustees
Limited
Baccata
Secretaries
Limited
Adriatic
Foundation
Adriatic
Foundation
Adriatic
Foundation
8,973
1,543
11,240
2,315
(6,276)
-
(14,381)
(2,875)
30,000,000
(30,030,806)
(10,242)
(15,813)
396
(1,513)
-
-
-
-
-
-
-
-
-
-
(7,510)
(13,155)
(119,314)
-
-
-
-
-
-
-
Corporate office
facilities and
services
Corporate office
facilities and
services
Travel Expenses
Legal Services
Senior Secured
Debt
Administration
and accountancy
services
Company
secretarial services
Initial establishment
costs
S Karic’s waived
board fees
Donation of
€100,000.
During the year ended 31 December 2021, 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.
The Company announced on 9 June 2021 its intention to donate 0.25% of the future profits from its operations in
Bosnia and Herzegovina to the Foundation.
Transactions with key management personnel are disclosed in note 21b below.
145
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
B. Key management personnel compensation
Compensation for key management personnel is shown in the table below. Key management personnel are those
persons having authority and responsibility for planning, directing and controlling the activities of the Group. Key
management personnel are considered to be the Non-Executive Directors and the Managing Director and Chief
Executive Officer in the year ended 31 December 2022 as well as the previous Chief Financial Officer up until
departure.
22. Directors and employees
Employees of the Group are all employees including Directors, key management personnel and personnel in
management positions engaged under management services contracts. The table below shows total costs for all
employees, including costs capitalised during the year.
(In USD)
Board fees
Consultancy fees
KPI bonus
Short term incentive plan bonus
Other
Cash remuneration in respect of qualifying services
Share-based payments expense
Social security costs
Year Ended
31 December 2022
Year Ended
31 December 2021
385,455
465,257
-
272,597
117,561
1,240,870
-
29,512
1,270,382
217,781
571,003
96,297
267,546
335,624
38,878
1,527,129
(In USD)
Wages and salaries
Consultancy fees
Cash remuneration in respect of qualifying services
Social security costs
Defined contribution pension cost
-
Share-based payments expense
1,152,627
Total
Average number of employees
Year Ended
31 December 2022
Year Ended
31 December 2021
4,775,218
2,373,539
7,148,757
2,365,912
12,172
1,295,293
10,822,134
158
2,733,130
1,128,075
3,861,205
605,363
12,682
1,978,880
6,458,130
109
The average number of employees was 158 in the year (31 December 2021 – 109 employees) due to increasing
staff numbers as the Vares Project progressed.
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 14f of the accounts.
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 14f of the accounts.
Consultancy fees above include the following amounts paid to related party companies controlled by key
management personnel.
The balances owed at 31 December 2022 in respect of STIP bonuses was $338,839 to the Managing Director
and Chief Executive Officer. There were no other balances outstanding with related parties at 31 December 2022
(31 December 2021: $133,504 in respect of GPE Consultancy Limited a company controlled by the previous
Chief Financial officer).
Directors’ remuneration is set out below:
(In USD)
Board fees
Consultancy fees
KPI bonus paid
Accrued cash bonus
Cash remuneration in respect of qualifying services
Average number of Directors
Year Ended
31 December 2022
Year Ended
31 December 2021
385,455
380,542
-
272,597
1,038,594
6
217,781
334,846
96,297
134,041
782,965
6
146
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
Additionally, the monetary value of directors’ share awards that vested in the year, 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 $nil (31 December 2021: $1,497,409) of which nil relates to Non-Executive Directors
(31 December 2021: nil).
The highest paid Director in the year ended 31 December 2022 received cash remuneration, excluding notional
gains on share options or performance rights, of $601,303 (31 December 2021: $562,923). The highest paid
Director in the year ended 31 December 2022 received remuneration, including notional gains on share options
or performance rights, of $601,303 (31 December 2020: $2,060,332).
23. Rehabilitation provision
Based on construction activity on the Vares Project during the year, the Group has recognised a provision of
$4,431,212 for its future closure, restoration and environmental obligations.
(In USD)
Undiscounted rehabilitation provision
Impact of discounting
31 December 2022
31 December 2021
6,551,455
(2,120,243)
4,431,212
-
-
-
The provision represents the net present value of the Company’s best estimate of the Vares mine’s future closure,
restoration and environmental obligations, based on the extent of land and other disturbance at 31 December
2022 caused by construction and other activities.
The Vares mine is not yet operational and the current mine life is estimated as ten years. Expenditure for
rehabilitation will therefore occur more than 5 years after the balance date.
The fair value of the above provision is measured by unwinding the discount on expected future cash flows over
the period up to closure, using a discount factor of 3.6% that reflects the credit-adjusted risk-free rate of interest.
The yield of US Treasury bonds with a maturity profile commensurate with the anticipated rehabilitation schedule
has been used to determine the discount factor applied to anticipated future rehabilitation costs.
The sensitivity of the provision to a 1% change in the discount factor is shown below:
a decrease from 3.6% to 2.6% would increase the provision by $0.7m with a corresponding increase in Property,
plant and equipment; and
an increase from 3.6% to 4.6% would decrease the provision by $0.4m with a corresponding decrease in
Property, plant and equipment.
Future climate change risks could impact the rehabilitation provision both in terms of the nature of
decommissioning and rehabilitation required, as well as the cost of these activities given its long term nature.
Climate change risks and mitigations have been considered in the TCFD Climate Disclosure within the Directors
report, based on scenario analysis of potential future transition and physical risks. Specific detailed analysis of
the potential impacts of climate risks will be carried out in future periods, which could result in adjustments to the
provision.
24. Commitments and contingencies
At 31 December 2022, the Group had entered into a number of supply and works contracts as part of the
development of the Vares Project. The expected payments in relation to these contracts which were not required
to be recognised as liabilities at 31 December 2022 amounted to approximately $34m. Of this total, approximately
$33m relates to contracts that are able to be terminated by the Company at any point in time. The amount
payable following termination would be less than this total, with the precise amount depending on the timing of
termination in each case. In addition, of the same total of approximately $34m, approximately $18m relates to
contracts that can be suspended by the Company, with the Company paying only direct costs that are reasonably
incurred and directly related to any such suspension for the time the supply of the goods is suspended.
In addition to the above capital commitments, the Group has entered into a five-year mining services contract
with Nova Mining & Construction d.o.o. The contract is able to be terminated for convenience by the Company at
any point in time. Amounts payable following such termination would include demobilisation and similar costs, as
well as a compensation payment of up to $5m, depending on the timing of termination. As this amount reduces
on a straight line basis over the life of the contract, the termination for convenience amount at 31 December
2022 would be $4.4m. In addition, the Group has committed to purchase the mining equipment provided by Nova
Mining & Construction d.o.o., in order to ensure continuity of operations.
147
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the consolidated financial statements
25. Net cash and borrowings
26. Prior year adjustment
An analysis of net cash and borrowings, including lease liabilities, and movements in each year is shown below.
See note 2b for details of the presentational currency change and resulting restatement of comparatives.
(In USD)
Cash and cash equivalents
Borrowings
Lease Liabilities
31 December 2022
31 December 2021
27. Subsequent Events
60,585,277
(42,498,052)
(8,186,741)
9,900,484
112,506,468
(16,071,066)
(767,098)
95,668,304
During February 2023, the second Senior Secured Debt tranche of $30m was drawn down and the $22.5m
copper stream deposit was received.
The third and fourth tranches of the remaining $60m of Senior Secured Debt will be drawn down in 2023 when
required subject to satisfaction of any applicable conditions.
Net cash/(borrowings) at 1 January 2021
(15,980,753)
(348,892)
40,418,257
24,088,612
Borrowings
Lease
liabilities
Cash and cash
equivalents
Total
Net cash used in operating activities
Net cash used in investing activities
Lease additions
Foreign exchange movements
Interest expense
Net interest payments
Capital payments on leases
Net cash arising from issue of equity
Settlement of deferred consideration
-
-
-
(232,240)
(1,699,740)
1,841,667
-
-
(10,417,089)
(10,417,089)
(13,761,598)
13,761,598
(493,250)
15,579
(33,302)
33,302
59,465
-
(493,250)
(546,908)
(763,569)
-
(1,733,042)
(1,874,969)
(59,465)
-
-
-
-
-
-
100,383,508
100,383,508
(1,635,268)
(1,635,268)
Net cash/(borrowings) at 31 December 2021
(16,071,066)
(767,098)
112,506,468
95,668,304
Net cash used in operating activities
Net cash used in investing activities
-
-
Net proceeds from loans and borrowings
(26,176,885)
-
-
-
(11,233,068)
(11,233,068)
(58,664,242)
(58,664,242)
26,176,885
-
Lease additions
Foreign exchange movements
-
-
(9,360,066)
-
(9,360,066)
67,082
(4,433,976)
(4,366,894)
Changes in fair value due to modifications
(214,605)
(16,850)
Interest expense
Net interest payments
Capital payments on leases
Settlement of deferred consideration
Net cash arising from issue of equity
-
-
(231,455)
(2,324,873)
(1,735,496)
(589,377)
1,700,000
589,377
(2,011,994)
277,383
-
-
-
1,890,191
(1,890,191)
-
-
-
(525,785)
(525,785)
661,180
661,180
Net cash/(borrowings) at 31 December 2022
(42,498,052)
(8,186,741)
60,585,277
9,900,484
148
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Parent company statement of financial position
As at 31 December 2022
(In USD)
Assets
Current assets
Cash and cash equivalents
Receivables and prepayments
Total current assets
Non-current assets
Investment in subsidiaries
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
f
i
f
g
m
h
n
p
o
h
n
o
o
Note
31 December
2022
Restated*
31 December
2021
Restated*
1 January 2021
(In USD)
Note
31 December
2022
Restated*
31 December
2021
Restated*
1 January 2021
27,143,743
98,850,523
38,236,017
22,674,681
8,334,441
6,994,033
49,818,424
107,184,964
45,230,050
Shareholders’ equity
Share capital
Share premium
Merger reserve
Warrants reserve
34,929,119
61,079,862
48,357,172
Share-based payment reserve
Foreign currency translation reserve
57,733,284
18,694,155
35,406
249,697
46,502
283,169
-
56,129
322,943
92,947,506
80,103,688
48,736,244
142,765,930
187,288,652
93,966,294
1,171,031
2,382,097
5,110,795
48,889
-
-
31,506
1,161,269
48,657
-
-
144,173
1,219,920
3,574,872
5,303,625
5,240
238,535
18,418
284,718
-
300,235
16,285,683
16,071,066
15,836,580
6,369,219
2,502,423
4,160,918
22,898,677
18,876,625
20,297,733
24,118,597
22,451,497
25,601,358
j
j
j
j
j
j
j
5,376,349
5,279,546
4,217,209
143,829,631
143,259,675
43,946,114
23,497,730
23,019,164
22,392,879
2,743,303
2,513,538
4,943,436
2,743,303
2,513,416
5,778,882
3,629,619
3,606,614
7,465,235
(64,256,654)
(17,756,831)
(16,892,734)
118,647,333
164,837,155
68,364,936
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
142,765,930
187,288,652
93,966,294
See note b to the Parent Company Financial Statements for details of the restatement of the prior year
comparatives.
The accompanying notes on pages 151 - 155 are an integral part of these Parent Company Financial Statements.
The Company’s loss after tax for the year ended 31 December 2022 was $48,630,562 (year ended 31 December
2021: $5,401,903).
The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved
and authorised for issue by the Board of Directors on 30 March 2023 and were signed on its behalf by:
Paul Cronin
Managing Director & Chief Executive Officer
Mike Norris
Chief Financial Officer
149
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Parent company statement of changes in equity
For the year ended 31 December 2022
(In USD)
31 December 2020 (Restated*)
Comprehensive loss for the year
Loss for the year
Total comprehensive expense
Issue of share capital
Settlement placement
Share issue costs
Exercise of options
Issue of options
Exercise of warrants
Expiry/cancellation of options/warrants
Acquisition of subsidiary
31 December 2021 (Restated*)
Comprehensive income for the year
Loss for the year
Total comprehensive expense
Issue of share capital
Settlement placement
Share issue costs
Exercise of options
Issue of options
2022 STIP awards
Exercise of aarrants
Expiry/cancellation of options/warrants
Acquisition of subsidiary
31 December 2022
Note
Share
Capital
Share
Premium
Merger
Reserve
Share Based
Payment Reserve
Warrants
Reserve
Foreign Currency
Translation Reserve
(Restated*)
Retained earnings
Total
Equity
4,217,209
43,946,114
22,392,879
7,465,235
3,629,619
3,606,614
(16,892,734)
68,364,936
-
-
-
-
893,946
100,072,041
23,868
1,173,991
-
(4,486,027)
120,143
990,975
-
-
18,248
1,562,581
-
6,132
-
-
5,279,546
143,259,675
-
-
-
-
-
-
91,224
-
-
-
-
5,579
-
-
-
-
-
(86,199)
656,155
-
-
-
-
-
j
j
j
j
j
j
j
j
j
j
j
j
j
j
j
-
-
-
-
-
-
-
-
-
626,285
23,019,164
-
-
-
-
-
-
-
-
-
-
-
478,566
-
-
-
-
-
(3,665,232)
2,861,858
-
(882,979)
-
-
-
-
-
-
-
-
(655,786)
(230,530)
-
(1,093,198)
(1,093,198)
(5,401,903)
(5,401,903)
-
-
-
-
-
-
-
-
-
-
-
3,665,232
-
655,786
230,530
(13,742)
(6,495,101)
(6,495,101)
100,965,987
1,197,859
(4,486,027)
1,111,118
2,861,858
1,580,829
(882,979)
618,675
5,778,882
2,743,303
2,513,416
(17,756,831)
164,837,155
-
-
-
-
-
-
(2,130,739)
873,155
576,000
-
(153,862)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
122
122
-
-
(48,630,562)
(48,630,440)
(48,630,562)
(48,630,440)
-
-
-
-
-
-
-
-
-
-
-
-
2,130,739
-
-
-
-
-
-
-
(86,199)
747,379
873,155
576,000
-
(153,862)
484,145
5,376,349
143,829,631
23,497,730
4,943,436
2,743,303
2,513,538
(64,256,654)
118,647,333
See note b to the Parent Company Financial Statements for details of the restatement of the prior year comparatives. The accompanying notes on pages 151 - 155 are an integral part of these Parent Company Financial Statements.
150
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
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 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 Parent Company is a public company limited by shares and incorporated in England and Wales. The
registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham, GL50 1HX.
B. Basis of preparation
i ) Statement of compliance
In preparing these financial statements, the Company applies Financial Reporting Standards 101, ‘Reduced
Disclosure Framework’ (FRS 101 ‘Reduced Disclosure Framework’), and applicable law.
In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the
following disclosures:
Cash Flow Statement and related notes;
Disclosures in respect of transactions with wholly owned Group companies;
Comparative year reconciliations for share capital, and intangible assets;
Disclosures in respect of capital management;
The effects of new but not yet effective IFRSs; a statement of compliance with FRS 101 is provided instead.
Disclosures in respect of the compensation of Key Management Personnel.
As the consolidated financial statements of the ultimate parent undertaking include the equivalent disclosures,
the Company has also taken the exemptions under FRS 101 available in respect of the following disclosures:
Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial
Instrument Disclosures
The Parent Company Financial Statements were authorised for issue by the Board of Directors on 30 March 2023.
These Parent Company Financial Statements are presented in USD compared with the prior year financial
statements which were presented in Great British Pounds (“GBP”, £). This change in presentation currency reflects
the fact that the USD is a more widely recognised currency for the mining sector in which the Company operates.
See note 2b to the consolidated financial statements for further details of the restatement of the prior year
comparatives.
In addition, compared with the prior year, the functional currency of the Parent Company has changed from GBP
to USD. See note 4Ba to the consolidated financial statements for further details.
Unless otherwise stated, all amounts indicated by “$” represent USD.
iii ) Going concern
Refer to accounting policies in note 2c to the notes to the consolidated financial statements.
C. Significant accounting policies
In addition to the accounting policies in note 3 to the notes to the consolidated financial statements, the following
accounting policies are relevant only to the Parent Company Financial Statements.
Investments in subsidiaries
i )
Unlisted investments are carried at cost, being the purchase price, less provisions for impairment. Additional
consideration paid when subscribing for new shares, is made via capital contributions and recorded as additions
to investments in subsidiaries.
Intercompany loans
ii )
All intercompany borrowings and loans are initially recognised at the fair value of consideration received or paid
after deduction of issue costs and are subsequently measured at amortised cost.
iii ) Impairment
The Company recognises an allowance for expected credit losses (”ECL”) for all receivables held at amortised
cost where there is objective evidence that the receivable is irrecoverable. ECL are based on the difference
between the contractual cash flows due in accordance with the contract and all the cash flows that the Company
expects to receive.
151
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the parent company financial statements
D. Critical accounting estimates and judgements
The preparation of the Parent Company’s Financial Statements requires management to make certain
judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income
and expenses. The actual results are likely to differ from these estimates. In addition to the critical accounting
estimates and judgements in note 4 to the consolidated financial statements, the following information about the
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.
F. Receivables and prepayments
Receivables contain amounts receivable for VAT, prepaid expenses and deposits paid. All receivables are held at
cost less any provision for impairment.
The Raska Project impairment set out in note d cast doubt over the ability of the subsidiaries to repay
intercompany balances owed to the Parent Company and a provision of $7,489,859 at 31 December 2022 was
recognised (year ended 31 December 2021: nil), representing 100% of the balance of the receivables relating
to the Raska Project reducing the non current amounts receivable from subsidiaries from $65,223,143 to
$57,733,284.
i ) Value of investments in subsidiaries
The Parent Company’s investments in subsidiaries, which are made via capital contributions or arise upon
acquisition, are reviewed for impairment if events or changes indicate that the carrying amount may not be
recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the
net present value of expected future cash flows of the relevant generating unit or disposal value if higher.
As set out in note i, following a reorganisation of the entities holding exploration tenements in Serbia, as a result
of which all four licences were transferred to Ras Metals d.o.o., Adriatic Metals Jersey Limited was no longer the
owner of any tenements with licences at 31 December 2022. This was identified as an impairment indicator in
relation to the Parent Company's investment in Adriatic Metals Jersey Limited, as it cast doubt on Adriatic Metals
Jersey Limited’s fair value. A judgement was made to recognise a full impairment of $3,973,286 against the
investment balance.
As also set out in note i, impairment indicators were identified in the year ended 31 December 2022 in relation
to the Raska Project and judgement was made to recognise an impairment of $22,177,477 against the carrying
amount of the investment in Ras Metals d.o.o., holder of the Raska Project tenements, resulting in a carrying
amount of $8,500,000 at 31 December 2022. The carrying amount has been determined by a benchmarking
exercise using industry standard valuation measures.
Intercompany loans
ii )
As set out in note f, judgement was made to establish a provision of $7,489,859 at 31 December 2022 against
foreign exchange adjusted receivables on the basis that the Raska Project impairment cast doubt on the
subsidiaries’ ability to repay the balances outstanding in the future. This had the effect of reducing the amounts
receivable from subsidiaries at 31 December 2022 from $22,309,041 to $14,819,182.
E. Loss for the year
The Parent Company has taken advantage of the exemption under section 408 (3) of the Companies Act
2006 and thus has not presented its statement of comprehensive income in these Parent Company Financial
Statements. The Parent Company’s loss after tax for the year ended 31 December 2022 is £48,630,562 (year
ended 31 December 2021 – $5,401,903).
All current receivables due within one year as follows:
(In USD)
Accrued interest income
Prepayments and deposits
Taxes recoverable
Amounts receivable from subsidiaries
Other receivables
All non-current receivables due more than one year as follows:
(In USD)
Amounts receivable from subsidiaries
31 December 2022
31 December 2021
57,114
202,118
74,184
22,309,041
32,224
22,674,681
-
713,789
185,152
7,433,193
2,307
8,334,441
31 December 2022
31 December 2021
57,733,284
57,733,284
18,694,155
18,694,155
152
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the parent company financial statements
G. Property, plant and equipment
Land & Buildings
Plant and machinery
(In USD)
31 December 2020
Additions
Foreign exchange difference
31 December 2021
Additions
Foreign exchange difference
31 December 2022
Depreciation
31 December 2020
Charge for the year
Foreign exchange difference
31 December 2021
Charge for the year
Foreign exchange difference
31 December 2022
Net Book Value
31 December 2020
31 December 2021
31 December 2022
23,809
-
(239)
23,570
-
-
23,570
2,525
2,397
(65)
4,857
2,356
-
7,213
21,284
18,713
16,357
74,848
5,800
(848)
79,800
10,110
2,546
92,456
40,003
12,621
(613)
52,011
21,396
-
Total
98,657
5,800
(1,087)
103,370
10,110
2,546
116,026
42,528
15,018
(678)
56,868
23,752
-
73,407
80,620
34,845
27,789
19,049
56,129
46,502
35,406
H. Accounts payable and accrued liabilities
The breakdown of current accounts payable and accrued liabilities is as follows:
(In USD)
Trade payables
Accrued liabilities
Other payables
Amounts payable to subsidiaries
31 December 2022
31 December 2021
89,199
918,861
70,472
92,499
1,171,031
83,386
1,213,425
996,231
89,055
2,382,097
The breakdown of non-current accounts payable and accrued liabilities is as follows:
(In USD)
Amounts payable to subsidiaries
31 December 2022
31 December 2021
5,240
5,240
18,418
18,418
153
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the parent company financial statements
Investments in subsidiaries
I.
The breakdown of the investments in subsidiaries is as follows:
(In USD)
31 December 2020
Additions
Transfer of RAS purchase option to the Company
Exercise of RAS Metals option
Group restructure
Capitalisation of intercompany loan balance
Foreign currency revaluation
31 December 2021
Impairment
Foreign currency revaluation
31 December 2022
Eastern Mining d.o.o.
Adriatic Metals
Holdings BIH Limited
Adriatik Metali d.o.o.
RAS Metals d.o.o.
20,806,189
7,390,353
-
-
(26,322,684)
-
(1,873,858)
-
-
-
-
-
135
-
-
26,322,684
-
103,324
26,426,143
-
20
26,426,163
-
2,944
-
-
-
-
12
2,956
-
-
2,956
-
-
27,843,051
3,436,991
-
-
(602,565)
30,677,477
(22,177,477)
-
8,500,000
Adriatic Metals
Jersey Ltd
27,550,983
-
(27,843,051)
-
-
3,766,120
499,234
3,973,286
(3,973,286)
-
-
Total
48,357,172
7,393,432
-
3,436,991
-
3,766,120
(1,873,853)
61,079,862
(26,150,763)
20
34,929,119
In the year ended 31 December 2021, the Company sold Eastern Mining d.o.o. to Adriatic Metals Holdings BIH
Limited (which was incorporated during the year ended 31 December 2021) in exchange for a single share issued
by Adriatic Metals Holdings BIH Limited.
Adriatik Metali d.o.o. was incorporated during the year ended 31 December 2021.
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 9 to the consolidated financial statements, Adriatic Metals Jersey
Ltd also held an option to acquire the remaining 90% of Ras Metals d.o.o. 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 Parent Company completed the acquisition of the entire issued share capital of Ras
Metals d.o.o. 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 $3,766,120.
Following a reorganisation of the entities holding exploration tenements in Serbia, as a result of which all four
licences were transferred to Ras Metals d.o.o., Adriatic Metals Jersey Limited was no longer the owner of any
tenements with licences at 31 December 2022. This was identified as an impairment indicator in relation to the
Parent Company's intercompany receivable from Adriatic Metals Jersey Limited, as it cast doubt on Adriatic
Metals Jersey Limited’s ability to repay the balance in the future. A judgement was made to recognise a full
impairment of $3,973,286 against the receivable balance.
During the year ended 31 December 2022, impairment indicators were noted in relation to the Raska Project,
see note 8 to the Consolidated Finance Statements for further information. This resulted in an impairment of
$22,177,477 (year ended 31 December 2021: nil) against the investment in Ras Metals d.o.o., down to a carrying
amount of $8,500,000 on the basis that the recoverable amount of the investment value is equal to the fair value
less cost of disposal of the exploration and evaluation asset.
The list of subsidiaries of the Parent Company is presented in note 3a to the notes to the consolidated financial
statements.
J. Equity
The balances and movements in share capital, share premium, share-based payment reserve, and warrants
reserve are as detailed in note 14 to the consolidated financial statements. There are no differences compared
with the Parent Company’s transactions.
K. Related party disclosures
The Parent Company’s related parties include key management personnel, companies which have directors in
common and its subsidiaries.
Ownership of subsidiaries is disclosed in note 3 of the consolidated financial statements. Transactions with its
Directors and key management personnel and transactions with companies which have directors in common
during the year have been disclosed in notes 21 and 22 to the consolidated financial statements.
154
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Notes to the parent company financial statements
L. Financial assets at fair value through profit and loss
The movements in financial assets at fair value through profit and loss are as detailed in note 12 to the
consolidated financial statements. There are no differences compared with the Parent Company’s transactions.
M. Right-of-use asset
Under IFRS 16, the Parent Company’s registered office has been recognised as a right-of-use asset and the
carrying amounts of right-of-use assets and the movements during the year are set out below:
Maturity analysis of lease liabilities displaying lease liabilities at their contractual undiscounted values.
As at 31 December 2022 (In USD)
Lease liabilities
Within
30 days
30 days to
6 months
6 to
12 months
-
24,516
24,516
(In USD)
31 December 2020
Depreciation
Foreign exchange difference
31 December 2021
Depreciation
31 December 2022
N. Lease liabilities
Set out below are the carrying amounts of lease liabilities and the movements during the year:
(In USD)
31 December 2020
Interest expense
Payments
Foreign exchange difference
31 December 2021
Interest expense
Payments
31 December 2022
Land & buildings
322,943
(37,158)
(2,616)
283,169
(33,472)
249,697
348,892
26,079
(51,623)
(7,124)
316,224
21,369
(50,169)
287,424
Of this amount, $48,889 is recognised as a current liability (year ended 31 December 2021: $31,506) and the
remainder $238,535 is shown within non-current liabilities (year ended 31 December 2021: $284,718).
Over 12
months
281,932
Over 12
months
330,964
As at 31 December 2021 (In USD)
Lease liabilities
Within
30 days
30 days to
6 months
6 to
12 months
-
26,147
24,021
O. Borrowings and Derivative Liability
The movements in the QRC convertible debt and its embedded derivative liability are as detailed in notes 6 c) and
6 d) to the consolidated financial statements.
The Orion Senior Secured Debt referred to in note 6b to the consolidated financial statements is held in Jersey
based Group subsidiary, Adriatic Metals Trading and Finance Limited, and is therefore not included in the Parent
Company Financial Statements.
P. Deferred Consideration
The value of remaining consideration payable under the Ras Option agreement when the option and investment
were ceded to Adriatic Metals Plc on 23 February 2021 from Tethyan Resource Corp was $3,436,991. After the
Parent Company acquired the remaining 90% ownership stake in Ras Metals d.o.o. the liability was reduced to
$1,161,269 at 31 December 2021 by cash paid and shares issued under the agreement. The liability was fair
valued at 31 December 2022 as nil as detailed in note 9 to the consolidated financial statements.
Q. Commitments
Commitments relating to the Parent Company have been disclosed in note 24 to the consolidated financial
statements.
The Parent Company has provided a Letter of Support to its subsidiary Adriatic Metals Holdings BIH Limited
(“BIH”), confirming that it does not intend to recall intragroup payables should BIH not have the financial capability
to settle them. The Parent Company will continue to support BIH in meeting its liabilities as they fall due, for a
period of not less than 12 months from the date of signing of the previous financial statements.
R. Prior year adjustment
As set out in note b ii to the Parent Company Financial Statement, prior year adjustments relating to the Parent
Company are as a result of the Presentation Currency change from GBP to USD effective 1 January 2022
S. Subsequent events
Subsequent events relating to the Parent Company have been disclosed in note 27 to the Consolidated Financial
Statement.
155
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Additional ASX information (unaudited)
The Company's corporate governance statement for the year ended 31 December 2022 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 30 March 2023. To
the extent applicable, the Company has adopted The Corporate Governance Principles and Recommendations
(4th Edition) as published by the ASX Corporate Governance Council (Principles and 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 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.
1.
1.1
1.2
Principles and recommendations
Comment
Lay solid foundations for management and oversight
A listed entity should disclose: (a) the
respective roles and responsibilities of
its board and management; and (b) those
matters expressly reserved to the board and
those delegated to management.
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.
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 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.
1.3
1.4
1.5
1.6
Principles and recommendations
Comment
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.
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 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 set formal diversity objectives for 2021
onwards which are included as a KPI in the Company’s
Short Term Incentive Plan in both 2021 and 2022.
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 2022.
The Company’s Corporate Governance Manual includes a
section on performance evaluation practices adopted by
the Company.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Additional ASX information (unaudited)
Principles and recommendations
Comment
Principles and recommendations
Comment
1.7
2.
2.1
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.
2.3
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 December 2022.
Structure of the board to add value
The board of a listed entity should:
(a) have a nomination committee which: (1)
has at least three members, a majority of
whom are independent directors: and (2)
is chaired by an independent director, and
disclose: (3) the charter of the committee;
(4) the members of the committee; and (5) at
the end of each reporting period, the number
of times the committee met throughout the
period and the individual attendances of the
members at those meetings: or
(b) if it does not have a nomination committee,
disclose that fact and the processes it
employs to address board succession
issues and to ensure that the board has the
appropriate balance of skills, knowledge,
experience, independence and diversity
to enable it to discharge its duties and
responsibilities effectively.
’The Company’s Corporate Governance Manual includes
a Nomination Committee Charter, which discloses the
specific responsibilities of the committee.
The Company has established a formal Remuneration &
Nomination committee.
Refer to the Company’s Annual Report for further details
regarding the Remuneration & Nomination committee.
2.4
2.5
2.6
3.
3.1
A listed entity should disclose: (a) the names
of the directors considered by the board to be
independent directors; (b) if a director has an
interest. position, association or relationship
of the type described in Box 2.3 but the board
is of the opinion that it does not compromise
the independence of the director, the nature
of the interest, position. association or
relationship in question and an explanation of
why the board is of that opinion; and (c) the
length of service of each director.
A majority of the board of a listed entity
should be independent directors.
The 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.
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.
The majority of the Company’s directors are independent.
Mr. Rawlinson, who was the Chairman through the
reporting year, is independent.
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.
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.
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 Manual includes a
'Corporate Code of Conduct', which provides a framework
for decisions and actions in relation to ethical conduct in
employment.
2.2
A listed entity should have and disclose a
board skills matrix setting out the mix of skills
and diversity that the board currently has or is
looking to achieve in its membership.
The Board’s skills matrix is set out below.
The matrix reflects the Board’s objective to have an
appropriate mix of industry and professional experience
including skills such as leadership, governance, strategy,
finance, risk, IT, HR. policy development, international
business and customer relationship.
Additionally, external consultants may be brought it with
specialist knowledge to complement the board’s matrix
of skills in the event that a deficiency were to exist in
required areas.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Additional ASX information (unaudited)
Principles and recommendations
Comment
Principles and recommendations
Comment
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.
4.
4.1
4.2
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.
4.3
A listed entity that has an AGM should ensure
that its external Auditor attends its AGM and
is available to answer questions from security
holders relevant to the audit.
The Company seeks to ensure that its external auditors
attend its AGM and are available to answer questions from
security holders relevant to the audit.
5.
5.1
6.
6.1
6.2
6.3
6.4
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.
Respect the rights of shareholders
A listed entity should provide information
about itself and its governance to investors
via its website.
A listed entity should design and implement
an investor relations program to facilitate
effective two-way communication with
investors.
A listed entity should disclose the policies
and processes it has in place to facilitate
and encourage participation at meetings of
security holders.
A listed entity should give security holders the
option to receive communications from, and
send communications to, the entity and its
security registry electronically.
The Company 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.
The Company maintains information in relation to
governance documents, directors and senior executives.
Board and committee charters, annual reports. ASX
announcements and contact details on the company's
website.
The Company encourages shareholders to attend its
AGM and to send in questions prior to the AGM so
that they may be responded to during the meeting. It
also encourages ad hoc enquiry via email which are
responded to and actively uses social media to engage
with shareholders.
Refer to commentary at Recommendation 6.2
The Company engages its share registry to manage
the majority of communications with shareholders.
Shareholders are encouraged to receive correspondence
from the company electronically, thereby facilitating a
more effective, efficient and environmentally friendly
communication mechanism with shareholders.
Shareholders not already receiving information
electronically can elect to do so through the share
registry, Computershare Australia at
www.computershare.com/au.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Additional ASX information (unaudited)
Principles and recommendations
Comment
Principles and recommendations
Comment
7.
7.1
7.2
Recognise and manage risk
The board of a listed entity should: (a) have
a committee or Committees to oversee risk,
each of 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) at
the end of each reporting period, the number
of times the committee met throughout the
period and the individual attendances of the
members at those meetings; or (b) if it does
not have a Risk Committee or Committees
that satisfy (a) above, disclose that fact and
the processes it employs for overseeing the
entity’s risk management framework.
The board or a committee of the board
should: (a) review the entity’s risk
management framework at least annually to
satisfy itself that it continues to be sound;
and (b) disclose, in relation to each reporting
period, whether such a review has taken
place.
The Company has established an Audit & Risk Committee.
The Company’s Corporate Governance Plan includes
an Audit & Risk Committee Charter, which discloses the
specific responsibilities of the committee.
Refer to the Company’s Annual Report for further details
regarding the Audit & Risk Committee.
The Company’s Corporate Governance Manual 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, this
was updated in the current reporting period.
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.
The Company is currently not in compliance with this
recommendation as it does not maintain a separate
internal audit function as the Board considers the
Company is not currently of the relevant size or
complexity to warrant the formation of a formal internal
audit function.
The Board, as a whole, evaluates and continually strives
for improvement in the effectiveness of risk management
and internal control processes.
The Audit & 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, in
particular the Principal Risks and Uncertainties section.
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 &
Nomination Committee.
The Company’s Corporate Governance Plan includes
a Remuneration & Nomination Committee Charter,
which discloses the specific responsibilities of the
Remuneration Committee.
Refer to the Company’s Annual Report for further details
regarding the Remuneration & Nomination Committee.
7.3
7.4
8.
8.1
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.
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 & 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) 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.
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Additional ASX information (unaudited)
Principles and recommendations
Comment
8.2
8.3
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.
Refer to the Remuneration & Nomination 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.
Board skills matrix
Michael Rawlinson
B. Economics. Master of Science
Peter Bilbe
B. Engineering Mining
Sandra Bates
B.Com & LLB
Corporate Law
Corporate Finance
Mining Engineer
Gold, Base Metals
Operational experience
M&A
NED - ASX
Resources focus
NED – ASX, LSE, AIM
Sanela Karic
LLB
Bosnian Law
Corporate affairs
M&A
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
Investment banking
Resources
Mining Finance
NED – LSE, ASX
Paul Cronin - CEO
B.Com & MBA
Resource Finance
CEO experience
M&A
As part of the board’s performance evaluation and within the remit of the Nomination 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-22
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
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
160
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Additional ASX information (unaudited)
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 as follows at 8 March 2023, being the latest
practical date for inclusion in this Annual Report:
Rank
Name
Number of
ordinary shares
Percentage of
issued share capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
WARBONT NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR MILOS BOSNJAKOVIC
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
GLAMOUR DIVISION PTY LTD
EUROCLEAR NOMINEES LIMITED
NORTRUST NOMINEES LIMITED
ABADI INVESTMENTS PTY LTD
CHASE NOMINEES LIMITED
BNY (OCS) NOMINEES LIMITED
NINCRO PTY LTD
MR ALBERTO LAVANDEIRA ADAN
BNY (OCS) NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
INTERACTIVE BROKERS LLC
BBHISL NOMINEES LIMITED
54,237,802
30,213,206
24,335,779
20,410,568
16,480,746
12,000,000
9,442,777
7,325,769
6,501,613
5,637,963
5,200,045
5,000,000
3,979,029
3,687,505
3,000,000
2,666,664
2,634,190
2,570,787
2,298,631
2,153,577
19.80
11.03
8.89
7.45
6.02
4.38
3.45
2.67
2.37
2.06
1.90
1.83
1.45
1.35
1.10
0.97
0.96
0.94
0.84
0.79
Totals: Top 20 holders
Total Remaining Holders Balance
219,776,651
273,863,593
80.25%
19.75%
At 8 March 2023 the Directors are aware of five 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 at 8 March 2023
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Unmarketable Parcel
Number of
shareholders
Number of
ordinary shares
Percentage of issued
share capital
868
689
233
322
111
2,223
377,316
1,855,496
1,806,537
10,268,168
259,556,076
273,863,593
0.14
0.68
0.66
3.75
94.78
100.00
ASX Minimum trade parcel AUD$500.00 parcel at
AUD$2.18 per share
Minimum Parcel
Size Shares
Number of
shareholders
Total Shares
230
255
21,150
Substantial Option and Performance Rights Holders
Total number of options, performance rights and warrants as at 8 March 2023 as follows:
Instrument
Share Options
Performance Rights
Warrants
Total
Securities in issue
Number of security holders
4,141,100
731,127
2,651,020
7,523,247
11
15
18
44
The only substantial individual holding is the 4,000,000 share options with an exercise price of A$0.20 held by
Eric Di Mori former Director which were granted on 27 April 2018 and expire on 1 July 2023.
Restricted securities
There were no restricted securities or securities subject to voluntary escrow at 31 December 2022.
161
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Additional ASX information (unaudited)
Tenement holdings
The Company’s tenements at 8 March 2023 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
Licence holder
Concession name
Area (km2)
Date granted
Expiry date
No: 04-18-14461-1/20
Eastern Mining d.o.o.
Droskovac - Brezik
Concession Agreement
No.:04-18-21389-1/13
Eastern Mining d.o.o.
No.: 04-18-21389-3/18
Eastern Mining d.o.o.
i
a
n
v
o
g
e
z
r
e
H
d
n
a
a
n
s
o
B
i
Annex 3 & 6 Area
Extension
Annex 5 – Area
Extension
Extension
Concession Agreement
No: 04-14-5359-3/22
Eastern Mining d.o.o.
Exploration Licence
310-02-1721/2018-02
Adriatic Metals d.o.o.
Exploration Licence
310-02-1722/2018-02
Adriatic Metals d.o.o.
Exploration Licence
310-02-1114/2015-02
Adriatic Metals d.o.o.
i
a
b
r
e
S
Veovaca1
Veovaca 2
Rupice-Jurasevac, Brestic
Rupice - Borovica
Veovaca - Orti - Seliste - Mekuse
1.08
0.91
0.83
4.52
1.32
Orti-Selište-Mekuše- Barice- Smajlova Suma-Macak
19.33
Borovica – Semizova Ponikva
Saski Do
Kizevak
Sastavci
Kremice
2.88
9.91
1.28
1.84
1.44
8.54
81.39
37.1
Exploration Licence
310-02-00060/2015-02
Deep Research d.o.o.
Rudno Polje Raska
Exploration Licence
310-02-01670/2021-02
Adriatic Metals d.o.o.
Kaznovice
* There concessions are pending renewal, applications for extension have been submitted, the Company is awaiting to receive confirmation of extensions from authorities.
**Possible to get a 1 year extension, but only for preparation of reserves elaborate which excludes any geological exploration work.
12-Mar-13
12-Mar-13
12-Mar-13
14-Nov-18
14-Nov-18
3-Dec-20
3-Dec-20
3-Dec-20
19-Jul-22
12-Mar-38
12-Mar-38
12-Mar-38
12-Mar-33
12-Mar-33
3-Dec-50
3-Dec-50
3-Dec-50
19-Jul-25
3-Oct-19
16-Oct-22 (pending)*
7-Oct-19
16-Oct-22 (pending)*
21-Apr-16
26-Jul-22 (pending)*
28-Dec-15
11-Oct-21
24-Oct-24**
22-Nov-24
162
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022
Additional ASX information (unaudited)
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.
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.
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.
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.
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.
b.
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
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.
163
Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022 Ground Floor, Regent House
65 Rodney Road
Cheltenham
GL50 1HX
United Kingdom
Tel: +44 (0) 207 993 0066
www.adriaticmetals.com
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Adriatic Metals | From developer to producer | Annual Report for the Year Ended 31 December 2022