More annual reports from Adriatic Metals:
2023 ReportBuilding a new European
Mining Company
Annual Report 2023
For the year ended 31 December 2023
Introduction
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Adriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023www.adriaticmetals.comABOUT USAdriatic Metals is a precious and base metals developer that is advancing the world-class Vareš Silver Project in Bosnia and Herzegovina, as well as the Raška Zinc-Silver Project in Serbia. The Vareš Silver Project is fully constructed and first concentrate was produced in February 2024. Concurrent with ongoing mining activities, the Company continues to explore across its highly prospective 44km2 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). Highlights of the year
Corporate
Strategic Report
Governance
Financial Statements
Delivering European
resource self
sufficiency
A scalable model to
develop sustainable
strategic metals
Delivering
responsibly
developed value to
all stakeholders
Strong capital control
& cash position
See p.4
See p.8
See p.79
See p.114
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Strategic Report
Market Review
Business Model
CEO Statement
Strategy
Operations Review
Financial Review
Principal risks and Uncertainties
Directors’ Section 172(1) Statement
Principal decisions by the Board during the period
Sustainability Review
Governance
Company Directory
Corporate Governance Report
Audit & risk committee report
Sustainability committee report
Remuneration & nomination committee report
Directors’ report
Statement of directors’ responsibilities
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Financial Statments
Independent auditors’ report to the members
of Adriatic Metals PLC
Consolidated statement of comprehensive income
Consolidated statement of financial position
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 (unaudited)
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Corporate
Company Overview
Chairman’s Statement
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Adriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023www.adriaticmetals.com Corporate
Delivering European
resource self sufficiency
Company Overview
Chairman’s Statement
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www.adriaticmetals.comCorporate Adriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Company
Overview
Our operations and
European smelter
locations
Likely customers in
northern Europe
Ireland
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 Vareš Project in
Bosnia and Herzegovina, which has been fully constructed and first
concentrate was produced in February 2024. The Company also has
an exploration project in Serbia called the Raška Project.
Bosnia and Herzegovina:
• Candidate for EU membership
• Local and federal government are supportive of mining
industry
• Strong mining history and highly skilled workforce
• 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
Sweden
Denmark
Latvia
Russia
Lithuania
United
Kingdom
Netherlands
Poland
Belgium
Germany
Czech
Republic
Austria
Slovakia
Hungary
France
Switzerland
Italy
Slovenia
Vareš Project
Bosnia and Herzegovina
Sarajevo
Capital of Bosnia
and Herzegovina
Montenegro
Belarus
Ukraine
l
M
o
d
o
v
a
Romania
Raska Project
Serbia
Bulgaria
l
a
g
u
t
r
o
P
Spain
Macedonia
Albania
Greece
Turkey
VAREŠ PROJECT BOSNIA AND HERZEGOVINA
The Company’s flagship Vareš Project is located in
the municipality of Vareš, 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.
progressing well, with first ore mined in July 2023 and
construction at the Vareš Processing Plant is now
completed. The road, mine site infrastructure and
additional infrastructure at the railhead and port were
completed in Q4 2023. The Project is fully funded
through ramp up.
On 5 March 2024, Adriatic marked the Grand Opening
of the Vareš Project in Bosnia and Herzegovina.
The official opening event took place at the Vareš
Processing Plant and was attended by Nermin Nikšić,
Prime Minister of the Federation of Bosnia and
Herzegovina, Zdravko Marošević, Mayor of Vareš and
other key dignitaries.
The construction of the Vareš Project is now complete
and first concentrate production took place on 27
February 2024. Mining development at Rupice is
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In 2023, exploration results from Rupice and Rupice
Northwest significantly increased the scale of the
Project delivering a Tier 1 project. In July 2023, Adriatic
Metals announced a 93% increase in indicated tonnes
compared to the 2020 Rupice MRE (using a 50 g/t AgEq
cut-off), and in December announced an 80% increase
since the previous Rupice Ore Reserve estimate stated
as at July 2021. This increased Reserve materially
extends the life of mine of the Vareš Project from 10
years to 18 years.
Exploration activity will continue to realise the resource
and reserve potential of Rupice as the deposit remains
open and still to be fully defined. In the wider Vareš
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 deposit that will
diversify the current production profile and capitalise on
the existing tenement holdings.
www.adriaticmetals.comCorporate Adriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Chairman’s Statement
OVERVIEW
2023 has brought significant success and growth
for Adriatic and I am impressed with how the
management team have successfully navigated
the construction of the Vareš Project, through
commissioning and into production. Our world-
class, multi-generational asset stands as the
first development of this scale in Bosnia and
Herzegovina in over 30 years and managing such
a project is a challenging and relentless task. As a
Company we are committed to building Europe’s
most modern and environmentally sustainable
mine, that will operate to the highest standards
PROJECT DELIVERY
We are extremely proud that in July 2023, first ore
was mined at Rupice. The Vareš Processing Plant
is fully constructed and commissioned, the road
connecting Rupice to the Vareš Processing Plant
has been completed and the first train has travelled
down the refurbished rail line from Podlugovi to
Vareš Majdan. On 27 February 2024, the first silver/
lead and zinc concentrates were produced. Across
the Project ramp up is now underway with nameplate
capacity expected to be reached in Q4 2024.
On 5 March 2024, Adriatic celebrated the Grand
Opening event of the Vareš Project with members of
Government, local community and press.
The team’s construction performance onsite has
been complemented by outstanding results in the
exploration programme. The ore body extension
discovery at Rupice Northwest has delivered
high-grade results, and in July and December
respectively, Adriatic announced an updated Mineral
Resource Estimate and Reserves Statement. The
updated ore reserve for Rupice is now 13.8Mt, an
increase of 89%. This significant increase in ore
reserves has increased the life of mine (LOM), with
production now set to continue through to 2041.
The exploration team has clearly demonstrated that
there is still considerable upside at Rupice, and in
August, Adriatic successfully raised $32m to fund an
expanded and accelerated exploration programme.
in sustainability and stakeholder relations. This
is evident through our stringent and continual
sustainability assessments and is reflected in the
support received from our local community and
host nation. As we move closer to generating
revenues from production in the upcoming year,
the Company is strategically laying the foundations
necessary for long-term success and ensuring
sustainable returns for all stakeholders.
The mining industry has faced a testing time in
recent years and the construction of a project of
this scale has encountered multiple challenges.
There has been global economic uncertainty
and geo-political insecurity due to the Israeli-
Palestinian conflict and continued war in the
Ukraine. The related inflationary environment,
currency instability, supply chain issues and
rising interest rates have contributed to some
delays in the project completion. Despite these
inevitable challenges we are now well positioned to
commence generating significant revenues over
the next 18 years and beyond.
The fundraise was significantly oversubscribed and
had strong global investor support. We firmly believe
that the accelerated exploration programme in 2024
and 2025 will add further years to the Vareš Project’s
LOM and position Adriatic as one of the leading base
and precious metals miners in Europe.
Another major accomplishment is the progress
made with the development and completion of
the Vareš Project with minimal escalation in capital
expenditure. The adept management of budgets
has played a pivotal role, ensuring that the Project
remains fully funded through commissioning and
ramp up.
SUSTAINABILTY
Sustainability is fully integrated into our operations,
and Adriatic aims to be an industry leader in
responsible business practices. In 2023, the
increased levels of activity have placed a significant
emphasis on all our socio-environmental impacts.
In response to the heightened operational risk
profile of construction, Adriatic has reinforced its
occupational health and safety systems, intensified
safety training efforts, expanded the safety team,
and instilled health and safety practices into the
operational culture.
The Company’s commitment to all aspects of
sustainability is paramount to maintaining a social
licence to operate. Recognising the challenges
confronting the mining sector, there is a need for a
transformation in the extraction of mineral resources
while acknowledging climate-related risks to the
business. Adriatic is strategically positioned to
produce high-grade critical metals within Europe,
diminishing dependence on imports from higher-
carbon producers and vulnerable supply chains in
remote jurisdictions. By generating concentrates
suitable for European smelters, Adriatic positively
contributes to the decarbonisation of European
supply chains, whilst reducing the energy intensity
profile of its own product.
As a business, the priority is on professional
development, encompassing education and training
initiatives for all our staff. Proactive leadership
is driving efforts to enhance the presence and
contribution of women in the mining sector, and
Adriatic takes pride in achieving a female workforce
percentage over 27% of total employees -
surpassing the industry average of 15%.
Michael Rawlinson
Chairman of the Board
As a Company we are
committed to building
Europe’s most modern
and environmentally
sustainable mine, that
will operate to the
highest standards
in sustainability and
stakeholder relations.
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www.adriaticmetals.comCorporate Adriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 BOARD OF DIRECTORS AND
MANAGEMENT
Adriatic continued to strengthen the management
team throughout 2023, with key appointments to the
operations and project delivery teams. I would like to
thank Paul Cronin, our Managing Director and Chief
Executive Officer, for his leadership and commitment
throughout the past year. He has worked tirelessly
to oversee the completion of the construction of
the Project, something I doubt would have been
possible had he not been based on site. Through the
continued commitment and hard work of all our staff,
we look forward to increasing momentum through
2024 and achieving our targets.
There were no changes to the Board of Directors in
2023. 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.
OUTLOOK
Despite slight delays to the initiation of
production, significant milestones were
accomplished by the team in 2023, bringing
the Project ever closer to completion. These
achievements are particularly commendable
given the challenging operational landscape.
I take pride in the fact that the team has
successfully realised these objectives in
a principled manner - exhibiting integrity,
positivity, and the utmost respect for the
communities and other stakeholders
hosting us in the country.
On behalf of the Board, I extend my gratitude
to the management and employees for
their persistent determination and hard
work, which have yielded significant results.
Additionally, I express appreciation to all our
stakeholders for their steadfast support and
dedication throughout this transformative
year. We have demonstrated through the
updated Reserves that Rupice will have a
generational mine life and deliver significant
benefits to the country, the local community
and all our stakeholders. Anticipation is
high as we eagerly look forward to the next
chapter of the Adriatic story, as we ramp up
to nameplate capacity and strong cashflows
at the world-class Vareš Project.
Michael Rawlinson
Chairman of the Board
Chairman’s Statement - Continued
Adriatic has continued to measure our socio-
economic and environmental impacts through
our Community and Biodiversity Action Plans.
Throughout the mining lifecycle, the Company
aims for a net gain in biodiversity, guided by clear
rehabilitation strategies related to climate action,
water management, tailings management and
reforestation. Collaborating with local businesses
and entrepreneurs in the region, Adriatic is
cultivating both capability and capacity in local
supply chains and establishing connections with
academic institutions to sponsor mining sector
qualifications, thereby supporting the future
recruitment of skilled nationals.
The Adriatic Foundation – the independently
governed organisation that is part-funded by the
Company has continued to review projects and
investments in the key areas of environment,
education, and health. We understand that creating a
legacy is crucial to ensuring that these investments
will finance initiatives that have been determined by
the community themselves.
SHAREHOLDERS
I would like to thank our shareholders for their
continued support during the last year and we
welcome those who invested in the recent equity
placing. We thank our debt, equity and streaming
partner, Orion Mine Finance, for its continued
commitment and assistance throughout the year.
The Vareš Project is fully financed and significant
cashflows are expected to commence in 2024
and accelerate in 2025. With the LOM increased
to 18 years and with a comprehensive and highly
targeted exploration programme, we aim to generate
significant and sustainable returns to all our
stakeholders for many years to come.
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www.adriaticmetals.comCorporate Adriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Strategic
Report
A scalable model to develop
sustainable strategic metals
Market Review
Business Model
CEO Statement
Strategy
Operations Review
Financial Review
Principal risks and Uncertainties
Directors’ Section 172(1) Statement
Principal decisions by the Board during the period
Sustainability Review
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Market Review
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MACRO TRENDS AND
DEVELOPMENTS
2023 was another turbulent year as the global
economy adjusted to the highest inflation in
decades, regional conflicts and geopolitical tensions
continued. Central banks raised interest rates rapidly
while trying to avoid triggering a major recession or
further bank failures.
Amidst this backdrop, the mining industry has
remained cautious about committing to new
development projects, which will further cap supply
growth after a prolonged period of underinvestment.
Key factors for the industry in 2024 include the
potential for rate cuts from the major central banks,
expected stimulus from China in order to reflate
their economy in light of ongoing weakness in their
property sector, and a year of pivotal elections
including in the United States that will further
reshape global relationships and trade.
EUROPEAN UNION CRITICAL RAW
MATERIALS ACT
The European Union adopted the Critical Raw
Materials Act on 7 December 2023. The regulation
aims to increase the security of supply for key
transition and industrial metals for the EU.
It mandates targets for the exploitation, refinement,
recycling and stockpiling of specific strategic and
critical raw materials, aiming to reduce permitting
times and increase investment in domestic mining
projects.
The Company is extremely well positioned to
take advantage of this shift in European resource
strategy through production at its Vareš mine.
This further underpins the longer-term strategy to
develop a European focussed multi-asset, mid-tier
diversified miner.
Bosnia and Herzegovina and
Balkan region
2023 saw a transition to new leadership
across Bosnia and Herzegovina leading to
some progress on EU accession. However,
governing coalitions maintain their diverse
makeups, leading to contrasting domestic
and foreign policy priorities which continues
to pose challenges.
Though acknowledged by the European Union
with candidate status in December 2022,
Bosnia and Herzegovina’s accession pathway
still hinges on the achievement of specific
reforms. These, outlined in the October
2022 enlargement policy communication,
demand a robust commitment to the rule of
law, effective measures against corruption
and organized crime, responsible migration
management, and unwavering protection of
fundamental rights.
However, as of March 2024, the European
Commission has recommended to open
EU accession negotiations with Bosnia
and Herzegovina based on a report they
submitted to the European Council citing
progress in key, if not all, areas. If this is
accepted the next stage is to adopt the
negotiating framework. 2023 also brought
a leadership change within Zenica-Doboj
Canton’s governing structure, diverging from
the Federation of Bosnia and Herzegovina
and state-level approaches. While this creates
additional operation considerations for
Adriatic, the Company is encouraged by initial
interactions with the new Cantonal Prime
Minister and his team. Adriatic anticipates
maintaining the strong collaborative spirit
fostered with previous administrations.
INTERNATIONAL METALS
MARKET
Analysts predict strengthening base metal prices
in 2024, as major economies rebound from the
effects of high inflation and tighter monetary policy.
Disruptions, resource nationalism and mine closures
have largely erased the previously expected near-
term surpluses, setting the stage for a rebound in
metal prices.
Around 5% of global zinc mine supply was curtailed
in 2023 due to low margins, and most of these
operations also produce lead and silver as by-
products. Of note were the closures of Boliden’s Tara
mine in Ireland, the largest zinc producer in Europe,
as well as Aljustrel in Portugal and many other
operations globally.
Silver industrial demand increased to all-time highs
in 2023, largely due to the growth in photovoltaics
and power grids, a trend that is expected to continue
with materially higher investment in renewable
energy over the coming decades. Gold prices
reached a new all-time high last year, and precious
metals are predicted to show further strength in
2024 amidst the ongoing geopolitical environment.
Inflation appears to be moderating across the major
economies, which should lead to the end of the
current interest rate tightening cycle. This would be
a welcome change for metals demand and mining
companies, who had to manage elevated cost
inflation but are starting to see their cost structures
level out in recent quarters.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Market Review - Continued
METALS APPLICATIONS
Zinc is mainly used for galvanising iron and steel
against corrosion, 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 less
suitable. Other uses of lead are in roofing, pigments,
ammunition, cable sheathing, weights, ceramics,
solders, alloys and radiation protection.
Silver has many applications including its use 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
functioning as a precious metal, being particularly
popular in the Asian sub-continent and the Middle
East.
COMMODITY PRICE VOLATILITY
Commodity prices ranged through 2023, with gold
prices rising 13% amidst global conflicts and a crisis
in the US banking sector, while the zinc price fell
13% year-over-year on weaker industrial demand.
Despite this volatility, Adriatic’s projected net smelter
return value varied only 6% year-over-year, which
speaks to the advantages of operating a polymetallic
project that evenly balances both precious and base
metal exposure.
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REFINING/SMELTING DEMAND
AND SHUTDOWNS
In 2022, smelters were shutting down due to high
electricity prices, but mine supply bounced back
from the challenges of the pandemic, creating a
temporary mismatch of concentrates, which led to
relatively high treatment charges.
In a reversal of that situation, 2023 saw smelters
turned back online while mines were put into care
& maintenance due to low profitability. This has led
to a tighter concentrate market with decreasing
treatment charges, for example below $100/dmt for
zinc concentrates.
These market conditions will be advantageous for
the Company as first concentrates are produced
this year.
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
Sea freight rates started to rise at the end of 2023
amid tensions in the Red Sea, however costs remain
below the elevated levels of 2021-2022. Looking
ahead to 2024, Adriatic will primarily be shipping
concentrates within Europe and so should not be
greatly impacted by this temporary situation. In the
medium term, increased shipbuilding activity from
recent years is anticipated to keep rates relatively
low.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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 Vareš 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
Leadership
expertise
Strong financial
position
High grade
deposits
Supportive
community
Local capability
and capacity
Resources &
Relationships
• 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
• Historic mining region with strong
• A source of committed
higher valuation
links to industry
employees
• Quality source material can lower
processing costs and environmental
impacts meeting supply chain
requirements
• Existing industrial infrastructure
• Established supply chain
• Stable geo-political environment
partnerships
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
Sustainable
development
goals
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 CEO Statement
Paul Cronin
Managing Director and Chief Executive Officer
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I am immensely proud
of the extraordinary
effort and unwavering
commitment to
successfully deliver the
Vareš Silver Project over
the past twelve months.
It has been a pivotal year for Adriatic, which
has now successfully transitioned from
a developer to a mining company. The
significant milestones in the year have
been first ore mined in July 2023 and first
concentrate production in February 2024.
This achievement is a true testament to the
dedication and capability of our exceptional
team. Their hard work and determination, in
the face of significant challenges, have played
a pivotal role in this transformative journey,
positioning Adriatic as a dynamic force in the
burgeoning European mining sector.
Another outstanding achievement in 2023
was the significant increase to the Life of
Mine (LOM) of the Vareš Project, with updated
Ore Reserves at our flagship Rupice mine
increasing by 89%. This considerable uplift
confirms our belief that the Rupice deposit is
today a Tier 1 asset, with significant further
upside as we continue to drill out this large
high-grade deposit. This extension of LOM
until 2041 is a significant step forward for
Adriatic as we aim to maximise the value of
our flagship asset for all our stakeholders. I am
excited about 2024 as Adriatic will commence
the delivery of critical metals to mainland
Europe.
MARKET
Despite volatile financial markets and uncertain
economic conditions, Adriatic has continued
to demonstrate its strategic importance in the
European market. In 2023, the global economy
remained under extreme pressure from geopolitical
instability and supply chain disruptions, driving
further deglobalisation and resource fragility.
Concerns about resource scarcity is now at the
top of the agendas of both EU and other western
economies. This has been demonstrated by a
strategic focus of sourcing metals and other key raw
materials from within European borders to improve
self-sufficiency in fuelling the energy transition and
to meet 2030 and 2050 carbon-reduction targets.
The focus on mining in Europe was accelerated
by the publishing of the European Critical Minerals
Act in March 2023, which sets strict targets for the
exploitation, refinement, recycling and stockpiling
of specific strategic and critical raw materials. Our
offtakers and customers recognise that Europe will
need to source more of its raw materials from within
the continent and from responsible and transparent
suppliers. As Adriatic moves into production in 2024,
the Company is well positioned to take advantage
of this shift in European mining strategy, which
strengthens our longer-term objective to evolve into
a European-focused, multi-asset, mid-tier diversified
miner.
Once in production, the Vareš Project will be
producing both a silver lead concentrate and a zinc
concentrate. With advancements in high-velocity
electric vehicle charging, the industrial demand for
silver in Europe is set to soar. Silver is one of the
most conductive metals and highly malleable and
it holds the key to the automotive electrification
transition. Zinc is mainly used as a protective coating
for other metals, such as steel and iron, to prevent
corrosion and will therefore play a crucial role in
green technologies such as zinc coatings to prevent
solar panels and wind turbines from rusting. These
are both strategic raw materials of great importance
for the green transition and new technologies
thus positioning Adriatic as a key player in the
international market for these critical metals.
PROJECT DEVELOPMENT
Our team on the ground has made significant
operational strides towards advancing the Vareš
Project’s development in Bosnia and Herzegovina.
A moment of pride for me personally was the
initiation of ore mining at the Rupice mine in
July 2023. The ongoing enhancements in the
underground development underscore the
unrelenting efforts by our talented mining team. The
implementation of an accelerated development
improvement plan has yielded substantial increases
in productivity and continues to deliver positive
results. Due to challenging ground conditions,
additional underground support is required in
the development drives at Rupice to ensure the
safety of our employees. Therefore, the ramp-up to
nameplate capacity is taking a few months longer
than expected and will be reached in Q4 2024.
Our considered progress stands as a testament to
our commitment to safe working conditions and
longevity and guarantees a promising future ahead
for the Project.
Furthermore, I am pleased to announce the
completion of the Vareš Processing Plant
construction over the course of the year.
While challenges such as delays in electrical
connection and equipment delivery extended the
commissioning timeline beyond initial projections,
I am delighted to report that all crucial equipment
is now on-site, installed, and the commissioning
process complete. First concentrate production
took place on 27 February 2024 and we look
forward to generating positive cashflows in the
second half of the year. All project infrastructure has
been completed and is ready for operations. The
24.5km road has been fully constructed and is now
being used to transport ore, equipment and workers.
In December 2023, the refurbished railway line was
successfully reopened, with the first train using the
track for the first time in 30 years. The occasion was
marked by a launch event on 14 December 2023,
which was attended by numerous local politicians
and dignitaries. The reopening of the railway is
of significant importance to the town of Vareš,
connecting it to the regions of Ilijaš, Breza, and
beyond. The reopening of the railway line creates
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 CEO Statement - Continued
new employment opportunities and economic growth in the region
and represents the modernisation and improvement of infrastructure in
Bosnia.
There was a day of celebration on 5 March 2024, as the Company
commemorated the Grand Opening of the Vareš Project in Bosnia
and Herzegovina. The official opening event took place at the Vareš
Processing Plant and was attended by Nermin Nikšić, Prime Minister of
the Federation of Bosnia and Herzegovina, Zdravko Marošević, Mayor
of Vareš and other key dignitaries. This was followed by a community
event ‘Vareš Fest’ that was held in the local town square to mark the
momentous occasion. Adriatic management and employees, key
suppliers and the local community came together to enjoy an afternoon
of traditional music, culture and other festivities.
The progress we have made has been remarkable and stands as a
testament to the dedication and proficiency of our management and
staff at the Vareš Project. The team has demonstrated their resilience
in overcoming challenges as well as their experience and capability
and we are now on the threshold of first commercial concentrate
production.
FINANCES
Undoubtedly, an uncertain economic outlook, inflation, increasing
interest rates, and disrupted supply chains have placed increased
pressure on Company finances over the last year. However, I have been
very impressed at how deftly we have managed our budgets, and the
Project cost budget has only increased slightly to US$188.9m. Our
disciplined approach and careful management of outflows has been
crucial in this rising-cost environment. Our entrepreneurial approach
has also been key in sourcing critical long lead-time items.
One advantage of the Vareš Project is its strategic proximity to
supportive infrastructure. Through diligent cost management across
various stages, we have successfully secured locally sourced materials
such as concrete, steel, and other essential components. Additionally,
Bosnia and Herzegovina enjoys the benefit of having one of the lowest
national power costs on a global scale. This favourable combination
of accessible infrastructure and cost-effective sourcing contributes
significantly to the Project’s overall efficiency and economic viability
and positions the Company as one of the lowest cost silver producers
globally.
13 of 170
Throughout 2023 we have worked closely with our financier Orion Mine
Finance (“Orion”) and we would like to thank them for their unwavering
support. To date, Adriatic has successfully drawn down the $120m of
senior secured debt from Orion, as well as the $22.5m copper stream
deposit. We have also agreed with Orion to commence our debt
repayments in December 2024, six months later then envisaged. In
August we raised $32m in an oversubscribed equity raise to primarily
accelerate and expand our exciting exploration programme. We were
pleased to have the ability to execute the transaction at such a tight
discount to the market and warmly welcome our new shareholders from
Australia, Europe and the US.
As we draw near to the anticipated generation of free cash flows from
the Project in 2024, we envisage a significant reduction in the discount
between Adriatic’s share price and its net present value. This impending
shift is indicative of the Project’s maturation and reduced risk profile
and underscores our confidence in future financial prospects.
SUSTAINABILITY
Sustainability is a core component of our business model and our
responsible business initiatives continue to adapt alongside our
operational development. Our primary commitment is in maintaining
the health and safety of our employees and contractors, protecting and
preserving the natural environment, and adopting sustainable resource
practices. Our dedication to environmental responsibility is evident
through continual environmental and social assessments. These
studies are integrated into our mine development plans and operational
activities and are stringently overseen by senior management.
To uphold our duty of care towards the environment, we have
implemented robust and continual monitoring provision. Furthermore,
our commitment extends to continual improvement, reflecting our
proactive stance in evolving environmental stewardship practices.
A priority for us throughout 2023 has been the maturation of our
Health & Safety Management System. As the complexity of our Project
has increased during the construction phase, the focus has been on
achieving a zero-harm outcome and ensuring the safety of all our
employees and contractors. Our comprehensive health and safety
framework encompasses meticulously crafted policies, procedures,
training modules, and company standards that surpass regulatory
compliance, underscoring our dedication to maintaining the highest
standards in occupational health and safety. Accordingly, we saw a
significant improvement in our total recordable incident frequency rate
(“TRIFR”) for 2023 standing at 1.40 as well as zero work-related fatal
incidents.
Furthermore, we have continued our commitment to 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 and tests,
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 conjunction with stakeholder expectation, Adriatic unveiled its
inaugural Sustainability Report in April. The report outlines the
Company’s ethical business commitments and discusses key
aspects of non-financial performance. After its release, we engaged
with stakeholders to deliberate its materiality and transparency, and
the report has been well-received for a company at this stage of its
developmental cycle. Nevertheless, Adriatic is cognisant that its social
and environmental footprint is evolving swiftly, and the breadth and
scope of sustainability measures will expand in impact and significance
in the coming months and years – especially given the evolution of
European sustainability reporting regulation. We will persist in refining
and advancing our sustainability commitments as we gain a better
understanding of our product lifecycle and assess our resource
management and processing efficiency post-commissioning.
Our intention is to deliver Europe’s most modern and environmentally
sustainable mine, and Adriatic remains fully committed to its immediate
and long-term social obligations. The execution of the Vareš Project
will accomplish one of the fastest rates of development for any junior
mining company. This achievement is due in great part to the support
we have enjoyed from our local stakeholders and the Government
and Ministries in Bosnia and Herzegovina. In 2023 this was reflected
in the Vareš Project being awarded the status of Project of Special
Importance by the State of Bosnia and Herzegovina.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 CEO Statement - Continued
EMPLOYEES
In 2023 we have hired a significant number of new
staff and our headcount increased significantly to
296 direct employees and 329 contractors, as of
31 December 2023. 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. Key appointments include Matthew
Hine as Chief Operating Officer, Sanette Harley as
General Manager - People, Ben Huxtable as General
Manager – Risk and Assurance and Alex Budden as
Chief Sustainability Officer.
The composition of the Vareš Project workforce
reflects our deliberate strategic choice to engage
young graduates and equip them with the necessary
skillsets. With an average employee age of
approximately 27 years old, our commitment to
high-quality operations necessitates substantial
vocational education programs. We firmly believe
in providing every member of our staff with job
security and making professional development
a cornerstone commitment to developing their
future careers. We also continue to make progress
towards our gender diversity targets, reaching a key
milestone of 27% female staff in 2023.
Our comprehensive training initiatives cover a
spectrum of skills, including English language
proficiency, driving skills, safe working practices,
higher education opportunities, environmental and
social principles, and personalized development
plans. We uphold a commitment to fair remuneration
and extend various benefits, such as private
healthcare for our employees and their families.
To ensure ongoing improvement, our Employee
Engagement Survey, launched last year, serves as
a valuable tool for continually assessing our cultural
performance. It enables us to identify areas where
work can be more fulfilling, fostering a sense of
engagement that ultimately contributes to greater
productivity across the board.
STAKEHOLDERS
The Vareš 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. This
achievement is due in great part to the unwavering
support we have enjoyed from the Government
and Ministries in Bosnia and Herzegovina. I
would like to express my appreciation to all our
stakeholders including the Government of Bosnia
and Herzegovina, our financiers, our shareholders
and the local communities within which we operate.
Without their endless encouragement, partnership
and support this Project would not have been
possible.
Over the past year, the Project has garnered
understandable interest from various stakeholders.
I personally recognise how imperative it is to
have clear and transparent engagement with
all 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 Vareš continues to provide regular updates
on our operational activity to local residents and
businesses and our sustainability team have spent
hours liaising closely with the local community on
any concerns they may have and working to address
these in a transparent way. In addition, Adriatic’s
leadership has worked tirelessly to ensure that
the local municipality and key authorities are fully
informed of developments on the ground at Vareš,
whom have also been hugely supportive on our
journey to success.
We are also increasing our marketing activities
and investor relations through participating in
numerous roadshows and conferences. In 2023,
we hosted over 15 site visits for analysts, investors
and advisors to see the Project for themselves. We
believe such engagement is essential for external
stakeholders to have an accurate perception of our
strategic delivery, operational progress and future
prospects.
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OUTLOOK
As Adriatic delivers on its first phase of
its strategy by reaching sustainable and
growing cashflows from production from the
Vareš Project, we look ahead to executing
the second phase of our growth plans
by adding to the LOM, and methodically
exploring our highly prospective exploration
licences. The Company has clear aspirations
to be a leading multi-asset, pan-European
operator with a 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.
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
exciting exploration programme and growth
strategy.
Paul Cronin
Managing Director and
Chief Executive Officer
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Strategy
Focus on project execution
Target Area
Growth &
Profitability
Operational
Discipline
People
Sustainability
Target
1. Exploration Growth and Return on
1. Effective Management of
1.
Increase Staff Engagement
1. Occupational Health & Safety
Investment (ROI)
Project Cost
2. Growth in Development
Asset Pipeline
3. Effective Capital Management
4. Cost of Capital
5. Develop medium term profitability
growth via acquisitions of development
stage or producing projects
2. Operational Effectiveness -
Production Ramp Up
3. Operational Effectiveness -
Underground Development
4. Operational Effectiveness - Plant
Performance
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2. Diversity
3. Maximise Staff Retention
4. Cultural Awareness
2. Minimise frequency and impact
of Environmental Incidents
3. Contractor Management Plan
Implementation
4.
Increase Stakeholder Perceptions
of Company in Local Community
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review
THE VAREŠ PROJECT, BOSNIA AND HERZEGOVINA
The Company’s flagship Vareš Project is located approximately 50km north of Sarajevo, in the district
of Vareš.
2
Vareš Project concession. The concession area includes the
Adriatic Metals, owns 100% of the 44km
mineralisation included in the Mineral Resource Estimates of Rupice and Veovača, as well as a number of
prospects and exploration targets as outlined in the map below:
Mining development at Rupice is progressing well,
with first ore mined in July 2023 and construction
at the Vareš Processing Plant completed, with
first concentrate produced on 27 February 2024.
The road, mine site infrastructure and additional
infrastructure at the railhead and port were
completed in Q4 2023. At the end of 2023, staff
headcount totalled 296 and contractor headcount
totalled 329. The final Project cost estimate is
$188.9m and Adriatic remains fully funded for plant
completion and ramp up.
In 2023, Adriatic received confirmation from the
Government of Bosnia and Herzegovina that the
Vareš Project has been granted the status of Project
of Special Importance. This acknowledgement
validates the significance of the Project to the
country in terms of its contribution to GDP, FDI,
employment and education. This important
recognition of the economic impact of the Project
will ensure that state institutions will prioritise their
support to the successful realisation of the Project;
accelerating procedural timelines and, where
applicable, allocating additional resources and
capital.
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 Veovača (which includes the Vareš Processing
Plant site) and Rupice on 28 January 2021 and 19
July 2021, respectively. The receipt of the Veovača
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
and an updated Mineral Resource Estimate was
subsequently announced in September 2020. In
June 2021 exploration permits were granted for an
2
of concession area, which covered
additional 32km
the new areas of Semizova-Ponikva, Brezik and Vareš
East, alongside the Rupice Northwest extension.
In 2021 and 2022 there was significant exploration
drilling took place over Rupice Northwest where
additional high-grade resources were discovered.
In December 2023, Adriatic announced updated
Reserves on Rupice and Rupice Northwest, which
increased the total to 13.8Mt at 187g/t Ag, 5.2%
Zn, 3.3% Pb, 1.4g/t Au, 0.5% Cu and 0.2% Sb. The
significant increase in ore reserves underpins an 18-
year mine life which now extends until 2041 based
on nominal throughput capacity of 800,000tpa.
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VAREŠ 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 Vareš Project has two commercial product
streams; a zinc concentrate and a silver-lead
concentrate. The Company has agreed offtake
contracts with four international commodities
trading and smelting companies for the purchase
of concentrate production from the Vareš Project.
The offtakers have been allocated 82% of the total
projected concentrate production over the first
24 months. The remaining 18% of concentrate
production has been intentionally reserved either for
advantageous spot market sales or additional long
term offtake agreements.
Existing infrastructure in a historical mining
district
The nearby town of Vareš is located between the
Rupice deposit to the northwest and the proposed
site of the Vareš 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.
17 of 170
Brownfield processing plant site, Greenfield underground mine
The new Vareš 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
Vareš, 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 Vareš Processing Plant site.
Mining
Infrastructure
Marketing
& Logistics
Ore Reserve
Roads
Logistics
Containerised rail transport from Vareš
to the Port of Ploče and sea freight to
end user
13.8Mt at 187g/t Ag, 5.2% Zn, 3.3% Pb,
1.4g/t Au, 0.5% Cu and 0.2% Sb
Mining Rate
800,000 tonnes / year
Life of Mine
18 years
Mining Method
Transverse Longhole Open Stoping and
Longitudinal Longhole Open Stoping
Operations
Contractor Mining
24.5km of road has been constructed
by the Vareš Municipality with funding
and oversight of construction provided
by Adriatic
Tailings Storage Facility
Dry stacked filtered tailings adjacent to
the Vareš Processing Plant
Water
Existing reticulated supply to Vareš
Processing Plant, plus supply from a
nearby stream that used to supply Vareš
town to Rupice Surface Infrastructure
Power
Rupice Surface Infrastructure:
6.5 MW average load to be provided
by JP Elektroprivreda BiH, plus a 1 MW
emergency diesel generator.
Vareš Processing Plant: 10.0 MW
average load to be provided by
JP Elektroprivreda BiH
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RUPICE MINE
World class
operation
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Rupice Underground Mine
MINE DESIGN
The Rupice Underground Mine design indicates
the location of the planned declines, ramps, levels
and stopes at Rupice. The primary access to the
underground workings will be via two separate
declines, developed from the surface.
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 egress route
for exhaust while the upper decline will serve as the
main ingress, insuring hauling is conducted in fresh
air. 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.
MINING PRODUCTION RATE
The Rupice Underground Mine
production rate is designed to match
the nameplate capacity of the Vareš
Processing Plant at a nominal 800,000
tonnes per annum.
MINING METHOD
Access to the underground workings will be via two
declines developed from the surface, accessing
the orebody via further development of ramps,
level access drives and footwall drives. All the
development access will be suitable for trackless
equipment.
The underground stoping will be divided into two
main mining method zones, as follows, and as shown
in the mine plan in the Rupice Underground Mine
design:
1. Transverse Longhole Open Stoping zone
(“TLOS”)
2. Longitudinal Longhole Open Stoping zone
(“LLOS”)
The TLOS zone will be below the 1,075m height
above mean sea level ("AMSL") and the LLOS zone
will be from and above the 1,075m AMSL.
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 retreating
echelon 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.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
Rupice Underground Mine - Continued
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 Vareš Processing Plant.
Figure 1: Rupice Mine Long Section FW
Figure 2: Rupice Mine Long Section HW
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Rupice Underground Mine - Continued
RUPICE MINE – DEVELOPMENT THROUGHOUT 2023
Rupice Underground Mine and Infrastructure
Throughout 2023, the development rate to date
has averaged approximately 127m per month. This
has been due a significant majority of the decline
development being in geo-technical category 4
ground, requiring time consuming ground support
implementation. In June 2023, due to the difficult
ground conditions, an accelerated development
improvement plan was put in place. Subsequently
H2 2023 monthly development meters increased
62% compared to H1 2023.
Key actions in the accelerated development
improvement plan included;
• The adoption of high-productivity development
methodology – a regional first with a single
development drill completing ground support,
scaling and boring of a development cycle. The
transition to a high-productivity development
cycle utilising 2 units (jumbo) is underway, with a
third jumbo arriving on site in March 2024.
• Fleet rationalisation and upgrades – two
development drill upgrades were completed in
2023 and surplus equipment identification and
demobilisation took place.
• People – key personnel experienced in high-
productivity development were hired. 35
experienced operators with international
experience in high-productivity development
were onboarded in 2023. These key people are
working in partnership with the mining contractor.
• Dewatering, electricity and shotcrete plant –
some delays to surface infrastructure completion
throughout 2023 impacted development cycles,
this has now been resolved. The Water Treatment
Plant ('WTP') has been commissioned, with
continuous operations achieved the beginning
of July. The WTP performance is in line with
3
/day and achieving
design, treating 240m
targeted discharge quality. The development and
commissioning of additional underground sumps
and an upgrade to surface drainage controls
were implemented. The lower and upper decline
electrical substations have been installed and
commissioned, providing a continuous electrical
supply at Rupice. The shotcrete plant was
constructed and commissioned in July.
•
Improving ground conditions - throughout
2023 53% of development has been in ground
classified as poor, therefore additional ground
support has been required thus increasing cycle
time. Ground conditions are expected to improve
materially in the orebody where rockmass
transitions to altered dolomite vs the current
sediments.
The first ore drive at the 1075 level was turned out
end of June and mineralisation intersected on 15
July 2023. Decline development and cycle times
have improved since the accelerated development
improvement plan was put in place end of June.
As of 31 December 2023, lower decline
development had advanced a total of 1,182m and
the upper decline 997m. There remains 110m of
development prior to decline connection, which is
scheduled for Q2 2024. This is on track to establish
primary ventilation prior to commencement of
stoping early Q3 2024. The primary fan is onsite,
with lower portal bypass construction commencing
in March 2024. Level development is progressing
well on 1075, 1050, 975 and 950 production levels,
providing multiple ore development fronts for plant
commissioning and ramp up.
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Figure 3: Decline Breakthrough Development
An achievable ramp-up profile at Rupice mine has been adopted targeting steady state production in Q4
2024. The anticipated ramp-up has been driven by:
• Underground Structural Geology – The
planned 900m structural geotechnical
drilling programme was completed during
the fourth quarter , delineating the poor rock
mass parallel to the orebody along-strike and
down-dip. Following a technical workshop and
completed studies, it has been established
that there is a requirement for upgraded
ground support standards to safely establish
and maintain footwall infrastructure. The
additional ground support improves ore drive
access and derisk level production rates once
stoping commences.
• Processing Plant Optimisation – The mine
plan delivers life of mine average head grade
throughout 2024 to ensure plant operating
parameters and product specifications are
achieved prior to delivery of high-grade feed
the second half of 2024, 2025, 2026 and
2027 onwards. Upon sustaining nameplate
parameters, the Company’s strategy will be
to maximise high NSR material in accordance
with future metal price expectations.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
Rupice Underground Mine - Continued
Rupice Underground Mine and
Infrastructure - continued
The grade control contractor has been mobilised
with the drilling programme expected to identify
opportunities for further optimisation of the mine
plan and reduce development costs. Adriatic is in
the process of conducting formal studies to confirm
plant throughput can be increased to over 1Mtpa, to
align with anticipated mine production.
Production Guidance 2024
On 24 January 2024, Adriatic announced its maiden
production guidance for 2024, 2025 and 2026. The
guidance for the 2024 ramp-up year and future life
of mine averages are based on the recently updated
Mine Plan incorporating updated mine designs and
the latest cost information.
The guidance is based on the additional drilling,
mineral resource estimation and advancing higher
grade development at Rupice and RNW. Down
blending of ore is planned during the initial months
of plant feed from lower grade stockpiles to facilitate
plant performance optimisation.
Maiden production guidance
2024
2025
2026
2027-2040
(average)
Ore Mined (kt)
240-300
750-850
800-900
800-900
Zinc (%)
Silver (g/t)
Lead (%)
Copper (%)
Gold (g/t)
4.5-5.9
5.8-7.8
6.1-8.1
4.6-6.1
261-348
259-345
211-281
160-214
3.2-4.2
0.5-0.6
2.1-2.8
3.6-4.9
0.5-0.7
2.4-3.2
3.5-4.7
0.5-0.7
2.9-3.9
0.4-0.5
2.1-2.8
1.2-1.6
The primary crusher construction was completed
at the end of 2023 and is currently being
commissioned. For the backfill pad the forestry
clearance commenced in November 2023 and was
completed in February 2024 . Excavation work has
also commenced.
Construction of the Rupice run-of-mine stockpile
is 83% complete. The lower plateau excavation is
complete with lining, multi-barrier and drainage work
commenced. The upper level has lining, multibarrier
and drainage work installed with material currently
being stockpiled.
At the end of 2023, over 10,000 tonnes of material
were stockpiled on surface and available for plant
commissioning.
The Water Treatment Plant was constructed in 2023
and, at the end of the year, had processed a record
3
of water, beating required specifications.
34,700m
3
settling pond was constructed and
The 2,600m
commissioned in 2023, with further improvements
planned for the first half of 2024, including an active
dewatering programme ahead of mine workings and
water treatment plant upgrades.
21 of 170
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VAREŠ PROCESSING PLANT
Modern, high-tech
operation
22 of 170
Vareš Processing Plant
The Vareš Processing Plant is located on a
brownfield site. The historic surface infrastructure
has been demolished, except for the administration
building, which has been refurbished and serves
as the company site offices, and the historical
thickeners, some of which have been repurposed for
water storage and the coarse ore stockpile.
The remainder of the site has been levelled and a
modern concentrator has been constructed using
the latest in grinding, flotation and dewatering
technologies.
Coarse ore is delivered from the three-stage
crushing plant at Rupice to VPP via a fleet of tipper
trucks. The trucks tip crushed ore into a hopper
which feeds the coarse ore stockpile via conveyors,
the coarse ore stockpile is enclosed under a dome
and provides a live residence time of approx. 24
hours.
The coarse ore is reclaimed via belt feeders onto the
ball mill feed conveyor. The ore is fed into the ball mill
at a P80 size of 7mm. The 1.9MW ball mill operates
in closed circuit with hydrocyclones to produce a
flotation feed product size of 40 microns.
The flotation circuit operates as a conventional
differential lead/zinc circuit where lead along with
copper, silver and gold minerals are recovered
first. The lead flotation circuit consists of rougher
flotation followed by regrinding via stirred milling to a
P80 size of 10 microns. Following the regrind stage
a scalper flotation cell produces final lead product
quality in a single stage. The scalper flotation tails
then feed a conventional three-stage cleaner
flotation circuit.
The lead flotation tails then feed into the zinc
flotation circuit where copper sulphate is used to
activate the zinc minerals prior to rougher flotation,
minor amounts of silver and gold are also recovered
in the zinc flotation circuit. The zinc rougher
concentrate is reground using stirred milling to a
P80 size of 20 microns. Again, a scalper flotation
stage is employed post regrinding to produce a final
zinc concentrate quality in a single flotation stage
with the zinc scalper tails feeding a conventional
three stage cleaner flotation circuit with scavenging
on the cleaner tails stream.
The final lead and zinc concentrates are sent to
high-rate thickeners and the water recovered from
the thickeners is returned to the process water
circuit. The thickened concentrates are then stored
in concentrate stock tanks which feed separate
horizontal plate pressure filters. These filters dry the
final products to a moisture content of approximately
9% by weight. The dried concentrate is then loaded
into containers to be delivered to the port of Ploče
for sale.
The tailings from the flotation circuit are also sent to
a high-rate thickener where water is also recovered
to the process water circuit. The thickened tailings
are stored in the tailings stock tank which feeds a
vertical plate pressure filter. The tailings are also
dried to a moisture content of approximately 9% by
weight. The dried tailings are then either returned to
the mine to be used as back fill or dry stacked in the
tailings storage facility.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
ROAD FROM RUPICE TO
VAREŠ PROCESSING PLANT
Connecting our
operations
Road from Rupice to Vareš Processing Plant
The road development that connects Rupice Underground
Mine and the Vareš Processing Plant has been constructed
and is ready for use ahead of first ore delivery requirements.
CONSTRUCTED ROAD
The 24.5km road has been built to transport
crushed ore and dewatered tailings between
the Rupice Surface Infrastructure and the Vareš
Processing Plant, as well as transporting full and
empty concentrate containers between the Vareš
Processing Plant and the Vareš 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
Vareš Processing Plant using the road.
The road consists of sealed and unsealed sections,
which by-pass villages and dwellings as well as the
town of Vareš. The 24.5km road has been permitted,
constructed and owned by the Municipality of Vareš,
and Adriatic has provided the funding and oversight
of its construction and will carry out ongoing
maintenance during the life of mine.
23 of 170
Figure 4: Map showing the road route between Rupice Underground Mine and the Vareš Processing Plant
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
Road from Rupice to Vareš Processing Plant - Continued
HAULAGE AND ORE HANDLING
In 2023, the haulage and haul road maintenance
contract was agreed with national provider, Almy
Transport. Fifteen new haul trucks are onsite and
commissioned, with all units fitted with fatigue
detection, safety intelligent speed assistance
(ISA), GPS tracking and dash cameras. All haulage
movements will be digitally monitored and recorded,
with the comprehensive tracking system allowing
the management and mitigation of risks associated
with road use and public interaction.
The concentrate handling agreement has also been
secured with national provider, Logistic Agent. Four
new 4x4 semi-trailer trucks together with four 20ft
container semi-trailers are in place. These are all
fitted with fatigue detection, safety ISA, GPS tracking
and dash cameras. Two reach-stackers, located at
the Vareš Processing Plant and railhead, are in place,
assembled and ready for operations.
The construction of the new fuel station at Vareš
has been completed and commissioned. Permitting
is in progress, with the technical review by Vareš
Municipality completed. The licensing for fuel
storage, transport, and selling is underway and on
track for completion in Q1 2024.
24 of 170
ELECTRICITY
The Vareš Majdan – Rupice 35kV & communications
cable installation is now complete and all permitting
approvals from Elektroprivreda BiH, the utility
company, and the Ministry have been received.
The electricity connection at Rupice took place
in November 2023 and connection to the Vareš
Processing Plant in December 2023.
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 treated and
re-circulated waste water or from pump-stations on
two local streams.
The water supply to the Vareš Processing Plant area
utilises the existing supply pipeline. Reticulation
around the Plant site is complete.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
INFRASTRUCTURE
Connecting our
operations to Europe
25 of 170
Infrastructure
RAIL
The concentrate will be transported from the
railhead at Vareš Majdan to the main export terminal
at Ploče in Croatia. The rail journey from the Vareš
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 Vareš to
Podlugovi uses diesel locomotives and was last
used in 2012. This line has been refurbished
(including 18 tunnels and 7 bridges) by AMBH and
FBiH Railways and was officially opened on 14
December 2023. The refurbishment of the Vareš
Majdan railhead and station was completed in
February 2024.
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 Vareš Majdan railhead to the Port of
Ploče will take approximately 10 hours.
The official opening of the rail line from Vareš Majdan
to Podlugovi on 14 December 2023, included
a ceremony that was attended by leading local
politicians, EBRD, ambassadors, press and key
delegates. The local community joined in the event
to celebrate this momentous occasion, marking
the revival of the railway after a hiatus of more than
three decades. The refurbishment of the railway line
and railhead holds not only historical significance
but also brings about enhanced logistics and
connectivity for the region.
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 a 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 of 60,000 TEU. In 2023, port
container traffic was approximately 30,000 TEU,
indicating that there is more than adequate capacity
for the concentrates produced by the Vareš
Processing Plant. At peak production, the Vareš
Project will require approx. 7,520 TEU of capacity.
At Ploče Port the agreement for the handling of
container cargo was signed in 2023. Refurbishment
work at the port warehouse has been completed
and is on track for first shipment of concentrate in
2024.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
Other Logistics - Continued
CONCENTRATE TRANSPORTATION
Key
Capital City
Zinc Processing Facility
Lead Processing Facility
Port
Road/Rail Route
Seabourne Route
Proposed Haulage Route
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MARKETING
The Company has agreed offtake contracts
with four international commodities trading and
smelting companies (“Offtakers”) for the purchase
of concentrate production from the Vareš Project.
The concentrates will be allocated to the Offtakers
as follows:
• Zinc concentrate to Boliden AB, Trafigura Pte
Ltd, Transamine SA; and
• Silver-lead concentrate to Glencore
International AG and Transamine SA.
The Offtakers have been allocated 82% of the
total projected concentrate production over
the first 24 months. The remaining 18% of
concentrate production has been intentionally
reserved either for advantageous spot market
sales or additional long term offtake agreements
to be agreed at a later date.
Post-production working capital will benefit from
favourable offtake terms, including the early
issuance of provisional invoices for between 90%
and 95% of concentrate value, the rights to export
smaller lot sizes and to ship a proportion of initial
zinc production by container.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
EXPLORATION
Significant increase
to Reserves
27 of 170
Exploration
EXPLORATION UPSIDE
In the Vareš region, significant new potential
remains across greenfield, brownfield and advanced
exploration targets. As part of a cohesive strategy,
Adriatic is committed to advance exploration
regionally to find the next economic deposit that will
diversify the current production profile and capitalise
on our existing extensive tenement holdings.
Exploration activity in 2024 will continue focus
on extending and further converting to reserve
previously drilled peripheral extensions of the Rupice
Main orebody. Areas for extension and infill drilling
across Rupice are to the north and south of areas
to be mined in 2024. Infill drilling will be to a nominal
25-30m separation between wider-spaced holes.
Drilling in 2023 highlighted these areas as having
potential through being under-drilled and poorly
understood geologically. The northern extension
of Rupice is expected to narrow, increase in grade
and precious metals, become more structurally
controlled and tightly constrained. To the south,
2023 drilling has shown mineralization to be
narrower, broadening, very continuous and open to
extension.
2023 marked the first modern drilling across the
Droškovac Fe-Ag-Pb-Zn-Sb deposit. A historic iron
ore deposit with remaining non-JORC reserves
of hematite, oligonite and sideritic iron ores. Base
metal horizons peripheral to iron ores were known
but not extracted. Drilling in Q3 and Q4 2023
started the process of testing areas of remaining
iron ore, the positions of reported base metal
zones and the validation of historic hand-drawn
geological interpretations. Drilling confirmed areas
of remaining iron ores and the existence of base
and precious metal horizons having thicknesses
of up to approximately15m. Of significance, both
base metal and iron zones were equally enriched in
silver as determined by pXRF. Assay results were
not fully available and validated by end of Q4, 2023.
Droškovac by end of 2023 had been validated
as being an iron, base and precious metal multi-
commodity project. Work in 2024 will focus on
defining the size of the mineralized system; grade
distribution and tenor for all mineralization domains;
metallurgical characterization; construction of
geological, structural and mineralization 3D models;
identification of global and regionally equivalent
styles of mineralization; as well as economic
potential. Greenfield project advancement in 2024 is
also scheduled for the Brezik prospect (historic iron
ore open pit along strike of Droškovac underground
mine) and the Vareš East tenement.
The area peripheral to the Brezik open pit and
extending towards and parallel to Droškovac was
found to be anomalously surface mineralized.
The anomalism was defined by multiple surface
geochemistry rock-chip and soil sampling programs
and to be coincident with outcomes from a
detailed 2023 ground gravity survey. Anomalism
was both for base and precious metals. Initial
results were originally considered potential surface
contamination from the Brezik open pit operations.
This was discounted with tighter infill sampling
showing repeatability and continuity of anomalism.
There was no historic underground mining beneath
the area of anomalism. These results will be
followed-up with diamond core drilling to define the
source of the anomalism in 2024.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
Exploration - Continued
There was no exploration activity across the Vareš
East property in 2023 other than completion of
work to clear the area of potential land-mine threats.
Sufficient areas have been cleared by the Bosnian
Civil Protection Authority to allow surface exploration
to commence in 2024 over an area of 5km x 2km.
Surface geochemical sampling and trenching are
planned. Scout drilling testing of the Barice and
Brgule barite associated base metal prospects is
also planned. Barice and Brgule are historic small-
scale mines with little known history and no modern
exploration coverage. The whole of the Vareš East
prospect has not been tested by extensive or
modern exploration methods.
The 2024 exploration program will move to
implementing hyperspectral logging linked to AI
processed spectral, lidar and lithogeochemical
analysis. Establishment of an onsite microscope
for metal speciation and quantification will allow
grade control, processing and exploration samples
to be rapidly reviewed for base and precious metals
minerals. A merging of technologies to interpret
faster bigger, more complex data sets to recognize
and drive the discovery of new opportunities.
28 of 170
DRILLING & ASSAY
Drilling in 2023 was completed using four
diamond drill rigs and crews provided by
Drillex International. 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 the end of each hole. Holes varied in depth
from 250m to 350m, depending on the
depth to drill target. All holes were downhole
surveyed using either a Reflex Gyro Sprint
or a Reflex Gyro OMNI tool. For azimuth
alignment, all holes were lined-up using a
Reflex TN14 Gyrocompass. Core orientation
was completed using both Reflex ACTIII and
Axis technologies Champ-Ori tools.
Drill core was logged and processed at the
Lipovici Exploration Coreshed in an outer
suburb of Vareš. Core was sampled using
Aan Almonte automatic core saw capable
of processing 200m of core a day. During
2023 SGS (Ankara) was used as the primarily
preparation and assay lab, maintaining
sufficient turn-around-time, lower cost and
reducing the number of laboratories required
to process samples. Barium over-limit assays
(>50% Ba) were sent to SGS Lakefield
(Canada) for completion of assay.
Drilling in 2024 will continue with three to four
diamond drill rigs using Drillex International
and Colonnade Drilling Services. 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 AND MINERAL RESOURCE ESTIMATE (MRE) DRILLING
A total of 28,769.2m from 120 drill holes was completed in 2023.
This total includes 26 abandoned holes.
Drilling was focused on defining the Rupice Northwest (RNW) 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 environmental impacts, fan drilling reduced the need for forest clearing, permitting and ground
disturbance across difficult, mountainous, environmentally sensitive terrain. Additional scout drilling was
conducted at Rupice West, Semizova Ponikva and Droškovac.
2023 Quarter
Collared Drillholes
Metres Drilled
1
2
3
4
Total
2023 Drilling Statistics
Meters Drilled
Collared Drillholes
23
33
38
26
120
10000
d
e
l
l
i
r
D
s
r
e
t
e
M
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
38
8,653
33
8,036
6,060
23
6,021
26
Q1
Q2
Q3
Q4
10
5
0
6,060
8,036
8,653
6,021
28,770
40
35
30
C
o
l
l
a
r
e
d
D
r
i
l
l
h
o
e
s
l
25
20
15
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Operations Review - Continued
Exploration - Continued
For the 2023 MRE for Rupice and RNW, a total of
287 diamond drill holes for a total of 76,935m define
the current limits of the known mineralization. Up
to mid-2022, the deposit was drilled and sampled
using diamond drill holes on a nominal 20m by
20m spacing. From mid-2022 to May 2023, the drill
hole spacing was widened to a 40m x 30m spacing
across RNW reflecting the robust continuity of the
stratabound mineralization along and across strike.
Drilling has defined a combined Rupice and RNW
mineralized system having a strike length of >900m
and an across-strike width of >350m.
The RNW portion of the 2023 MRE includes a total
of 80 diamond drill holes from the Company’s drilling
programmes in 2021 to May 2023 for 25,708m
to define the current limits of the known RNW
mineralization. Up to mid-2022, the deposit was
drilled and sampled using diamond drill holes on a
nominal spacing of 40m by 20m. From mid-2022
to the end of May 2023 the drill hole spacing was
widened to a 40m by 30m spacing. The widening of
the drill spacing was in response to the RNW deposit
being spatially continuous over its >300m strike
length and having a >260m across-strike width.
Figure 5: Isometric of the Rupice Block Model colored by AgEq Grade Ranges
29 of 170
Figure 6: Cross Section Rupice 2023 Resource Block Model – Rupice Main, Upper and Lower Zones
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Exploration - Continued
Long Section of Rupice and Rupice NW sulphide and semi-massive sulphide mineralisation to end
of 2023. Significant assays reported as of 13 November 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.
30 of 170
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Exploration - Continued
MINERAL RESOURCES
The Rupice Mineral Resource Estimate was updated in July 2023 by AMC Consultants. The July 2023 MRE reported 21.1Mt of Indicated and Inferred Resources at 156g/t Ag, 1.2g/t Au, 4.3% Zn and 2.8% Pb, as set out below.
Rupice Mineral Resource Estimate by Classification
Rupice Mineral Resources, July 2023
Grades
Class.
Ind.
Inf.
Total
(Mt)
18.3
2.8
21.1
Ag
(g/t)
168
75
156
Zn
(%)
4.6
2.4
4.3
Pb
(%)
2.9
1.6
2.8
Cu
(%)
0.4
0.2
0.4
Au
(g/t)
1.3
0.5
1.2
BaSO4
(%)
30
13
27
Sb
(%)
0.2
0.1
0.2
Ag
(Moz)
98.6
6.8
105.4
Zn
(kt)
844
69
913
Pb
(kt)
535
46
581
Contained Metal
Cu
(kt)
81
7
88
Au
(koz)
742
47
789
BaSO4
(kt)
5,426
353
5,779
Sb
(kt)
36
4
39
Veovača Mineral Resource Estimate by Classification (Unchanged)
Veovača Mineral Resources, July 2019
Class.
Ind.
Inf.
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)
16
6
13
38
8
46
Ag
(Moz)
9
1
10
Zn
(kt)
83
23
106
Pb
(kt)
55
11
66
Au
(koz)
14
4
18
BaSO4
(kt)
860
123
984
Grades
Contained Metal
Combined Notes:
• Mineral Resources are based on JORC Code
Rupice Notes:
• A cut-off grade of 50g/t silver equivalent has been
definitions
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
•
•
Ind. = Indicated
Inf. = Inferred
• AgEq – Silver equivalent was calculated using
conversion factors of 31.1 for Zn, 24.88 for Pb,
80.0 for Au, 1.87 for BaSO4, 80.87 for Cu and 80.87
for Sb. Metal prices used were US$2,500/t for Zn,
US$2,000/t for Pb, $150/t for BaSO4, $2,000/oz
for Au, $25/oz for Ag, $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) * 90% +
31.1 * Zn(%) * 90% + 24.88 * Pb(%) * 90% + 1.87 *
BaSO4(%) * 90% + 80 * Au(g/t) * 90% + 80.87 * Sb(%)
* 90% + 80.87 * Cu(%) * 90%.
• A bulk density (BD) was calculated for each model
cell based on its domain, using regression formulas.
For the Main zone: BD =2.66612 + BaSO4 x 0.01832
+ Pb x 0.03655 - Zn x 0.02206 + Cu x 0.09279
for the barite high-grade domain, BD = 2.72748 +
BaSO4x 0.02116 + Pb * 0.04472 + Zn x 0.01643 - Cu
x 0.08299 for the barite low-grade domain; and for
the NW zone: BD = 2.92581 + BaSO4 x 0.01509 +
Pb x 0.04377 - Zn x 0.02123 + Cu x 0.10089 for the
barite high-grade domain, BD = 2.74383 + BaSO4
x 0.01731 + Pb x 0.04573 + Zn x 0.02023 - Cu x
0.06041 for the barite low-grade-domain (the barite
domains were interpreted using 30% BaSO4 cut-off).
Veovaca Notes:
• A cut-off grade of 0.6% ZnEq has been applied
• 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
31 of 170
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Exploration - Continued
MINING
Ore Reserves
The Ore Reserve Estimate was prepared by AMC Consultants and comprises Probable Reserves as shown in
the table below:
Vareš Project Ore Reserve Estimate, December 2023
Deposit
JORC Class.
Rupice
Probable
Ore
Mt
13.8
AgEq
g/t
187
Ag
g/t
5.2
Zn
%
3.3
Pb
%
1.4
Au
g/t
0.5
Cu
%
0.2
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 32.4 for Zn, 25.9 for Pb,
79.2 for Au, 84.2 for Cu and 84.2 for Sb
• The applied formula was: AgEq = Ag(g/t) * 92% *
86% + 32.4 * Zn(%) * 97% * 71% + 25.9 * Pb(%) *
93% * 84% + 83.3 * Au(g/t) * 70% * 76% + 84.2 *
Sb(%) * 96% * 17% + 84.2 * Cu(%) * 97% * 82%
• ZnEq – zinc equivalent is calculated using AgEq
* 1/32.4
The Ore Reserves for the Vareš 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 AMC (Australia)
as part of the governance and internal controls
in relation to mineral resource estimates and the
reporting thereof.
32 of 170
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 AMC consultants 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.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Operations Review - Continued
Exploration - Continued
TENEMENT HOLDINGS
The Company’s tenements at 21 March 2024 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 Raška
(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
2
)
Area (km
Date granted
Expiry date
Orti-Selište-Mekuše- Barice- Smajlova Suma-Macak
19.33
3-Dec-20
3-Dec-50
1.08
0.91
0.83
4.52
1.32
12-Mar-13
12-Mar-38
12-Mar-13
12-Mar-38
12-Mar-13
12-Mar-38
14-Nov-18
12-Mar-33
14-Nov-18
12-Mar-33
2.88
9.91
1.28
1.84
1.44
8.54
3-Dec-20
3-Dec-50
3-Dec-20
3-Dec-50
19-Jul-22
19-Jul-25
3-Oct-19
29-May-26
7-Oct-19
29-May-26
21-Apr-16
07-Jul-25
Concession Agreement
No.:04-18-21389-1/13
Eastern Mining d.o.o.
Veovača 2
Veovača1
No.: 04-18-21389-3/18
Eastern Mining d.o.o.
Rupice-Juraševac, Brestić
Rupice - Borovica
Veovača - Orti - Seliste - Mekuse
No: 04-18-14461-1/20
Eastern Mining d.o.o.
Droškovac - Brezik
Borovica – Semizova Ponikva
Concession Agreement
No: 04-14-5359-3/22
Eastern Mining d.o.o.
Saski Do
Exploration Licence
310-02-1721/2018-02
Adriatic Metals d.o.o.
Kizevak
Exploration Licence
310-02-1722/2018-02
Adriatic Metals d.o.o.
Sastavci
Exploration Licence
310-02-1114/2015-02
Adriatic Metals d.o.o.
Kremice
I
A
N
V
O
G
E
Z
R
E
H
Annex 3 & 6 Area
Extension
Annex 5 – Area
Extension
i
a
n
v
o
g
D
e
z
N
r
e
A
H
d
A
n
I
a
N
a
S
n
s
O
o
B
B
i
I
A
B
R
E
a
S
b
r
e
S
i
* Possible to get a 1 year extension, but only for preparation of reserves elaborate which excludes any geological exploration work.
33 of 170
Exploration Licence
310-02-00060/2015-02
Deep Research d.o.o.
Rudno Polje Raška
81.39
28-Dec-15
24-Oct-24*
Exploration Licence
310-02-01670/2021-02
Adriatic Metals d.o.o.
Kaznovice
37.1
11-Oct-21
22-Nov-24
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Operations Review - Continued
THE RAŠKA PROJECT, SERBIA
Raška, Serbia
34 of 170
The Raška Project, Serbia
The Raška Zinc-Silver Project in Serbia
was obtained through the acquisition of
Tethyan Resource Corp. (“Tethyan”), which
was completed in October 2020. Tethyan
2
was exploring a highly prospective 130km
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 Vareš Project, sit on the Polymetallic
Tethyan Metallogenic Belt and thus also
contain zinc, silver and lead mineralisation.
Since the acquisition of the Raška 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.
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Operations Review - Continued
The Raška Project, Serbia - Continued
2023 Raška Exploration
Exploration across the Raška Project in southern
Serbia was focused on the Rudnica, Rudnica North,
Kozja Glava, Kremice and Kaznovice prospects.
There was successful intersection of mineralization
on the Kozja Glava (Pb-Zn-Ag), Plavkovo (Cu-Au) and
Rudnica (Cu-Au) prospects from trench, surface and
drill core sampling. Drilling results from the Rudnica
prospect identified the potential for a significant
increase in the size of the historic Rudnica porphyry
deposit. Drilling defined a low-grade gold leach
cap from surface, extensions to the known higher
grade copper supergene zone below the leach
cap, and an expansion of mineralization potential
within fresh rock at depth. In 2024, an accelerated
exploration program will be advanced to define
the size, distribution, contained metal potential
and metallurgical characteristics of the Rudnica
Cu-Au porphyry. Other Raška prospects will have
drilling and field programs advanced at a reduced
spend so as to maximize drilling metres across the
Rudnica porphyry prospect. Although a low-grade
porphyry deposit, Rudnica’s potential for expansion,
mineralization extending from surface, economically
favourable zonation, localization along an elevated
ridgeline and ready access to infrastructure, make
a compelling case for advancement to an Inferred
resource and PEA study stage.
In 2023 a total of 68 boreholes were
collared and 10,839.3m drilled with
a total of 9,357 drill core samples
dispatched for assay and 5,092 samples
sent for spectral analysis. In total,
3,194.7m of trenches and channels have
been mapped and 968 samples were
dispatched for assay.
35 of 170
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INCOME STATEMENT
(In USD)
Year ended
31 December 2023
Year ended
31 December 2022
Change
Operating loss before impairment
(20,879,003)
(13,287,601)
(7,591,402)
Exploration and evaluation impairment
-
(23,186,959)
23,186,959
Operating Loss
(20,879,003)
(36,474,560)
15,595,557
Net finance expense & fair value
movements
(8,053,856)
(10,668,258)
2,614,402
Loss before taxation
(28,932,859)
(47,142,818)
18,209,959
The Group made an operating loss of $20.9m for the year ended 31 December 2023 compared with an
operating loss of $36.5m for the year ended 31 December 2022 (“prior year”). The decrease is primarily due
to a $23.2m partial impairment of the Raška Project recognised in the prior year partially offset by an increase
in general and administrative expenses of $6.6m,exploration costs of $0.7m and share-based payment
expense of $0.3m.
GENERAL AND
ADMINISTRATIVE EXPENSES
General and administrative costs incurred
in the year were $17.2m (prior year: $10.6m)
primarily due to increased headcount and
higher travel expenses, property costs, and
professional fees.
Wages and salaries in the year totalled $6.5m,
an increase of $2.0m compared with prior
year due to higher headcount, with an average
number of employees of 296 in the year (prior
year: 158). Travel expenses increased by
$1.0m to $1.3m due to more travel associated
with the exploration and development of the
Vareš Project during the year.
Property costs increased mainly due to new
office leases in Sarajevo and London.
Professional fees in the year were $2.8m
compared with the prior year of $0.9m, an
increase of $1.9m including higher audit fees
and legal costs.
EXPLORATION COSTS
Exploration costs of $2.1m expensed in the year
relating to the Raška Project were higher than the
prior year ($1.4m) due to higher levels of drilling, as
activity continues to focus on developing a detailed
understanding of the Raška Project’s potential and a
revised development plan.
FINANCE EXPENSE
The finance expense in the year was lower at $5.5m
(prior year: $7.1m) mainly as a result of a higher
foreign exchange loss in the prior year of $4.6m
recognised on the revaluation of cash held in Euros
for the Vareš Project construction, as the Euro
depreciated against the US dollar. This favourable
change was partially offset by higher interest
expense on lease liabilities of $0.5m, amortisation of
the day one fair value deferral of the Copper Stream
of $0.1m and an adverse fair value Copper Stream
liability revaluation of $2.5m.
REVALUATION OF DERIVATIVES
AND FAIR VALUE OF LIABILITIES
The Group issued $20m convertible debt to Queens
Road Capital Investment Ltd on 30 November 2020
which could 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 2023 resulted in a $3.5m loss in
the year ended 31 December 2023 (prior year: a
loss of $4.1m), with the Company share price at
31 December 2023 of A$4.01(prior year: A$3.15)
compared with the conversion strike price of
A$2.7976 per ordinary share. The QRC convertible
debt was converted into shares in March 2024.
36 of 170
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Strong capital control
CASH FLOW AND BALANCE SHEET REVIEW
Net liability/cash
(In USD)
At 31 December 2023
At 31 December 2022
Change
Cash and cash equivalents
44,856,215
60,585,277
(15,729,062)
Cash Flow
(In USD)
Year ended
31 December 2023
Year ended
31 December 2022
Long term borrowings (including
embedded derivative liability)
(150,710,423)
(48,867,271)
(101,843,152)
Net cash used in operating activities
(22,886,414)
(11,233,068)
Net cash used in investing activities
(99,485,435)
(58,664,242)
Net cash inflows from financing activities
106,998,895
22,410,095
Net decrease in cash and cash equivalents
(15,372,954)
(47,487,215)
Net cash used in operating activities during the year was $22.9m compared with $11.2m in the prior year.
Net (liability)/cash
(105,854,208)
11,718,006
(117,572,214)
The Company had a net liability position at 31 December 2023 of $105.9m, compared with a net cash
position of $11.7m at 31 December 2022. As well as the cash flow movements noted above, the change
in cash and cash equivalents of $15.7m includes exchange losses of $0.3m while the $101.8m increase
in borrowings mainly reflects $58.6m debt draw down net of costs, receipt of the $22.5m copper stream
deposit and its fair value adjustments totalling $4.4m, capitalised Orion senior debt interest of $13.0m, and a
$3.5m fair value adjustment to the embedded option in the QRC convertible debt.
Investing activities included cash outflows for the purchase of property, plant and equipment during the year
of $101.0m (prior year: $58.7m) mainly reflecting the development phase of the Vareš Project.
Non-current assets
Net cash inflows from financing activities totalled $107.0m, an increase of $84.6m on prior year. This includes
two drawdowns of $30m each of the Orion Senior Secured Debt, net of fees and associated legal costs
totalling $1.4m, and receipt of the $22.5m copper stream deposit. Other financing inflows include $30.6m
(net of transaction costs of $1.4m) from issue of share capital to accelerate and expand the Company’s
exploration programme. These inflows were partially offset by $1.9m interest paid on loans and borrowings
and $2.8 lease payments.
Working capital
(In USD)
At 31 December 2023 At 31 December 2022
Change
(In USD)
At 31 December 2023 At 31 December 2022
Change
Exploration and evaluation assets
8,500,000
8,500,000
-
Property, plant and equipment
212,730,670
77,860,563
134,870,107
Right-of-use assets
8,319,826
8,953,835
(634,009)
Total non-current assets
229,550,496
95,314,398
134,236,098
Receivables and prepayments
14,892,072
18,830,315
(3,938,243)
Total non-current assets increased to $229.6m at 31 December 2023 (prior year: $95.3m) due to progress on
the construction and development of the Vareš Project.
Accounts payable and
accrued liabilities
Inventory
Working capital
(17,672,820)
(5,341,740)
(12,331,080)
1,552,781
-
1,552,781
(1,227,968)
13,488,575
(14,716,543)
The Group had a negative working capital position at 31 December 2023 of $1.2m, compared with a positive
working capital position of $13.5m at 31 December 2022. The decrease in working capital is mainly due to
an increase in accounts payable and accruals as the Vareš Project construction neared completion and the
Company prepared for the operational phase.
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Financial Review - Continued
38 of 170
QUEENS ROAD CAPITAL
CONVERTIBLE DEBT
The QRC convertible debt was converted into
shares in March 2024.
VAREŠ PROJECT DEVELOPMENT
BUDGET
The Project cost estimate increased to $188.9m
as at 30 January 2024. The Company remains fully
funded to Project completion.
SHARE PRICE PERFORMANCE
The Company’s share price has appreciated 72% during the past three years, outperforming relevant
comparable market indices, S&P ASX 300 Metals & Mining (23% increase) and FTSE 350 Mining index
(54% decrease).
FTSE 350 Mining Index
S&P ASX 300 Metals & Mining
ADT
100%
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60%
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Clear debt repayment
programme
CASH
The Company had a cash balance at 31 December
2023 of $44.9m and, subject to satisfaction of
conditions precedent, an undrawn debt facility of
$30.0m. The final $30m tranche of debt was drawn
down in January 2024.
ORION MINE FINANCE PROJECT
FINANCE PACKAGE
In 2021 the Company secured a $244.5m project
finance package (“Project Finance Package”) to
provide the Group with sufficient funding through
to first concentrate production at the Vareš 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.
• All conditions precedent for drawdown of the
second and the third tranche of $30m each
of the Senior Secured Debt were satisfied and
these funds were received in February and April
2023 respectively. The copper stream deposit
was also received in February 2023. The fourth
tranche of the Senior Secured Debt was drawn
down in January 2024.
EQUITY RAISE
In August 2023 the Company secured a gross
equity raise of $32m for the purposes of funding an
expanded and accelerated exploration programme
at Rupice and Rupice Northwest, for general working
capital associated with exploration and growth
opportunities, general corporate purposes and fees.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Financial Review - Continued
Resilient through cycles
COMMODITY PRICE
PERFORMANCE
The value of the Company’s assets and potential
earnings will be affected by fluctuations in commodity
prices, such as the US$ 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:
Figure 7: LOM average revenue split by commodity
from 2021 Definitive Feasibility Study
14%
Ag
Zn
Pb
Au
Cu
Sb
18%
34%
Average
Revenue Split
1%
2%
31%
39 of 170
The price performance during the year of relevant commodities for the Vareš Project are shown in the graph below:
Silver (Ag)
Zinc (Zn)
Lead (Pb)
Copper (Cu)
Gold (Au)
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
Jan 2023
Feb 2023 Mar 2023
Apr 2023 May 2023
Jun 2023
Jul 2023
Aug 2023
Sep 2023 Oct 2023
Nov 2023 Dec 2023
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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.
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A. 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).
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.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Principal risks and Uncertainties - Continued
B. 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.
It is not uncommon for new mines to experience
unexpected problems, increased costs and
delays during production ramp-up. Any adverse
event affecting the Vareš Project 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. The Company’s ultimate
success will depend on its ability to reach nameplate
concentrate production and generate positive cash
flow from operations, with the principal risks being:
Operation of the Vareš Mine
The principal risks relating to operation of the Vareš
Mine are unchanged 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
• adverse ground conditions and slow advance
during mining;
The Company has yet to reach
nameplate production and is
exposed to ramp-up risk
The Vareš Project is anticipated to be the
Company’s sole source of near term earnings
and positive cash flow. Project development
is no longer considered a principal risk as the
Company announced on 27 February 2024 that
it had produced first concentrate from the Vareš
Processing Plant. The Company’s future success
will therefore largely depend upon the Company’s
ability to complete the production ramp-up of, and
then manage, the Vareš 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.
rates of underground development and mining;
and
• difficulties in ramping up the plant and equipment
to nameplate capacity.
An achievable ramp-up profile at Vareš Mine has
been adopted targeting steady state production
in Q4 2024, a slower ramp-up than previously
anticipated driven by:
• underground structural geology - following a
technical workshop and studies completed in the
final quarter of the year, it has been established
that there is a requirement for upgraded ground
support standards to safely establish and
maintain footwall infrastructure. Once installed,
the additional ground support will improve ore
drive access and derisk level production rates
once stoping commences; and
• processing plant optimisation - the mine
plan delivers life of mine average head grade
throughout 2024 to ensure plant operating
parameters and product specifications are
achieved prior to delivery of high-grade feed in
the second half of 2024, 2025, 2026 and 2027
onwards. Upon sustaining nameplate parameters,
the Company’s strategy will be to maximise high
NSR material in accordance with future metal
price expectations.
•
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 Vareš Processing Plant and
ancillary operations falling below expected levels
of output or efficiency;
• difficulties experienced by the state rail operator
of Bosnia and Herzegovina in operating the
railway line for the movement and storage of
concentrates from the Vareš Railhead to the port
of Ploče;
• difficulties in operations at the deep-water
port of Ploče in Croatia required for shipping of
concentrates to smelters;
• 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;
•
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
Vareš Mine .
Exploration
Exploration risk is unchanged. During the year,
the Company achieved further success with its
exploration programme at Vareš, with strong drilling
results both at the Rupice main ore body and at
Rupice NW, which has added 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 Vareš Project, or any
other exploration properties that may be acquired
in the future, will result in the discovery of further
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.
41 of 170
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Principal risks and Uncertainties - Continued
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.
AMC (Perth) provides services for resource
estimation and sign-off on the QA/QC related to
all resource block models and resultant estimates
produced. 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.
42 of 170
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.
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.
The Company has continued to strengthen 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
The majority of the Group’s revenues 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, while any depreciation in
the US dollar relative to non-US dollar expenditure
will result in a reduction in margin and cash flow.
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 Vareš 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.
Historical tailing storage facility
Whilst the historical tailings storage facility
(“Historical TSF”) is the legal responsibility of the
Municipality of Vareš and is not located inside the
area covered by the Veovača Exploitation Permit,
there remains a residual risk to the Company
that the community near Vareš may consider or
perceive the Historical 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 Vareš on this matter and while it is not
required to do so, the Company has commissioned
an independent expert appraisal of the Historical
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 Historical TSF and monitoring continues.
An appropriate management action plan will be
developed by the Company.
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 Vareš 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 Vareš and has been
open since September 2019.
The community of Vareš, government stakeholders
and the wider audience in Bosnia and Herzegovina
remain supportive of the Project. A significant
proportion of the Company’s staff is from the
local communities of Vareš, Breza and Kakanj.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Principal risks and Uncertainties - Continued
An ongoing priority for the Company is the
importance of carefully managing the activities of
its employees, contractors and sub-contractors to
ensure that they 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 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 is also open in Raška, which,
like Vareš, 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 Raška
with the same commitment as at Vareš.
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, including staff training on prevention of
bribery and corruption 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 of bribery and corruption during
the year.
43 of 170
POLITICAL INSTABILITY
The Company acknowledges the potential impact
of political instability and civil unrest in or around
the Vareš mine site, processing plant or its supply
routes, or at its Raška Project, on its ability to
advance the projects. To mitigate this risk, the
Company closely monitors the national political
situation and carefully considers its engagement
with politicians (at all levels, including internationally).
The level of political tension during 2023 was less
elevated than in late 2021, when secessionist
rhetoric by Milorad Dodik, the president of Republika
Srpska, received national and international
attention, and late 2022 when 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 Company recognises that the political
landscape in Bosnia and Herzegovina 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 but there has been no impact on the
Company’s operations.
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
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.
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.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Directors’ Section 172(1) Statement
Working and communicating with our stakeholders
This statement, a key component
of the Strategic Report, is intended
to demonstrate how the Directors
have approached and fulfilled their
responsibilities under Section 172(1) (a)
to (f) of Companies Act 2006 (“Section
172(1)”) during the period under review.
In accordance with Section 172(1), Directors must
act in a way he/she considers, in good faith, would
most likely promote the long-term success of the
Company for the benefit of its members as a whole,
having regard for its stakeholders and the matters
set out in Section 172(1). In doing this, the Director
must have regard, amongst other matters, to:
a) The likely consequences of any decision in the
long term;
b) The interests of the Company’s employees;
c) The need to foster the Company’s business
relationships with suppliers, customers and
others;
d) The impact of the Company’s operations on the
community and the environment;
e) The desirability of the Company maintaining
a reputation for high standards of business
conduct; and
The Board acknowledges the importance of forming
and retaining constructive relationships with all
stakeholder groups. Effective engagement with
stakeholders yields valuable feedback and insights,
enabling Directors to incorporate stakeholder
interests in decision-making processes, ultimately
contributing to the long-term success of the
Company.
The Company maintains ongoing interactions 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.
The Board is committed to providing shareholders
with clear and timely information on Adriatic Metals’
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. In addition, Adriatic Metals’ newly
appointed Chief Sustainability Officer will be joining
in 2024 and reporting directly to the CEO.
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.
f) The need to act fairly between members of the
Company.
Adriatic Metals consistently communicates and
collaborates with individuals or groups that have
influence or have an 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 Company publishes on its website a range
of information which helps current and potential
shareholders to assess the Group’s position and
prospects. This includes investor presentations,
technical reports on projects, resource estimates,
drilling updates, annual and interim financial
statements, sustainability reports, quarterly activities
report, business strategy documents, governance
materials, and regulatory announcements, among
others.
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In Q2, Adriatic Metals published its updated
Stakeholder Engagement Plan ("SEP"), which is
available on the Company website. The document
is developed with the aim of guiding stakeholder
consultations and communications throughout
the life of the Project, including closure. The SEP
is monitored, reviewed and updated on a regular
basis by Adriatic Metals providing a roadmap for
engagement and monitoring the effectiveness of
impact mitigation measures. The plan has been
developed to meet best practice as exemplified by
the standards of the Equator Principles financial
institutions, including the sustainability frameworks
of the International Finance Corporation and EBRD's
Performance Requirements 1 & 10.
CONSIDERATIONS OF KEY
STAKEHOLDERS
Shareholders
Acknowledging that a majority of private investors
hold shares via nominee shareholders, limiting
the full exploitation of their shareholder rights,
the Company is committed to engaging with all
shareholders, not just institutional ones. The Head
of Investor Relations, based in London, manages
shareholder inquiries and collaborates with the
Company's brokers and public relations advisers to
facilitate engagement.
Board review
To keep the Board informed about the perspectives
and concerns of major shareholders, briefings from
the CEO, Chairman, Head of Investor Relations, and
the Company's brokers are regularly conducted.
External consultants provide share register analyses
on a monthly basis, along with significant investment
reports from analysts.
The Company’s annual general meeting, open to all
shareholders, will be held in London following the
publication of annual results and the issuance of the
Notice of Annual General Meeting.
Local stakeholders
Adriatic Metals recognises that its activities and
the forthcoming commissioning of the Vareš
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.
KEY CONSIDERATIONS UNDER
SECTION 172(1)
A: The likely consequences of any decision in
the long term
The Board prioritises the long-term success of
the Company, evaluating decisions with a focus on
sustained growth and value generation. Strategies,
such as ongoing engagement and environmental
impact assessments, contribute to the Company’s
long-term success.
B: The need to foster business relationships
with key stakeholders
The Board acknowledges the significance of
relationships with key stakeholders, emphasising
effective engagement and relationship-building.
Analyses of stakeholder engagement mechanisms
and ongoing reports ensure a comprehensive
understanding of stakeholder feedback and insights.
C: The desirability of maintaining a reputation
for high standards of business conduct
The Board oversees the Company's culture, values,
and reputation. A commitment to high standards of
business conduct is maintained through compliance
reports, stakeholder engagement, and metrics that
contribute to upholding the Company's reputation.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
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
number of site visits in 2023 which provided direct
experience of the progress of the Vareš Project and
understand more about the development process.
The Company also attended numerous investor
conferences globally.
Shareholders
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, acquisitions and fund
raises.
As the Company progresses
through development and into
production, shareholders have
raised the following topics:
• Construction progress on the
Vareš Project
• Management changes
• Geopolitical impacts on
supply chain and sourcing key
equipment
• NGO activity
•
Inflationary impact on cost and
budget
• Climate change / TCFD
reporting
• Political climate in Bosnia &
Herzegovina
• 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
•
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
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
Directors’ Section 172(1) Statement - Continued
D: The impact of the Company’s operations on
the community and environment
The Board actively monitors the Company’s
community and environmental impact through
reporting from senior management, aligning with
ESG objectives. Comprehensive discussions on
environmental issues and ongoing engagement with
the local community guide decision-making.
E: The need to act fairly as between members
The Company's Directors engage with shareholders
through various channels, ensuring accessibility and
transparency. Regular meetings, comprehensive
online updates, and the publication of key
information contribute to fair and transparent
communication with members.
In adherence to our purpose and strategy, these
considerations contribute to the long-term
sustainable success of the Company.
The following table sets out the Company’s key
stakeholder groups, how the Company has engaged
them during the year.
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Directors’ Section 172(1) Statement - Continued
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.
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 Vareš Project.
Regular technical team meetings have taken place
between the Company and Orion throughout the
construction phase of the Vareš Project.
The CEO and CFO maintained regular and open
communications with both Orion and Queens Road Capital,
as well as external consultants, on an ongoing basis.
In September 2023, Adriatic Metals hosted a team from
Boliden, one of the Company’s offtakers. Boliden brought
their senior sustainability officers to site and the Vareš
Project underwent a significant review of its sustainability
procedures. Following the site visit Boliden and Adriatic
Metals issued a joint press statement that both companies
will work together to produce zinc with the highest ESG
standards.
Workforce
Employees are critical to Adriatic Metals’
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 Metals maintains an open line of communication
between its employees, senior management and Board.
• Compensation and benefits
• Health and safety
• Career development
• Diversity and inclusion
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.
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 1.25.
Training
2023 focused on a fit for purpose Technical Training
solution, to ensure operational readiness and safe
production.
Diversity
The Company has maintained a strong level of female
representation in the workforce of 27%.
Employee Survey outcome
In October 2023, an Employee Survey was conducted to
gauge the performance of senior management’s delivery
of the Company’s values and visions.
In 2023, participation in the survey was 69% with 80% of
employees agreeing they are proud to work for Adriatic
Metals. Following the survey, Adriatic Metals’ working
group continues to develop and launch further employee
engagement initiatives.
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Directors’ Section 172(1) Statement - Continued
Key Stakeholder groups
Key topics raised
How and why we engage
Engagement outcomes
A number of areas were raised and discussed during the
course of the year, including:
• Licencing and permitting.
• Site visits.
Governmental and NGO bodies
Adriatic Metals 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.
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. 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 Metals is committed to being a long term
participant 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
In Q1 2023 Adriatic Metals received confirmation from
the Government of Bosnia and Herzegovina that the Vareš
Project has been granted the status of Project of Special
Importance.
In September 2023, Adriatic Metals organised a site visit
for local NGOs to enhance their comprehension of the
company’s operations and sustainability practices. Adriatic
Metals also conducted several site visits for guests such
as the US, British, and Norwegian Embassies, the Prime
Minister and Cabinet of Zenica-Doboj Canton, the Federal
Minister of Environment and Tourism, and representatives
from various Balkan governments.
During 2023 the following licences and permits
applications were successfully completed:
• The environmental permit for Rupice, was approved
by the Federal Ministry of Environment and Tourism
(‘FMOIT’) due to the changes in the surface layout at
Rupice.
Serbia
During 2023 the following licence applications were
successfully made:
• The Ministry of Mining and Energy granted Adriatic
Metals extensions for three exploration permits in
Q2 and Q3, recognizing the company’s commitment
to responsible resource exploration. Adriatic Metals
continues focused exploration on specific areas,
emphasizing sustainable development for growth and
contribution to Serbia’s economic landscape.
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Directors’ Section 172(1) Statement - Continued
Key Stakeholder groups
Key topics raised
How and why we engage
Engagement outcomes
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 Vareš and
Kakanj and the wider population of the
municipalities and Canton of Zenica-Doboj.
Serbia
The near-mine communities in the Municipality
of Raška, the national park of Kopaonik (which
borders the North-eastern extremities of the
license areas) and the wider population of both
Southwest Serbia and Northern Kosovo.
Suppliers
Suppliers are fundamental to ensuring that
Adriatic Metals can construct the Vareš
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
subcontractors.
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As Adriatic Metals is progressing towards production, the
Company is starting to have significant social, economic
and environmental impacts on the local community and
surrounding area, leading to questions around:
Bosnia and Herzegovina
Adriatic Metals continues its engagement through the
Vareš Information Centre and Public Liaison Committee,
proving an excellent forum for community feedback.
• Strategic plans in place for the successful execution
of infrastructure undertakings such as the road
reconstruction.
• Employment opportunities.
•
Involvement in Adriatic Metals sponsored events and
education programmes such as English language
courses.
•
Installation of electric cables.
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 utilized.
Procurement and contracting
The Company employs the majority of its current (and
future) staff from the municipality of Vareš. In addition, a
Local Business Development Officer is in place to engage
with local suppliers and contractors.
During the construction phase of the Vareš Project,
Adriatic Metals engaged key suppliers under commercial
engineering and supply contracts to deliver the mine and
plant equipment and support ongoing production.
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
In May, Adriatic Metals actively participated in a conference
on “Secondary Vocational Education in Bosnia and
Herzegovina,” fostering the exchange of experiences
in dual education. The event, supported by the Swiss
Agency for Development and Cooperation and the German
Association for International Cooperation, aimed to guide
future activities and legal obligations.
In June, as part of collaborations with the University of
Zagreb and the European Institute for Innovation and
Technology, Adriatic Metals hosted an international
student exchange program, welcoming 50 students and
6 professors from various continents to learn about the
company’s operations, mission, and vision.
More information can be found in the community section
of this review.
Serbia
Adriatic Metals maintained a successful partnership
with Raška Gymnasium, fostering connections between
students, professors, and company representatives
to acquaint students with exploration activities and
the geology profession. Additionally, the company
demonstrated ongoing social responsibility in Raška
through generous contributions, benefiting various local
organizations, emphasizing the importance of community
engagement for trust and positive relationships.
Bosnia and Herzegovina
Adriatic’s engagement with suppliers for the Vareš Project
aims to ensure strategic alignment. Through transparent
communication and collaboration, we continue to uphold
high standards of performance and safety while optimising
procurement.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Principal decisions by the Board during the period
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. NEW REMUNERATION POLICY
The Board approved seeking approval from
shareholders for a new Directors’ remuneration
policy that will apply for up to 3 years from the
2023 AGM, including the performance conditions
applicable to the new 2023 LTIP.
B. RASKA PROJECT IMPAIRMENT
Due to the longer development horizon envisaged
for the Raska Project, the Board approved
recognition of a non-cash partial impairment of
$23.2m against the Raska Project, bringing its
carrying value to $8.5m and for this to be reflected in
the Company’s Annual Report and Accounts for the
previous year.
C. ROAD HAULAGE AGREEMENT
The Board approved the entering into of a Road
Haulage Services and Maintenance Agreement
with Almy Transport d.o.o. Zenica for a duration of
five and a half years for the provision of haulage
services, road maintenance and other related
services in connection with the transportation of ore,
tailings and aggregate, as well as road maintenance,
in connection with the Vareš silver project.
D. EQUITY FINANCING
The Board approved an equity financing by way
of a conditional placing of 14,777,632 ordinary
shares in the Company to raise gross proceeds
of US$32,069,456 at the placing price of £1.70
(AU$3.30) per share, for the purposes of funding an
expanded and accelerated exploration programme
at Rupice and Rupice Northwest, for general working
capital associated with exploration and growth
opportunities, general corporate purposes and fees.
The equity financing was completed during August
2023.
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review
Standards and commitments
This sustainability review presents a summary of Adriatic’s sustainability-
related performance in 2023. 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.
BASIS OF PREPARATION
The information within this sustainability review
has been developed in accordance with legal
requirements such as Streamlined Energy and
Carbon Reporting (SECR), Task Force on Climate-
Related Financial Disclosures (TCFD), Companies
Act 2006 and Bosnian Mining Law.
Disclosures have largely been shaped by the
benchmark reporting standard agreed with
investors the European Bank for Reconstruction and
Development (EBRD) as well as the United Nations
Sustainable Development Goals (UN SDGs).
Unless clearly stated, all sustainability disclosures
are related to operations in Bosnia and Herzegovina,
where impacts are most evident and material.
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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.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
MANAGING SUSTAINABILITY-
RELATED RISK AND
OPPORTUNITY
We believe that
sustainability
considerations must
be built into the
foundations of what
we do.
Adriatic Metals is committed to managing
sustainability-related risks and opportunities,
embodying a comprehensive approach led by
our executive team. The Board bears ultimate
responsibility for the company’s environmental,
social and climate change management. This crucial
leadership role is complemented by the Head of
Sustainability, who spearheads an operational-level
working group tasked with delivering the company’s
sustainability strategy. This strategy includes
targeted initiatives to address climate-related risks
and seize emerging opportunities.
Adriatic Metals views the management of
sustainability-related risks and opportunities not
only as a strategic imperative but as a collective
responsibility that effects every level of our
organisation. Through active leadership, operational
excellence, and community engagement, we strive
to reach a sustainable future aligned with our values
and responsibilities.
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Sustainability governance structure
I
T
H
G
S
R
E
V
O
T
N
E
M
E
G
A
N
A
M
Adriatic Board of Directors
The Board supervises and evaluates management, oversees business
performance, sets policies and approves strategies and goals.
Executive Team
Sustainability Committee
All Sustainability-related matters sit with the CEO who remains informed on sustainability-related
matters on a weekly basis. In 2024, the newly appointed Chief Sustainability Officer will be joining
Adriatic Metals and will be key reporting of sustainability-related matters.
Chaired by Sanela Karic. Responsible for overseeing the
development and implementation of our sustainability and
ESG strategy.
The Executive Team has collective responsibility for delivering the Company’s strategy and
operating performance and ensuring that the appropriate skills and competencies are held within
the company to address the deliver range of impacts, risks and opportunities within the business.
Areas of focus include: HSSE, HR (including labour rights,
DEI etc.), Human Rights, Climate Change, Supply Chain and
Community.
Operations and Functions
Human Resources
Risk
Includes exploration, development and
contractor teams on operations as well as
other sustainability-linked functions such as
sustainability and community.
Responsible for managing Adriatic Metals’
approach to HR and all relevant risks and
opportunities, oversight of the companies’
HR management system and policies
Responsible for management and
ownership of Adriatic Metals’ Health
and Safety performamnce and
management systems.
Sustainability-related policies and non-financial metrics
Relevant policies on topics such as anti-bribery and corruption, climate change, human rights, health
and safety, human resources, social performance and community, environment and procurement
Sustainability Policy
Adriatic Metals’ Sustainability Policy regulates and
provides guidance for the company’s 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
communities or other stakeholders. The health and
safety of these stakeholders, and the preservation
of the environment in which they work or live, is a
critical factor in measuring the long-term success of
the company’s business.
Climate Change Policy
As stated in our Climate Change Policy, Adriatic
Metals recognises that climate change represents
one of the most significant challenges facing the
world today and supports the goals of the Paris
Agreement. Our aim is to minimise our contribution
to greenhouse gas emissions, to consider and
plan for the physical risks of climate change on our
operations and to work with our host communities
to build their understanding of their resilience to the
physical impacts of climate change.
The responsibility for implementing the policy
extends to all employees and contractors engaged
in relevant activities within our operational sphere.
Company managers play a pivotal role in promoting
and ensuring compliance with this policy, as well as
any specific site-level policies and practices. In the
Vareš project, our commitment to sustainability is
further manifested through advanced stakeholder
engagement, facilitated by a comprehensive plan.
Activities such as establishing a Public Liaison
Committee (PLC) contribute to transparent
information dissemination, fostering collaboration
and understanding.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
Sustainability Framework
Assessing and managing our operational impacts.
Pillar
Long-term success criteria
2023 Facts and Highlights
COLLEAGUES
Building capability
• Zero life altering injuries
(this would include fatalities, physical and health injuries)
• Total recordable injury frequency < 8
• 25% of women employed to 2024
• Build capacity and capability in local workforce
COMMUNITY
Driving shared
prosperity
CLIMATE
Meeting
environmental
challenges
• Zero degradation in public health from our activities
• Socioeconomic contribution
• Community engagement and development
• Social investments
• Build capacity in local supply chain
• Zero serious environmental incidents
• Rehabilitate at least 110 ha of degraded forest together with local
forestry authorities
• Reduce fresh water use through recycling
• Design and achieve 100 % of recycling waters in process plant and
underground mining
296total employees
27%
female employees
1.40
TRIFR
1.25
LTIFR
27,463
total hours of internal and external training
80%of employees are proud to work for Adriatic Metals
2,987
visits to the Vareš Information Centre
72%
of spending on local suppliers
121
local contractors
2,448
tCO2e scope 1 and scope 2 emissions
3
1.6Mm
tailings
capacity
Built water treatment facility with
3
25 m
/h of treatment capacity
3
43.8m
of processed water used per day
COMPANY
Transparency and
accountability
• Corporate governance and business ethics
• Zero tolerance for bribery and corruption
ISO9001, 14001 and 45001 certification
•
Sustainability Committee meetings
4
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Sustainability Review - Continued
Our intention is to deliver a European environmentally
sustainable mine while fulfilling our immediate and
long-term social obligations.
COLLEAGUES: THE PATH TO
OPERATIONAL READINESS
Our People
Adriatic Metals comprises a dynamic and diverse
workforce of 296 individuals who contribute to the
ultimate success of our company.
Notably, 88% of our workforce operate within
Bosnia & Herzegovina, forming a cohesive and
integral part of our local presence. This significant
local contribution underscores our commitment
to the communities we operate in, fostering strong
connections and collaboration.
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Workforce management system
Adriatic Metals retains a robust management
structure and follows best practice in establishing
the required policies and procedures.
HR Information System (“HRIS”)
Adriatic Metals continues to enhance its core people
processes within its Human Resources (HR) function.
Previously, the company operated with a myriad of
HR systems and various manual interventions.
Recognising the need for a comprehensive solution,
a dedicated project was initiated to identify a
suitable Human Resource Information System
(HRIS). The overarching goal was to streamline HR
operations, addressing the current deficiencies in
integration between systems.
The HRIS implementation commenced in January
2024. This timeline allows for thorough planning
and preparation to ensure a seamless transition to
the new system. The anticipated benefits include
improved integration, enhanced functionality, and a
scalable system that aligns with the evolving needs
of the company.
Employee Relations
To track effectiveness, Adriatic Metals 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. Adriatic Metals believes
that the efficacy of cultural approach is evidenced in
the positive responses that were recorded from the
employee survey.
In 2023, participation in the survey was 69% with
80% of employees agreeing they are proud to work
for Adriatic Metals. Following the survey, Adriatic
Metals’ working group continues to develop and
launch further employee engagement initiatives.
Sanela Karić was appointed by the Board to
be responsible for employee relations and in
discharging these duties attends both the working
group and employee council meetings.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
Training and development
In the lead up to production, Adriatic Metals established a robust Technical Training solution that seamlessly
integrates health, safety, and environmental awareness training into the technical training curriculum.
This initiative is key in ensuring the operational readiness of our workforce, cultivating a safety ethos,
and facilitating a progression to incident-free production. This integrated approach is key in ensuring the
operational readiness of our workforce.
Learner Management System
Identify best solution based on AMs needs
Training Intervention Templates
Standardisation and Alignment
Service Provider Selection and Onboarding Process
Quality Assurance
Learning and Development Procedure
Governance
Technical Training Project Plan
Project Management
Diversity and equality
Adriatic Metals is committed to creating a diverse
workplace and firmly believes in the benefits
that arise from cultivating a multi-demographic
environment. Our goal is to attract a wide range
of high-quality candidates, tapping into diverse
perspectives and ideas while enhancing employee
retention. This commitment is outlined in our
Diversity Policy, establishing a culture of inclusivity
for the benefit of all.
A key focus at Adriatic Metals is supporting and
increasing the representation of women in our
industry. Committed to expanding employment
opportunities for women in a historically male-
dominated field, we set a target of 25% female
representation across the company. Once again,
we have surpassed this goal, achieving 27% female
employees at the end of 2023.
As of 31 December 2023, 33% of the Board of
Directors were female. One of which is independent.
None of the Board of Directors are from a minority
ethnic background.
In October, we successfully onboarded respected
training partners H2E Sustainability, The Compliance
Group, and The Outsourcing Institute. A detailed
analysis of training needs related to mining,
processing, and maintenance was conducted, laying
the groundwork for further tailoring our training
programs to meet the specific demands of our
operational landscape.
Building on the insights derived from the training
needs analysis, a comprehensive Processing
Training Matrix was developed. This matrix serves
as a blueprint, outlining the mandatory training
requirements essential for completing work in the
safest manner possible.
In addition, Adriatic Metals implemented and
developed a Process Plant Workplace Induction
program, ensuring that our workforce is well-
acquainted with the intricacies of their roles,
contributing to a smooth transition
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Case Study:
Operator Trainee
Programme
In October, we welcomed our first intake
group of a 3-month Blended Learning
Programme under the Operator Trainee
Programme. Informed by the Adriatic
Metals Learning and Development
Framework, this initiative represents
a strategic investment in the growth
and proficiency of our workforce. The
trainee group is a diverse group of 15
trainees from Vareš, including 12 females,
exemplifying our dedication to inclusivity
and community engagement.
As we move towards production, these
initiatives will continue to underscore our
dedication to operational excellence and
employee development.
Benefits and recruitment
Our resourcing strategy continues to evolve with
a focus on enhancing the identification, attraction,
and selection of top-tier talent for critical roles
within Adriatic. Upholding the principles of fairness
and transparency, the recruitment process aims to
secure the most qualified candidates while fostering
diversity. This formalised approach spans all stages
of enrolment, encompassing job description
approval, distribution of job opportunities, criteria for
shortlisting and the interview process.
Key 2023 initiatives can be characterised by:
1. Internal resourcing and professional
development: Adriatic Metals advertise all
available positions to our existing internal
employees. This not only promotes a sense of
inclusivity but also supports the growth and
career development of our existing workforce.
2. Operational role development: As Adriatic
Metals looks ahead to becoming operational,
the Company continued to develop employee
skills ready for operational roles, driven by clear
transition plans, ensuring a smooth integration of
valuable skills.
3. Expat recruitment: Mandatory site visits have
been incorporated into the expatriate recruitment
process. In 2023 alone, Adriatic Metals arranged
a total of 9 site visits, reinforcing a commitment
to thorough candidate selection.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
Health and safety
Adriatic Metals 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 Metals also ensures that its operations do not impact negatively on the safety or
health of associated communities.
We are committed to creating a company-wide culture of care and trust, where managers lead by
example and ensure that where significant incidents do occur, including high-potential situations/
near misses, an investigation is undertaken to identify root causes and to ensure that learning points
are identified and disseminated, to prevent reoccurrence. We engage with internal and external
stakeholders, including employee representatives, on health and safety-related issues in an open,
collaborative and transparent manner.
Accountability
Adriatic Metals have an established accountability
cycle, setting and holding individuals to common
expectations to support people to go home,
unharmed, every day. The six-step cycle outlines
the stages each employee must go through: from
setting goals and expectations through to giving
feedback to ensure the Company continues to drive
and maintain accountability.
Safety model
Health and safety are approached through the
lens of continuous improvement. The Company
maintains a robust health and safety model that
includes policies, procedures, training and Company
standards.
A key element of the Adriatic Safety Model and an
integral part of risk management that focusses on
identifying and managing controls that are critical
to prevent catastrophic or fatal events is Critical
Control Management. The Company stipulates that
these controls must be in place before commencing
any task that involves a major hazard.
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
Training initiatives
Adriatic Metals has prioritised the enhancement
of training capabilities through the HR department,
acknowledging the role of education in creating a safe
workplace. This involved the introduction of dedicated
health and safety training resources, aimed at
enhancing the knowledge and skills of the workforce.
In 2023, Adriatic Metals took proactive steps to
commence workforce training in high-risk tasks,
collaborating with external experts. This initiative
aimed to equip employees with specialised
knowledge, fostering a well-prepared and informed
workforce. A bespoke Introduction to Hazard and Risk
Awareness Module was crafted and implemented.
This module plays a pivotal role in enhancing our
employees’ understanding of potential hazards and
risks, fostering a safety-conscious work environment.
In addition, improvements were made to the content
and structure of inductions, particularly in 'Creating
Safe Work'. These enhancements were designed
to empower employees and contractors with the
knowledge and capabilities necessary to effectively
execute the Adriatic Metals Safety Model.
Driver safety
To enhance road safety performance in line with the
increased traffic intensity of heavy plant machinery,
Adriatic Metals has installed forward and cabin-facing
dash-cams, along with GPS speed/location tracking in
light vehicles. This initiative is aimed at monitoring and
managing safe driving behaviours among employees.
Looking ahead
In 2024, Adriatic Metals will commit to continuing its
spread and frequency of health and safety initiatives,
including:
• establishing a Major Hazard Champion program,
• enhancing competency-based health and safety
training through various learning techniques,
• conducting scheduled drills and further training for
the emergency response team.
These measures reflect Adriatic Metals’ unwavering
commitment to fostering a safe and healthy work
environment.
Health and safety performance
Despite a substantial increase in contractor and
employee work, with an associated higher health
and safety risk profile due to increased construction
and operational activities, Adriatic Metals achieved
strong health and safety performance, with an
immaterial increase in Lost Time Injury Frequency
Rate (LTIFR) and a significant reduction in Total
Recordable Injury Rate (TRIFR).
As of the end of 2023, the LTIFR and TRIFR stand
at 1.25 and 1.40, respectively. This compares to
2022 where the LTIFR and TRIFR stood at 1.03 and
4.10 respectively. The Company also recorded zero
work-related fatal incidents during the entire year,
underscoring the effectiveness of Adriatic Metals’
safety measures and protocols.
Maturing the health and safety management
system
The company has focused on the maturation
of its health and safety management system,
extending coverage and operationalisation for more
comprehensive risk mitigation.
In 2023, Adriatic Metals invested in health and safety
event management software. This sophisticated
tool enabled accurate and effective tracking and
management of incidents, inspections, audits, and
improvement opportunities, streamlining the overall
safety management process
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Case Study:
Incident investigation
through animated
videos
In 2023, Adriatic Metals embraced Incident
Cause Analysis Method (ICAM) protocols
and utilised animated videos as a means
of enhancing its understanding and
communication of investigation outcomes.
ICAM is a widely acknowledged approach used
by organisations to systematically investigate
incidents, pinpoint root causes, and implement
corrective actions. Recognising the pivotal
role of effective communication in incident
investigation, Adriatic Metals integrated
animated videos into their ICAM procedures.
The primary objectives set by Adriatic
Metals centred around transforming the
communication of investigation outcomes
within the organisation. Their goals included:
1. Enhancing Understanding:
Through animated videos, Adriatic Metals
aimed to simplify intricate investigation
findings, making them more accessible to a
diverse audience within the organisation.
Improving Communication:
2.
The focus was on fostering clearer
communication of investigation outcomes to
ensure that all stakeholders comprehended
the incident causes and corrective actions.
3. Promoting Engagement:
The objective was to elevate engagement
and retention of critical information by
presenting investigation outcomes in a
visually compelling and memorable format.
By concentrating on the video development
of investigation outcomes, Adriatic Metals
has successfully elevated their incident
investigation process, ultimately contributing
to a safer and more informed workplace.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
COMMUNITY RELATIONS
AND ENGAGEMENT
Our mission is to
enable the use of
materials needed for a
thriving planet and we
are excited to be a part
of this journey.
Maintaining a social licence to operate
Adriatic Metals is committed to creating a lasting
positive legacy in the regions where it operates
through supporting local people and aiding
sustainable socio-economic development. Active
and inclusive engagement with the communities
associated with our operations is critical to
delivering on these commitments.
In 2023, Adriatic Metals received confirmation
from the Government of Bosnia and Herzegovina
that the Vareš Project was granted the status of
Project of Special Importance acknowledging the
significance of the Project to the country in terms of
its contribution to gross domestic product, foreign
direct investment, employment and education.
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Case Study:
Refurbishment
of railway
Throughout 2023, Adriatic Metals led
efforts to reopen a railway line from
Podlugovi to Vareš that closed in 1992
during the Bosnian war. Following months
of renovations, the line is due to be used
for transporting Adriatic Metals’ production
ore to the wider transport network and for
delivery to offtakers.
A ceremony was held in December
to mark the reopening of the line with
representatives from the country’s Ministry
of Communications and Transport and
the British Ambassador celebrating the
achievement.
Community relations and engagement
Developing collaborative local relationships based
on honest and transparent communication is at
the heart of the community strategy therefore
the Company employs a number of channels of
communication to gather feedback, understand
local needs, and provide clarity on the Company’s
activities. By maintaining a consistent flow of
communication, we aim to keep our community
well-informed about the company’s developments
and build trust.
Throughout 2023, Adriatic Metals maintained an
active engagement strategy, conducting a total of
43 meetings in accordance with the communication
plan for the year. These meetings were arranged
with representatives from local communities,
public institutions, and non-governmental
organisations. These sessions served as a platform
for collaboration, fostering shared efforts in
implementing various community-related events.
This commitment to engagement encompassed
a wide spectrum of stakeholders. This inclusive
approach ensured a clear understanding of
the diverse needs and challenges within the
community. By actively listening to and involving
these stakeholders, we ensured that our initiatives
and responses were finely tuned to best serve the
collective interests of all involved parties.
Case Study:
“Hands of Vareš
Women” Bazaar
One such initiative, the “Hands of
Vareš Women” Bazaar, was an event
put on to support Adriatic Metals’ local
female producers. Sponsored by the
Company and organised by the Women’s
Association for Rural Development
“Zvijezda,” this event provided a platform
for women across the Municipality of Vareš
to showcase homemade products. Such
enterprises empower local entrepreneurs,
encouraging their active participation in
community growth.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
Case Study:
Championing Sports
and Athletes
Adriatic Metals actively sponsors sports
clubs and individuals from the local
community aspiring to become successful
athletes. The Company’s support extends
beyond the Municipality of Vareš, with a
portion of donations and sponsorships
benefiting the Municipality of Kakanj. In
Kakanj, 4 donations and 3 sponsorships
were awarded and the commitment further
extends to the Municipality of Breza,
where the Volleyball Club for the disabled
received a donation.
Newsletter outreach
In 2023, Adriatic Metals’ newsletter distribution
reached a total of 862 community members,
contributing significantly to our communication
goals with the local community. The purpose
of our newsletter distribution goes beyond
dissemination of information. It serves as a
platform for enhancing community engagement
and fostering an interactive dialogue with our
stakeholders.
Community donations
Adriatic Metals’ commitment to community
development is evident in the 38 donations
and 4 sponsorships awarded in 2023. These
contributions were strategically directed
towards events and initiatives closely tied to
cultural preservation, sports competitions, and
overall community development.
Adriatic Metals employs a rigorous mechanism,
guided by specific criteria, to evaluate
and approve requests. Formal policies on
donations and sponsorships and a process for
recommending and approving the support of
local causes are in place. Non-governmental
organisations, educational institutions, sports
clubs, and accomplished athletes are prioritised
in line with the Company's commitment to
diverse community development aspects.
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Case Study:
Preserving Heritage and Cultural Identity
The Company recognises the importance of preserving the community’s rich cultural heritage.
Donations play a crucial role in safeguarding traditional values and historical structures. Adriatic
Metals directs contributions towards the protection and preservation of heritage buildings, ensuring
that the community’s cultural identity remains intact for future generations.
In essence, Adriatic Metals’ approach to donations reflects its commitment to sustainability and
community enrichment. Each contribution is a strategic investment in initiatives that address
immediate needs while laying the foundation for a resilient and flourishing community.
Land acquisition
Land Acquisition is required for the development
of Rupice Infrastructure, the haul road and the
tailings storage facility (TSF). Adriatic are committed
to aligning with relevant regulation and comply
with EBRD’s PR5, which encompasses Land
Acquisition, Involuntary Resettlement and Economic
Displacement requirements, as well as other
applicable international best practice standards that
guide land acquisition.
In November 2023, an independent audit was
conducted on Adriatic Metals’ Land Acquisition,
Compensation and Livelihood Restoration Plan. The
purpose was to ensure that objectives in the initial
plan have been met and that the land acquisition
exercise complies with EBRD’s PR5. The report
concluded:
“Generally, the team can be commended for
implementing a smooth and fair process. The
Auditor was very favourably impressed by the
Community Centre in Vareš and the quality of the
relationship between staff and locals.”
Grievance resolution
Adriatic Metals prioritises the effective resolution
of grievances in line with the Environmental and
Social Policy of the EBRD and its Performance
Requirements. The Company’s grievance procedure
aligns with EBRD’s PR 10, ensuring timely response
and culturally sensitive handling.
During the construction phase, Adriatic Metals
registered 40 complaints reflecting the dynamic
challenges faced. Of the 40 complaints, 36 have
been successfully resolved and the company is
continuing to address any final complaints in a timely
and transparent manner. Open communication
with complainants, field inspections, and dedicated
efforts ensure thorough understanding and effective
solutions.
The community in the Municipality of Vareš is well-
informed about our grievance procedure, accessible
through various channels including the centrally
located Vareš Information Centre, email, telephone,
and anonymous submissions. Our commitment to
constructive feedback fosters a transparent and
positive relationship with our stakeholders.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
Public Liaison Committee ("PLC")
To ensure structured, regular communication with
the local community, Adriatic Metals 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. Currently, 22 of its members represent
the community and its institutions and the other 5
members are representatives of the Company. 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,
• allow an opportunity for locals to advise the
Company on how best to serve the needs of the
community.
Regular PLC meetings have taken place over 2023,
which serves as a mediator between the Company
and the general public. The committee agenda
has focused on some leadership changes with the
formal introduction of Alem Logo, who has taken
on the role of Executive Director of the Committee,
and Matthew Hine, who assumed the position of
General Manager of Operations. The PLC discussed
a number of construction activities, scrutinising
the implementation of electrical and optical cables,
while August's meeting provided a platform for
stakeholders to engage in meaningful conversations
about the geological, environmental, and social
considerations associated with exploration drilling.
Members had the opportunity to embark on an
immersive tour of the VPP at Tisovci, gaining
firsthand insights into its operations and processes.
In November, the PLC conducted a comprehensive
review of the preceding year, addressing
advancements, challenges, and planning for future
initiatives.
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Vareš Information Centre
During 2023, the Vareš Information Centre played a
pivotal role in facilitating communication, recording
2,987 visits—a 26.46% increase compared to 2022.
This increase can be attributed to various factors,
notably the Company's employment campaign
initiated in March 2023 and the heightened interest
as the opening of the mine approaches.
Functioning as a central hub for communication,
the Information Centre serves as a cornerstone
in Adriatic Metals’ interactions with the local
community. Beyond disseminating crucial
information, it operates as a platform for active
engagement, allowing stakeholders to seek
information and provide feedback. This ensures
that the information flow is two ways, reflecting a
commitment to understanding and meeting the
expectations of local residents.
Information Centre Visits
Other
Job Information
Meetings
Work duties
Mail
Job application
4%
8%
34%
13%
11%
30%
Case Study:
Educational
Empowerment
In 2023 Adriatic Metals continued
an educational program, “Miner in
Underground Exploitation,” in the local high
school. Aimed at aiding the development
and education of young individuals,
this program supports employment
opportunities within the community.
The Company has already awarded
scholarships to three generations of
students engaged in this educational
endeavour, emphasizing the importance of
investing in the future through education.
Building local capacity
Adriatic Metals is committed to conducting its
business affairs in an ethical and responsible
manner, including through the sourcing of goods and
services. This involves fostering the development of
new enterprises capable of generating sustainable
skills, livelihoods, and capacities.
To actively engage with local suppliers, the
company has implemented outreach processes
to communicate procurement opportunities and
support their capacity building, enabling them to
compete for suitable contracts.
In May 2023, Adriatic Metals actively participated in
the influential conference on “Secondary Vocational
Education in Bosnia and Herzegovina: Best Practices
and Future Priorities.” Collaborating with the
Chamber of Commerce of Sarajevo Canton and the
Chamber of Commerce of Zenica-Doboj Canton,
supported by the Swiss Agency for Development
and Cooperation (SDC) and the German Association
for International Cooperation (GIZ), the conference
facilitated the exchange of experiences in dual
education implementation and practical teaching
activities for secondary vocational schools.
Emphasis was placed on discussing future activities,
providing guidelines, and addressing the legal
framework and obligations of stakeholders.
In June, to build on the established relationship with
the University of Zagreb and the European Institute
for Innovation and Technology (EIT), Adriatic Metals
organised visits for 50 students and 6 professors
from various continents including Europe, South
America, North America, Africa and Asia as part of
the international student exchange program. This
initiative provided participants with insights into
Adriatic Metals’ work, mission, vision, and goals,
fostering a global perspective on the company’s
operations.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
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Community health and safety
The community health and safety management
plan has been in place for three years and includes
strategies to prevent illness and injury, as well as the
promotion of healthy lifestyles and behaviours.
Community well-being
Community health and well-being projects, with
a particular focus on vulnerable groups, stand as
important tools in shaping resilient, healthy, and
supportive communities. The Company actively
engaged in a range of community well-being
initiatives throughout 2023.
By incorporating health education into our
community-related initiatives, we aim to instil a
sense of awareness and responsibility regarding
individual and collective well-being. This approach
aligns with our commitment to creating not just a
physically healthy community but also one that is
aware of the importance of preventive measures and
health maintenance.
Case Study:
Breast Cancer
Awareness
In November, Adriatic Metals collaborated
with the Municipal Council of Vareš to
organise an impactful breast cancer
awareness lecture, bringing together over
a hundred women from local communities
at the Municipal Hall, Vareš. Information
about the session was spread through
posters, radio announcements, and social
media platforms, each platform playing a
key role in mobilising the community.
The lecture, led by Dijana Jerković, Head
Nurse of the Breast Disease Department
at Cantonal Hospital Zenica, and a
representative of the “Život” Zenica
Association, emphasized the association’s
support for women affected by breast
cancer. Dr. Harun Drljević, Head of the
Breast Disease Department, delivered
the main part of the lecture, covering
common types of breast cancer, treatment
modalities, and stressing early diagnosis.
Going into 2024 Adriatic Metals will
continue to support community well-being
and will continue to focus on both non-
vulnerable and vulnerable groups within
the community.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Sustainability Review - Continued
ADRIATIC FOUNDATION
The Adriatic Foundation (“Foundation”)
is a charitable initiative established by
Adriatic Metals in 2021 to support local
communities around the Vareš Project
and create a positive long-term legacy.
The Foundation has actively engaged in
supporting various projects within the
Vareš and Kakanj regions. A notable aspect
of its initiatives involves financial support
for projects implemented by local non-
governmental organisations (NGOs). These
include; the Center for Ecology Kakanj, the
Municipality of Vareš - Co-financing of the
Air Quality Station, the Association for the
Protection of Animals, amongst others. In
March 2023, the Foundation successfully
finalised contracts with these organisations,
marking the completion of administrative
processes and formalising collaboration for
environmental projects. This underscores
the Foundation’s commitment to fostering
positive impacts within the communities it
serves.
Another significant aspect of the
Foundation’s efforts is within education
through its scholarship program. In 2023,
the Foundation distributed scholarships to
29 students from the municipalities of Vareš,
Breza, and Kakanj. The scholarships aim
to provide financial assistance to talented
individuals, fostering their academic growth
and contributing to the advancement of the
local community.
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Key areas of focus in 2023
The 7th Board Meeting held in April 2023 played
a pivotal role in shaping the Foundation’s mission.
During this meeting, a new secretary, Nikola
Andrić, was appointed, and the meeting also saw
discussions on the solar and sewage project,
a potential collaborative effort with the Mozaik
Foundation. The project aims to empower local
communities in the Vareš Municipality through
the implementation of solar energy and sewage
management initiatives.
The 8th Board Meeting delved into various agenda
items, including plans for an air quality station,
renovation projects, updates on solar energy and
sewage initiatives, a recycling plant proposal, and
evaluations of cooperation projects, including
those in the health sector. Detailed discussions
were conducted, focusing on project planning,
community benefits, financial implications, and
strategic partnerships.
The year concluded with the 9th Board Meeting,
during which significant changes were announced.
Sanela Karić, the Director of the Adriatic
Foundation, tendered her resignation. The board
unanimously elected Arnela Babić as the new
Director. Looking forward, Babić is tasked with
preparing a comprehensive plan and strategy for the
Foundation’s activities and growth in 2024, with a
focus on strengthening initiatives, expanding reach,
and enhancing community impact.
The board expressed optimism for the Foundation’s
future under Babić’s leadership while acknowledging
and appreciating Karić’s contributions to the
organization.
Funding and independence
The Foundation is managed by a Board of Trustees,
which includes four independent representatives
from the region surrounding the Vareš Project and
meets quarterly to discuss and approve submitted
proposals that meet the Foundation’s objectives.
The Board of Trustees meets quarterly to discuss
and approve submitted proposals that meet the
Foundation Objectives. 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 Vareš. Regular board
sessions foster an independent and transparent
rapport to drive continual awareness of local
opportunities.
New projects
Projects that have received support 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.
Approach to tax and concessionary
payments
The operational phase of the Project will have a
positive impact on the national economy through
payments of value-added tax on supplies, including
materials and equipment, fuel, food, and advisory
services and through 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 addition to these statutory payments - and to
provide a more direct form of community funding
- the Adriatic Foundation supports and promotes
local sustainable socio-economic development, with
a particular focus on the communities associated
with Adriatic Metals’ operations.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
ENVIRONMENTAL IMPACTS
Adriatic Metals is committed to
responsibly managing natural resources
and strives to operate in a sustainable
manner that minimises, mitigates or
compensates for adverse impacts and
maximises positive environmental and
socio-economic impacts.
In its pursuit of sustainability, Adriatic
Metals plays a crucial role in supporting
the transition to clean energy by
producing essential metals required
for the European Green Deal, the EU’s
strategy for reaching the 2050 goal.
In Q3, Adriatic Metals advanced its
environmental management efforts,
implementing INX Software and Arc
GIS. This strategic move involves
integrating both platforms to visualize
environmental data on maps, enhancing
data tracking, visibility, and monitoring
plans with warning systems. The
combination of INX and Arc GIS will
significantly improve our ability to track
and predict environmental impacts,
providing transformative data insights
and clarity. Additionally, these tools
enable us to model field sampling
and laboratory analysis processes,
optimizing our environmental
performance effectively during project
implementation.
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Environmental system updates
The Environmental Social Management System
(ESMS) underwent amendments to accommodate
changes to accommodate the implementation of
a comprehensive traffic management plan for both
the construction and operational phases of the
Vareš Project, updated designs to align with the five-
year sustainability targets, and the initiated ISO 9001
standardisation.
Environmental permit amendments and
external audits
Further reinforcing its commitment to environmental
standards and in alignment with expectations
from Orion, an external environmental audit of
the Environmental Social Action Plan (ESAP) was
conducted by local audit company Ceteor.
Simultaneously, an Environmental Social Update
Report was produced, reflecting the final design
considerations and anticipated impacts of
scheduled production. Due to these changes,
Adriatic Metals amended the environmental permit
for Rupice in Q1, a change that secured approval
from the Federal Ministry of Environment and
Tourism. Management plans within the ESMS will be
updated to incorporate mitigation and monitoring
measures corresponding to any changes identified
during this process.
Comprehensive monitoring during
construction
At our operations, regular monitoring takes place,
tracking all environmental parameters during the
construction phase. In Q2 the following monitoring
analysis was completed:
• Groundwater, Wastewater, and River Water:
Thorough analysis was conducted to assess
the quality of groundwater, wastewater, and the
Bukovica river water.
• Water Treatment Plant Output: Examination
of the output from the water treatment plant at
Rupice, now fully operational.
• Additional Wastewater Monitoring: Stringent
measures were taken to monitor and uphold
environmental standards related to wastewater
management.
• Air Quality Monitoring: Comprehensive
assessments were conducted at seven locations
to gauge the impact of our operations on
atmospheric conditions.
• Noise Monitoring: An evaluation at nine
locations addressed concerns related to the
auditory environment.
Climate change mitigation
In recognition of the global challenge posed by
climate change, Adriatic Metals supports the goals
of the Paris Agreement. Adriatic Metals is committed
to minimising its contribution to greenhouse gas
emissions and in 2023 commenced planning
to address the physical risks associated with
climate change on its operations. In alignment
with best practices, Adriatic Metals has adopted
the recommendations of the TCFD, ensuring a
comprehensive and transparent approach to
managing the impacts of climate change. For more
information, please refer to page 64
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BIODIVERSITY AND REHABILITATION
Adriatic Metals 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 biodiversity or critical
habitats and, where possible, to contribute to a ‘net gain’ of biodiversity as a result of its activities.
Biodiversity Action Plan (BAP)
The BAP serves as a key component of the ESMS, guiding the company’s approach to project development.
Through detailed field and office research, the BAP incorporates measures aligned with international and
national standards, ensuring a safe, sustainable, and socially responsible project development approach.
The Action Plan for Biodiversity Conservation follows a structured hierarchy of priority actions: Avoid, Reduce,
Renew, and Compensate. This approach guides project activities to prevent or minimise biodiversity loss.
Several strategic measures have been implemented, including the avoidance of project elements in protected
natural areas, preservation of key habitats, and comprehensive plans for the compensation and restoration of
damaged natural habitats post-construction. The action plan defines measures for the appropriate alignment
of the project with the requirements of the previously mentioned international and national legislation as well
as with the EBRD performance requirements (PR6) on biodiversity sustainability related to the areas of critical
habitat and priority characteristics of biodiversity or qualified species for any of these areas.
AVOID
REDUCE
RENEW
COMPENSATE
One notable aspect of the BAP is its commitment
to an annual monitoring and evaluation process.
External experts assess biodiversity status and
changes, and adjustments are made to the BAP
based on monitoring results, ensuring ongoing
alignment with legislative requirements and best
practices. In 2023, the BAP was updated, reflecting
alterations in haul road design and incorporating
findings from the 2022 research.
In addition, several strategic measures were
implemented into the BAP, including:
• Avoidance of Protected Areas: Relocating
project elements outside protected natural areas
and resources.
• Preservation of Key Habitats: Measures to
protect habitats of species with conservation
status or those classified as Priority Biodiversity
Characteristics (POB).
• Compensation Planning: Developing plans for
the compensation and restoration of damaged
natural habitats post-construction.
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“Green Plan” for afforestation
In June, Adriatic Metals established a
comprehensive “Green Plan.” The initiative involves
afforestation and greening of the haul road area
with indigenous tree species. Anticipating the
planting of approximately 2,500 seedlings, the plan
is forecasted to reduce the company’s carbon
footprint by 55 tonnes in its initial phase. This
initiative, woven into Adriatic Metals’ BAP, embodies
the company’s commitment to environmental
preservation and sustainable practices.
Water as a shared resource
Adriatic Metals places a strong emphasis on the
responsible and efficient use of water, adopting
robust water governance measures that encourage
collaboration with other water users. The company
achieves 100% recycled water at the processing
plant and is actively working towards increasing the
amount of water recycled within the underground
mining operations. Systems for wastewater
treatment and acidic rock drainage are in the
detailed design and commissioning phases.
Mitigation measures have been implemented to
ensure that residual impacts to surface water and
groundwater remain insignificant. These include a
commitment to no discharge effluent from the Vareš
Processing Plant, the establishment of site-wide
drainage and settlement ponds, active treatment of
contact water contaminated by acid rock drainage,
and the implementation of a Water and Wastewater
Management Plan.
The quality of water within the surrounding
hydrological system is continuously monitored
during both the construction and operational phases
to safeguard against potential pollutants entering
the drainage system. In May, two water inspection
site visits, conducted by cantonal and federal
authorities, verified compliance, and in June, the
Federal Inspection for Environment visited Rupice.
All inspections were passed successfully, indicating
full compliance with environmental standards.
Tailings management
Adriatic Metals’ commitment to responsible tailings
and waste management is grounded in adherence
to national legislation and international codes of
best practice. Tailings, as a by-product of mining,
are meticulously managed to ensure minimal
environmental impact.
Waste tailings from Adriatic Metals’ 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 of
tailings per month will be generated. Excess tailings
that are not required for backfill will be disposed of in
the new dedicated tailings storage facility (TSF).
capacity and will be lined
3
The TSF has a 1.6 Mm
and designed to ensure that any rainwater or snow
that has come into 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. Approximately 10% of tailings is water, which
will be collected and recirculated to processing plant
instead of new freshwater intake.
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Sustainability Review - Continued
TCFD
Introduction
Throughout 2023, Adriatic Metals progressed its
integration of the recommendations of the TCFD
into its operations. This has been a critical year for
the business marked by the construction of the
Vareš and Rupice operating sites.
Adriatic Metals’ Environmental and Social Impact
Assessment (ESIA), aligned with the European
Bank for Reconstruction and Development (EBRD)
standards, remains a cornerstone of its ambitions
going forward. It encompasses analyses of physical
and transitional risks and opportunities, providing a
comprehensive framework that continues to guide
the business.
Recognising the need to address identified impacts,
particularly those arising from water management,
the company took action based on sustainability
consultants' assessments. Given the original
design's potential water consumption intensity,
adjustments were made to mitigate both direct and
indirect financial risks in the face of an increasingly
water-stressed environment. Details of the
substantial reduction in water usage are elaborated
below and throughout this annual report.
The company’s approach to Governance of climate
risk has remained constant over the year. Both
the board and management teams are actively
engaged in climate-related matters, commissioning
a comprehensive climate risk report. This report
delves into National Determined Commitments
(NDC), ongoing and forthcoming legislation affecting
the business, carbon-related taxes like the EU's
Carbon Border Adjustment Mechanism (CBAM), and
relevant litigation.
Robust risk management processes, ingrained
with climate-related considerations, continue to
underpin the company's operations. In addition, a
more in-depth assessment of climate-related risks
and opportunities is expanded upon in our Strategy
section, reflecting the company's commitment to a
thorough understanding of the landscape.
The business is diligently capturing greenhouse
gas (GHG) emissions data. Once the mine and
processing plant are fully operational, definitive
Scope 1 and 2 emissions targets will be established,
further aligning the company with its sustainability
objectives.
Bosnia’s operating context
Bosnia and Herzegovina (BiH), a diverse lower
middle-income country in the Western Balkans,
must navigate a challenging operating context
marked by complex topography, economic reliance
on industries and decentralised governance
structures as it strives for sustainable development.
Transitional factors
Net-zero
The country is a signatory of the Sofia Declaration
of the Green Agenda for the Western Balkans, which
commits to work with the European Union to reach
net-zero emissions across the continent by 2050.
The Sofia Declaration includes a commitment
to try to decrease and gradually phase out coal
subsidies while respecting state aid rules. It also
agreed to “actively participate' in the “Coal Regions
in Transition in the Western Balkans and Ukraine”
initiative, through which the European Commission
and partners such as the World Bank aim to help
countries in the region shift away from coal to a
carbon-neutral economy.
Power
Coal forms the bedrock of Bosnia and Herzegovina’s
power generation capacity, which sits at roughly 2
gigawatts. There has been investment into the asset
base to modernise it. Renewable energy capacity
in Bosnia and Herzegovina is minimal, but includes
wind, solar, biomass and small hydro. In recent years,
two wind farms were commissioned and brought on
stream, providing around 100 megawatts of installed
capacity.
Carbon price mechanism
Bosnia and Herzegovina plans to implement a CO2
pricing and trading system by 2026, as the country
aims to avoid paying the European Union’s carbon
border tax. The EU will apply a Carbon Border
Adjustment Mechanism from 2026 on energy-
intensive products (such as iron, steel, aluminium,
cement, fertiliser) and electricity from countries
without a national carbon pricing scheme.
Nationally Determined Contributions (NDC)
commitments
Bosnia and Herzegovina’s latest NDC, submitted
in 2021 aims to reduce its GHG emissions by 33%
by 2030 versus a 1990 baseline year, and by 62%
by 2050. Decarbonisation could be accelerated
if Bosnia and Herzegovina receives international
financial and technological assistance, in particular
to decarbonise the mining sector.
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Physical climate risk assessment
Bosnia and Herzegovina maintains a diverse climate
profile owing to its expansive size, varied topography,
and unique landscape. The country encompasses
temperate continental climates in the north and
central regions, colder sub-mountainous and
mountainous climates, and warmer climates along
its coastline. The influence of the Adriatic Sea and
the Dinarides Mountains, running parallel to the
coast, plays a pivotal role in shaping these climatic
zones.
The southern region of Bosnia and Herzegovina
receives abundant sunlight, contributing to its
distinctive Mediterranean climate in the coastal and
lowland Herzegovina area. This climatic diversity is a
key factor in Bosnia and Herzegovina’s biodiversity,
ranking among the largest in Europe. The country
experiences three distinct geological and climatic
regions: the Mediterranean, Euro Siberian-Bore
American, and the Alpine-Nordic.
To assess the potential impact of climate-related
risks on Adriatic Metals, the company conducted
a desktop-based evaluation of the physical risks.
This involved utilising the ND-Gain Country Index
and climate risk reports from the University of Notre
Dame. This tool offers insights into a country's
vulnerability and preparedness for climate change
risks, aiding governments, businesses, and
communities in prioritising investments for a more
effective response to global challenges.
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The assessment considers a country's vulnerability
across six crucial life-supporting sectors: food,
water, health, ecosystem services, human habitat,
and infrastructure. It evaluates the nation's exposure,
sensitivity, and capacity to adapt to the adverse
effects of climate change. Simultaneously, readiness
is gauged based on the country's ability to convert
investments into adaptation actions, considering
economic readiness, governance readiness, and
social readiness.
According to the tool, Bosnia and Herzegovina’s low
vulnerability score and low readiness score places
it in the lower-left quadrant of the ND-GAIN Matrix.
Relative to other countries, its current vulnerabilities
are manageable but improvements in readiness will
help it better adapt to future challenges.
Key trends
Cmip5 Ensemble Projection
2020-2039
2040-2059
2060-2079
2080-2099
Annual Temperature Anomaly (°C)
+0.38 to +2.4
+1.0 to +3.5
+1.8 to 4.8
+2.7 to 6.4
(+1.31)
(+2.22)
(+3.40)
(+4.44)
Annual Precipitation Anomaly (mm)
-18.0 to +13.03
-23.0 to +14.9
-26.6 to +14.3
-30.1 to +13.3
(−1.46)
(−1.64)
(+3.73)
(−7.73)
Table 1: Data snapshot: CMIP5 ensemble projection
Note: The table shows CMIP5 ensemble projection under RCP8.5. Bold value is the range (10th–90th Percentile) and
values in parentheses show the median (or 50th Percentile).
Temperature
Historically, winter temperatures range from -6.0°C to 6.2°C, while summer temperatures vary from 9.8°C to
24.7°C. However, the past two decades have witnessed disruptions in the seasonal onset and distribution
of rainfall, leading to unexpected flooding, periodic droughts, and elevated temperatures. Bosnia and
Herzegovina faces evolving physical climate risks, emphasizing the need for adaptive strategies to address
the changing patterns and potential impacts on the environment and communities.
Hist. Ref. Per., 1950-2014 SSP1-2.6 SSP2-4.5 SSP3-7.0 SSP5-8.5
20
18
16
14
12
10
8
6
1960
1980
2000
2020
2040
2060
2080
2100
Figure 8: Projected Average Mean Surface Air Temperature - Bosnia and Herzegovina; (Ref. Period: 1954-2014), Multi-
Model Ensemble
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Sustainability Review - Continued
Temperature - continued
Water stress
2023 Low Risk
Water risks are an urgent
global challenge.
Adriatic Metals employed the World Resources Institute’s online tool, Aqueduct,
a global water risk mapping tool which aims to help companies, investors,
governments, and other users understand where and how water risks and
opportunities are emerging worldwide.
In an optimistic scenario, analysis found that the country’s baseline water stress
ranking remains low risk, however, the risk increases to low-medium into 2030
and 2050. Based on these projections, the potential operating and financial
impact to Adriatic is considered low at this point in time.
Precipitation
The amount and distribution of precipitation has already changed
across Eastern Europe. While there is significant inter-annual and
decadal variability, under the pessimistic scenario, monthly precipitation
is projected to steadily decrease through the end of the century; with
an average annual reduction of 7.7 mm by the 2090s. Based on these
projections, the potential operating and financial impact to Adriatic is
considered low at this point in time.
2030 Low-medium risk
2050 Low-medium risk
Widespread temperature increases are anticipated
across Bosnia and Herzegovina, particularly in
coastal and inland lowland regions during the
summer months. This trend necessitates substantial
and costly adaptation investments. The rate of
temperature rise is expected to surpass the current
adaptive capacity of the country’s distinctive
ecological systems, posing a threat to high mountain
and lowland oak forest areas. Such adverse impacts
may lead to irreversible damage and the potential
extinction of numerous endemic species.
The "optimistic" scenario (SSP1 RCP2.6) represents
a future that limits the rise in average global surface
temperatures by 2100 to 1.3°C to 2.4°C compared
to pre-industrial levels. SSP1 is characterised
by sustainable socioeconomic growth: stringent
environmental regulations and effective institutions,
rapid technological change and improved water use
efficiencies, and low population growth.
The "business as usual" scenario (SSP3 RCP7.0)
represents a middle-of-the-road future where
temperatures increase by 2.8°C to 4.6°C by 2100.
SSP3 is a socio-economic scenario characterized
by regional competition and inequality, including
slow economic growth, weak governance and
institutions, low investment in the environment and
technology, and high population growth, especially in
developing countries.
The "pessimistic" scenario (SSP5 RCP8.5)
represents a future where temperatures increase up
to 3.3°C to 5.7°C by 2100. SSP5 describes fossil-
fuelled development: rapid economic growth and
globalisation powered by carbon-intensive energy,
strong institutions with high investment in education
and technology but a lack of global environmental
concern, and the population peaking and declining
in the 21st century.
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Case Study:
Water strategy
in action
The Vareš Project’s initial design envisioned it as a
significant water consumer, as explicitly documented
in our ESIA. Recognising the potential environmental
impacts and climate-related financial risks and
opportunities associated with this design, we embarked
on a comprehensive evaluation of the situation, focusing
on the present and future implications for our business.
Revisiting the World Resources Institute’s Aqueduct
platform and complemented by location-based
assessments from our 2022 published ESIA, we identified
drought risk as an escalating concern in Bosnia and our
specific operating region.
This analysis brought to light potential water access risks
for both the business and the processing plant, along
with community stressors that could impact future water
access and associated costs.
Responding to this challenge, our sustainability team
actively engaged throughout 2022 and 2023. They
presented a proposal to the management and board,
advocating for the construction of a water treatment
plant on-site as a strategic move to mitigate water
management risks.
Currently undergoing operational testing, the water
treatment plant will play a crucial role in treating mine and
drainage water before safely returning it to the Vrućci
Potok Rriver. The system also includes storage units to
gather treated drainage water and wastewater, serving
operational needs and significantly reducing reliance on
traditional water sources.
Notably, Adriatic Metals stands as the sole mining
operation in Bosnia and Herzegovina with a dedicated
mine water treatment plant, reflecting our commitment to
innovative and sustainable water management practices.
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Climate change projections indicate that Serbia
and the Western Balkans face a high probability of
continuing temperature increases, along with more
frequent and prolonged droughts and wildfires.
Adriatic Metals once again drew upon the ND-Gain
Country Index and climate risk reports from the
University of Notre Dame to assess the potential
impact of climate-related risks on the Company in
Serbia.
According to the tool, Serbia’s low vulnerability
score and high readiness score places the country
in the lower-right quadrant of the ND-GAIN Matrix.
Adaptation challenges still exist, but Serbia is
well positioned to adapt. Serbia is the 99th most
vulnerable country and the 82nd most ready
country.
Sustainability Review - Continued
SERBIA’S OPERATING CONTEXT
Located in southeastern Europe, Serbia’s terrain
is highly varied, with fertile plains to the north,
limestone ranges and basins to the east, and hills
and mountains dissected by river valleys to the
southeast.
Over the past two decades, droughts, floods,
exceptionally harsh winters and other weather-
related extreme events have caused major physical
damage, financial losses and even deaths, with
significant impacts on Serbia’s economy, especially
in the agricultural sector.
Transitional and physical factors
Net-zero goal and strategy
Serbia does not have an official net-zero greenhouse
gas emissions target but aims to reach renewables
share of 40% in final energy consumption by 2040.
Recent assessments of its 2013 renewable energy
action plan, suggest that investment is behind
schedule.
In its 2022 NDC, Serbia set an emissions reduction
target of 13.2% compared to 2010 level by 2030.
Power
In 2021, some 62% of Serbia's generation came
from coal, while 30% came from large hydro.
Generation from renewable sources of power,
however, has been picking up in recent years. Serbia
is not subject to the EU carbon price, unlike its
neighbouring countries, the country benefits from
exporting cheap coal power to EU countries.
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Enterprise-wide considered climate risks
and opportunities
We recognise that being a mining business, which
is considered energy intensive, may present
certain climate-related risks to our business, we
fundamentally believe that the business itself, which
is to produce metals that can be used to support
both the energy and transportation transition
provides significant opportunity.
We consider climate-related risks under two broad
headings: physical risk and transition risk and
recognise climate litigation as an emerging third risk
category.
Physical risk can be divided in to two types: acute
risks from increased severity of extreme weather
events such as storms and floods and increased
incidence of wild-fires and other climate-related
emergencies; and chronic risks from changes in
precipitation patterns, extreme variability in weather,
rising mean temperatures, rising sea levels and
increased incidence and intensity of droughts.
Transition risk meanwhile refers to the actual and
potential impacts of risks associated with the energy
transition on our business, strategy, and financial
planning. These risks are considered under four
headings suggested by the TCFD – Policy and Legal,
Technology, Market and Reputation – and is the
approach taken in carrying out our own climate risk
assessment.
The physical and transition risks we have identified,
based on our assessment of their impacts on our
Company, and the actions we are taking to mitigate
these risks, are summarised in the table below. We
have assessed potential impact against short-,
medium, and long-term time horizons which we
define as up to two years, between two and ten
years, and ten years and beyond respectively.
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Risks and opportunities
Type
Potential impact on Adriatic Metals
Timeframe
Adriatic Metals controls and mitigants
I
I
N
O
T
S
N
A
R
T
Market
Demand for our
products
Meeting Net Zero ambitions, as set out in the Paris Agreement, requires global shift in energy
generation, storage and utilisation.
Short Term, Medium
Term & Long Term
• Responsible production of our
metals
Our primary products can be used to support the growing EV market, renewable and low
carbon fuel in power generation, and in energy storage and energy grid expansion.
We consider the net effect to be positive for our silver, zinc, lead and copper product streams.
Consequently, and irrespective of the current offtake agreement that we have in place, we
believe this will support revenue generation for the business.
Increased cost
of capital
Restricted availability of debt and/ or equity financing for heavy emitting industries could impact
on the ability to fund acquisitions and/or to fully develop existing assets in an optimal timeframe.
Medium Term &
Long Term
• Deliver transparent, robust GHG
emissions disclosures
Policy
Cost of carbon
Bosnia-Herzegovina intends to implement a system for CO2 pricing and trading by January
2026, as the country aims to avoid paying the European Union’s carbon border tax. Indeed, the
EU will apply a Carbon Border Adjustment Mechanism (CBAM) from 2026 on energy-intensive
products (initially applying to products such as iron, steel, aluminium, cement, fertiliser) and
electricity from countries without a national carbon pricing scheme.
Short Term, Medium
Term & Long Term
The impact of such this mechanism will impact financial performance.
The business may consider increasing its capex budget to reduce its emissions profile, by
increasing investment into its own renewable energy power generation.
The business may also consider strategic partnerships with renewable energy power
generation partners that would require investment.
• GHG mitigation incorporated into
corporate funding model, such as
our commitment to meet EBRD
criteria
• Utilising management expertise,
consider sustainability-linked
financing initiatives, where cost of
funds is linked to ESG outcomes
• Continue to assess the operational
emissions footprint of the business
and to identify credible investment
opportunities to decarbonise
• Maintain ongoing monitoring of
policy and legislation development in
countries of interest.
Increased
regulation
and reporting
requirements
The LSE is amongst the global leaders for ESG and climate-related disclosure. The Company
also operates in Bosnia and Herzegovina and Serbia, who possess differing regulatory maturity
relative to climate change. The failure to meet the highest of these expectations may result in
fines, impacts to reputation and future commercial
Short Term, Medium
Term & Long Term
• Maintain transparency relating to all
ESG issues.
• Comply with the highest reporting
standards.
• Ensure continued engagement with
external stakeholders.
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Risks and opportunities
Type
Potential impact on Adriatic Metals
Timeframe
Adriatic Metals controls and mitigants
d
e
u
n
i
t
n
o
c
I
I
N
O
T
S
N
A
R
T
Technology
Cost of GHG
emissions
reduction
Adopting technology to reduce emissions will have implications for capital and operating
expenditure
Short Term &
Medium Term
• We approach the decarbonisation
assessment of our operations
in a strategic way, led by our
Sustainability Department, with cost-
effective reduction strategies being
of key consideration
Reputation
Changes in
consumer
preferences
Increasing expectations for companies to define a clear net zero strategy could mean the
Company is at risk of being associated with the negative impacts of climate change
Short Term, Medium
Term & Long Term
• To define our net zero strategy,
setting and communicating interim
decarbonisation targets.
Legal
Increase in legal
cases being
brought against
heavy emitting
industries
With the increased appreciation for the link between GHG emissions and physical climate
impacts, and a growing body of regulation, raises the risks of climate-related litigation. Such
litigation would impact financial performance directly, with reputational issues potentially
impacting cost of access to capital.
Medium Term &
Long Term
• Robust compliance management
and regulation scanning
•
Increased awareness, training and
skillset development amongst
operating teams, management and
board
We have conducted assessments to consider the way in which the climate is expected to vary over the life of the mine based on local projections for Bosnia Herzegovina.
The projections have been used to help undertake a vulnerability assessment as to potential risks to the project itself from changing climatic patterns.
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Sustainability Review - Continued
Risks and opportunities
Type
Potential impact on Adriatic Metals
Timeframe
Adriatic Metals controls and mitigants
Chronic
Drought,
variable rainfall
patterns and
water stress
I
L
A
C
S
Y
H
P
According to Aqueduct, the World Resources Institute online tool, drought and water stress
are anticipated to increase in Bosnia over the coming decades, based on current science
and environmental forecasts.
Medium Term &
Long Term
Consequently, this may drive direct increases in opex costs for the business to acquire an
increasingly precious resource.
Indirectly, operations may be affected by local communities as businesses consuming
large quantities of water, or those considered to be water intensive, contend with protests.
Increased
ambient
temperatures
According to the World Bank’s Bosnia and Herzegovina Climate Risk Report, Bosnia and
Herzegovina increasing temperature anomalies under the IPCC’s RCP 8.5 – business-as-
usual, high emissions scenario.
Long Term
Increased peak temperatures could adversely affect the workforce through dehydration,
heat stroke etc., which may affect productivity levels that could impact financial
performance, and cause plant and machinery to overheat impacting maintenance
schedules, as well as opex costs.
Additionally, most of the Project area is surrounded by forestry, increased temperatures
may result in increased risk of forest fires.
• The business has taken this issue
incredibly seriously during the
construction and commissioning phase
and provides detail in a case study below
as to how it has reduced its reliance on
access to water.
• We have radically redesigned our
water management processes at
Vareš, dramatically reducing water
requirements.
• Communicate our water management
strategies and utilisation to our
stakeholders, and increasingly to local
stakeholder groups to ensure true
appreciation of ADT’s approach to
precious resource.
• Clearly defined occupational HSSE
policies and procedures that inform
personnel of the correct working
practices through seasons.
• Clearly defined equipment maintenance
programmes.
• Clearly defined management practices
and systems for the storage of
explosives and fuel and taken active
steps to remove possible fuel and
ignition sources, particularly during
intense periods of dry weather.
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
Risks and opportunities
Type
Potential impact on Adriatic Metals
Timeframe
Adriatic Metals controls and mitigants
d
e
u
n
i
t
n
o
c
I
L
A
C
S
Y
H
P
Acute
Flooding, heavy
rainfall
Localised flooding during heavier periods of rainfall, as well as project design may
impact the business’s ability to manage waterfall. This could be particularly acute at our
Rupice mining operations where surface runoff may flow through our declines and other
infrastructure channels, such as ventilation shafts, affecting operating activity.
Short Term, Medium
Term & Long Term
•
Consequently, impacts to operations may affect financial performance, and require
increases in opex and capex to address water management issues.
An increase in intensity and variability of rainstorms may result in unauthorised discharge
into local water sources, which might incur violations of environmental permits.
Initial hydrology and water management
consideration were assessed within the
Prefeasibility Study and ESIA, which have
continued to evolve as the business has
progressed through the construction
phase. In satisfaction of all regulatory
requirements, the water management
and physical infrastructure capacity at
Rupice was materially upgraded during
construction phase to reduce water
handling risk, including at the TSF.
• The business will continue to assess
water supply security as well as more
detailed water vulnerability assessments.
• The business has an emergency
response process in place to respond to
flood risk.
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Sustainability Review - Continued
COMPLIANCE INDEX
Under FCA Listing Rule 9.8.6 6/14.3.27R, Adriatic is required to report on a comply or explain basis against the TCFD Recommendations and Recommended Disclosures in respect of the financial year 31 December 2023.
The climate-related disclosures are consistent with the four pillars and 11 recommendations. The table below details our consistency with the recommendations and status and planning regarding the recommendation where
we do not currently comply.
This Compliance Table provides information as to the consistency of Adriatic Metals’ reporting with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
We understand that climate change resilience is integral to the long-term success of our organisation. We have used the TCFD recommendations to further develop our climate-related strategies, programmes, and
reporting. While our reporting is not entirely consistent with the TCFD requirements at this stage, we will focus on advancing our processes and embed the recommendations within our management structure.
Governance
Compliance
Page reference
Risk Management
Compliance
Page reference
Describe the board’s oversight
of climate-related risks and
opportunities
Compliant
Managing Sustainability [page 51]
Risk Management Section [page 40]
Sustainability Committee Report [page 93]
Sustainability Committee Charter [link online]
Climate Change Policy [link online]
Describe management’s role
in assessing and managing
climate-related risks and
opportunities
Compliant
Managing Sustainability [page 51]
Climate Change Policy [page 51]
Describe the organisation’s
processes for identifying and
assessing climate-related risks
Describe the organisation’s
processes for managing climate-
related risks
Describe the organisation’s
processes for managing climate-
related risks
Compliant
Link to Risk Management section of the annual
report
Compliant
Link to Risk Management section of the annual
report
Strategy
Compliance
Page reference
Metrics and targets
Compliance
Page reference
Describe the climate-related
risks and opportunities the
organisation has identified over
the short, medium, and long
term
Compliant
We have detailed a
comprehensive list of risks
and opportunities for the
business to manage.
Table above
Link to ESIA
Compliant
Table below
Partial compliance
Qualitative
Describe the impact of climate-
related risks and opportunities
on the organisation’s
businesses, strategy, and
financial planning
Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-
related scenarios, including a 2°C
or lower scenario
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Disclose the metrics used by the
organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process
Disclose the metrics used by the
organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process
Compliant
GHG / SECR report
Partial compliance
GHG
Target date 2026
Describe the targets used by the
organisation to manage climate-
related risks and opportunities and
performance against targets
Pertial compliance
Targets can only be set once the asset is
operational and actual GHG emissions data,
including a true appreciation of emissions
sources, is understood.
Target date 2026
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
STREAMLINED ENERGY &
CARBON REPORT
Scope 1 and Scope 2 GHG emissions for projects
are calculated and reported as part of our SECR and
as part of CDP.
The Company has assessed its energy fuel
consumption and 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
gases on an annual basis in tonnes of carbon dioxide
equivalent resulting from the combustion of fuel
(direct Scope 1 emissions) and from the purchase of
electricity (indirect Scope 2 emissions).
Methodology
Adriatic Metals has sourced consumption
information from utility bills, fuel expenditure
and internal records to produce a database
of consumption for the reporting period. GHG
emissions have been calculated in accordance
with the GHG Protocol Corporate Accounting and
Reporting Standard (revised edition), using the
location-based method to determine Scope 1
and Scope 2 emissions using the latest emissions
factors from recognised public sources that are
applicable to the various jurisdictions in which the
group operates. The Group's carbon emissions
disclosure has been undertaken in accordance with
the UK Companies Act 2006.
Emissions information for the UK covers the head
office in London. Emissions disclosures for Europe
cover two mining operations: the Vareš Project in
Bosnia and the Raska Project in Serbia. The only
change from the previous report is the closure of a
small office in Jersey.
Greenhouse gas emissions
In 2023, emissions increased by 93% compared
to reported figures in 2022. This is primarily due to
the increased Scope 1 use of fuel for transport and
stationary generation to support mine operations.
Reduction targets
The Company has completed a streamlined GHG
inventory of its 2022 Scope 1 and Scope 2. This
showed that in 2022 64% of emissions were from
Scope 1 and 2 emissions.
The Company considers that a more fulsome
appreciation for the most material climate-related
risks will be understood once the mine and
Processing Plant are operational and has committed
to the following GHG reduction targets and
strategies.
• A targeted science-based reduction in combined
Scope 1 and 2 emissions by 2035, from a 2025
baseline (i.e. from the first full year of concentrate
production).
• Develop a progressive Net Zero strategy during
2024 and 2025, with clearly defined measures
for emission reduction and shape the boundaries
of an eventual effective net zero target. This
process will include Scope 1, 2 and 3 (location
and market-based evaluations) and result in a
published strategy document with detailed plans
and targets, in due course.
• As part of the Net Zero journey the company also
commits to monitoring its emissions reductions
through the SBTi processes permitting
external verification of its sustainability strategy
implementation.
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The following table outlines the metrics used by Adriatic to assess climate-related risks and opportunities in
line with its strategy and risk management process.
1. TOTAL SCOPE 1 AND SCOPE 2 EMISSIONS
Scope 1
Scope 2
2. EMISSIONS BREAKDOWN (LOCATION BASED)
UK
Scope 2
Indirect emissions from electricity
Global (including UK)
Scope 1
Transport Emissions
Process emissions
Stationary generation
Scope 2
Indirect emissions from electricity
3. EMISSIONS AND OFFSETS (MARKET BASED)
Scope 2
Scope 2
NA
Global market-based emissions
Avoided emissions due to renewable facility
Offsets from tree planting
4. GLOBAL ENERGY USE
Total energy use
Scope 1
Liquid fuels
Process chemicals
Scope 2
Electricity
5. PARAMETERS
Number of FTEs
Electricity from solar generation
Percentage of consumed energy from renewable source
6. INTENSITY MEASURES
Unit
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
kWh
kWh
kWh
kWh
kWh
2023
2,448
2,256
192
2022
1,269
966
303
2
2
819
217
1,220
192
240
10
11,968
45
NA
921
303
NR
NR
NR
9,360,455
3,733,066
8,500,308
3,464,862
505,688
354,459
28,904
239,300
296
17,122
4.83%
145
18,235
7.62%
Scope 1 and 2 GHG emissions per FTE
tCO2e/person
8.27
8.75
Key: NR - Not reported, NA - Not Available
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
Energy consumption
In 2023, total energy use was up by 150%, driven
primarily by a 145% increase in the quantity of
liquid fuels used for stationary generation and
transportation. Process energy has been calculated
using the relative efficiency of Ammonium Nitrate
compared to TNT, resulting in the use of 505,588
kWh of energy. Figures for 2022 have been restated
on the same basis, resulting in a 124% increase in
process energy from mining operations.
Energy efficiency actions
In accordance with EBRD’s PR3, Adriatic Metals
has worked to integrate best available techniques
and Good International Industry Practice (“GIIP”) to
optimise resource use and efficiently prevent and
control release of pollutants into the environment.
The Company takes action to ensure its future
operations are as energy efficient as possible
during the design and construction phases of its
projects. The Vareš project is now moving to the
end of construction and mining and processing
are the primary activities that use energy in the
current phase of construction, along with fuel for
powering fleet operations and stationery and mobile
generators.
Renewable energy and offsets
The Company has installed a 32.4 kWp roof-
mounted solar PV array at the Vareš Processing
Plant administration building. In 2023, this produced
approximately 17,122 units of electricity, avoiding 19
TCO2e in market-based emissions from the supplier.
The Company also registered on the TvojCO2
platform. This is the first website in Bosnia and
Herzegovina to facilitate offsetting an organisation's
carbon footprint by investing in activities that can
result in the absorption of CO2 from the atmosphere
or contribute to the reduction of CO2 emissions.
The Company invested in a project to buy 6,800
beech seedlings which will be planted in the areas
of Travnik, Novi Travnik, Bugojno, Busovača, and
received a certificate for 11,968 tCO2e of offsets.
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Future strategies
Adriatic Metals has committed to ensuring that the
Vareš Silver Project will comply with international
best practice regarding environmental and social
standards. The Project is now fully permitted with
regards to environmental requirements.
A range of Scope 1 and Scope 2 emissions
reduction measures are being considered, including
the use of local procurement for materials and
production chemicals to support operations. The
Company plans to install more solar panels on its
building roofs in 2024 and commissioned a Life
Cycle Assessment (LCA) study to internally evaluate
its economic and environmental aspects and find
solutions to optimize its environmental impacts
and costs. Additionally, there is an extension to the
cradle-to-grave boundary for Zinc concentrate,
involving transportation to the customer,
concentrate processing, product manufacturing, the
use stage, and end-of-life treatment. The Company
intends to extend the LCA to the end of life of
products.
Assurance and verification
The information in this report is for information
purposes only. Energy Systems makes no warranty,
either express or implied, as to the accuracy or
completeness of the assumptions, calculations
or information contained in this report. Energy
Systems and its affiliates do not accept liability for
errors and omissions and cannot be held liable for
indirect, direct or consequent losses under any
circumstances. No external assurance has been
carried out on these figures and an independent
audit of the information in this report should be
performed by Adriatic Metal's statutory reporting
representatives
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Sustainability Review - Continued
ENGAGEMENT IN RAŠKA
Highlights
27
employees
2,500
Spruce seedlings
procured
0.23
LTIFR
Since the acquisition of the Raška 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.
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Information centre and feedback
In 2023, Adriatic Metals has continued the
practice of publishing newsletters aimed at the
local community and available in print at the
Information Centre and online 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 with important people from the local
community.
In 2023 visits to the Information Centre have
doubled from almost 400 in 2022 to 785 visits in
2023. The visits included 291 visits from colleagues
on work assignments and 494 visits from various
people regarding the following queries:
1. Company and Info Center activities in Raška
2. Sponsorships/donations and handing in related
applications
3. Job opportunitites and handing in CVs
4. Current activities in exploration areas and local
community cooperation
Other Info Centre visits included following reasons:
mail delivery, invoice delivery, exchange of
documents, support for Company’s sponsorships/
donations and successful cooperation with the local
community, and information about CV submission
procedure.
Overall, in 2023 there were zero recorded
Grievances, 10 CVs were received, and 3 meetings
held. Our Information Centre Associate Ivana Miletic
met with:
1. Dusica Sretenovic, Professor of Geography
and Librarian at Raška Gymnasium, regarding
continuation of cooperation
2. Danijela Matovic, Curator at Gradac Cultural
Centre, regarding organization of planned mining
exhibition
3. Jasmina Trikosanin, Grafit printing firm
representative, regarding preparation of
Company promotional materials for the New Year
Community projects
As in previous year, Adriatic Metals has been
involved in a number of social projects and initiatives
in Raška that align with the Company’s values.
The Company has made 5 donations that total over
€4,500 and include support given to:
1. Raška Municipality Children’s Association
2. Cultural and educational association Rasanka
3. Church in Baljevac
4. Donation of water hose to Tiodze village
5. Cultural Artists’ Association “Raška”
The Company has given 3 sponsorships that total
€2,500 and include support given to:
1. Rudnica local community for “Srecko Lazarevic”
memorial football tournament
2. Mini-football club “KMF Raška”
3. Ski club “Kopaonik”
In 2023, Adriatic continued its collaboration with
Raška Gymnasium, hosting trips where Gymnasium
students and professors explored our Information
Centre, while our geologists visited Raška
Gymnasium for the second consecutive year. These
visits, aligned with the previous year’s initiative,
aimed at familiarizing students with our Company,
our exploration activities, and the geologist
profession at large.
Ivana Miletic, our Information Centre Associate, once
again represented the Company at the annual Raška
Municipality Day celebration. The event, attended
by esteemed guests from the local community and
the national government, provided a platform for
showcasing our commitment to sustainability and
environmental protection.
Demonstrating our dedication to environmental
stewardship, our Company procured a total of 2,500
spruce seedlings for planting in Badanj village. The
afforestation project saw active participation from
all members of the Adriatic Metals Serbia team, who
dedicated two days to successfully plant all the
seedlings.
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Our company will continue and expand our
monitoring efforts across all locations. This
data will serve as a crucial starting point for the
Environmental Social Impact Assessment (ESIA)
process, guiding our ongoing commitment to
sustainability and minimizing environmental
impact. Looking ahead, we are poised to continue
and extend these efforts in 2024, reinforcing
our dedication to responsible environmental
management.
Health & Safety
At the end of the period, the Lost Time Injury Rate
(‘LTIFR’) and Total Recordable Injury Rate (‘TRIFR’) are
0.23 and 2.08 respectively. These are positive safety
results when compared to Q1 2023 where LTIFR and
TRIFR were 0.25 and 2.22 respectively.
Adriatic Metals has continued to focus on managing
critical health and safety risks. The Company has
continued with the roll out of risk management
procedures and “Creating Safe Work” (Adriatic
Metals’ safety culture program). The new standards,
systems and processes continue to have a positive
impact on risk management and safety. The
Company has focused on growing its emergency
and crisis management capabilities.
Adriatic Metals is working closely with Technical
Rescue International, a London-based company
specializing in emergency and crisis management.
In January 2023, the Company completed a
workshop with senior management to develop a
greater understanding and awareness of the key
health and safety risks of operating in Vareš. Crisis
management plans are now in place to manage
these risks.
Sustainability Review - Continued
ENGAGEMENT IN RAŠKA -
continued
Environmental studies
In 2023, Adriatic made significant progress in
environmental monitoring. The goal was to address
data gaps and include new locations where
assessments hadn’t been conducted before.
Collaborating once again with the local consulting
company Envico, the company undertook
comprehensive environmental baseline studies,
reinforcing its dedication to understanding and
mitigating potential impacts on the ecosystems
surrounding its exploration licenses. We also
maintained our environmental monitoring on Kizevak
and Sastavci locations, ensuring that we stayed on
top of our responsibilities in those areas.
In our sampling campaign, covering 69 different
samples of sediment, surface, ground and drinking
water, we are pleased to report that most of the lab
results align with regulatory standards for pollutant
concentrations. While the overall findings are in
line with regulations, it’s crucial to note that some
elevated concentrations were observed. This can
be attributed to historical pollution in certain areas,
highlighting the lasting impact of past activities.
Additionally, in some instances, normal variations
in pollutant levels were detected. Our commitment
to thorough environmental monitoring allows us to
not only ensure compliance but also to understand
the unique challenges posed by historical factors
and natural variations. This approach empowers us
to implement targeted measures where needed,
ensuring the long-term health and sustainability of
the areas in which we operate.
In the pursuit of a responsible approach and
a commitment to environmental and cultural
stewardship, our company conducted a
comprehensive archaeological survey across
key locations, namely Kremice, Kozija Glava, and
Rudnica. This effort underscores our dedication to
respecting and preserving the historical and cultural
aspects of the regions where we operate.
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Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability Review - Continued
CORPORATE STRUCTURE
The corporate structure of the Group
at the date of this report is as follows:
Adriatic Metals PLC
England & Wales
Company Number: 10599833
The Board remains fully committed to
good corporate governance, including the
Corporate Governance Code published
by 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 the Vareš Project as it advances
toward steady-state production .
Adriatic Metals PLC is a public limited company
incorporated in England and Wales on 3 February
2017.
The Company’s principal assets are its wholly
owned indirect holding, via Adriatic Metals Holdings
BIH Limited, in Adriatic Metals BH d.o.o. and its
wholly owned direct holding in Adriatic Metals d.o.o.
(formerly RAS Metals d.o.o.) which holds the Raška
Project in Serbia.
Adriatic Metals BH d.o.o. (formerly named Eastern
Mining d.o.o.) was registered in Bosnia and
Herzegovina on 19 May 2008. Adriatic Metals BH
is the main operating entity of the Group and holds
the Vareš Project concession which comprises the
Rupice and Veovača deposits. Eastern Mining d.o.o.
underwent a name change to Adriatic Metals BH
d.o.o. in April 2023.
Adriatic Metals Holdings BIH Limited was
incorporated on 1 June 2021 and acquired the
entire share capital of Adriatic Metals BH d.o.o. from
Adriatic Metals plc on 30 September 2021 as part
of the Group’s preparation for entering into the Orion
Project Finance Package.
Adriatic Metals Trading 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.
Adriatic Metals Trading & Finance B.V., which was
incorporated on 14 December 2021, was liquidated
during 2023.
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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
Adriatic Metals BH 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
Adriatik Metali d.o.o. was incorporated on 8 April
2021 and had limited operating activity during the
year ended 31 December 2023.
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 which it may acquire the
entire share capital of Deep Research d.o.o. which
holds the Suva Ruda licence in Serbia though it has
no equity interest in that entity at present.
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 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 of the signing date.
KEY
All shareholdings 100% unless otherwise stated
Holding Company
Operating Company
Liquidated 2023
The strategic report of Adriatic Metals
PLC on the preceding pages was approved
and authorised for publication by the
Board of Directors on 27 March 2024 and
was signed on its behalf by:
Michael Rawlinson
Chairman of the Board
Strategic Reportwww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Governance
Delivering responsibly developed
value to all stakeholders position
Company Directory
Corporate Governance Report
Audit & risk committee report
Sustainability committee report
Remuneration & nomination committee report
Directors’ report
Statement of directors’ responsibilities
80
81
89
93
95
109
113
79 of 170
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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).
80 of 170
Chief Financial Officer
Auditors
Mike Norris
BDO LLP, 55 Baker Street, London W1U 7EU
Company Secretary
Stock Exchange Listings
Jonathan Dickman, Gabriel Chiappini
(joint secretaries)
London Stock Exchange (LSE:ADT1)
Australian Securities Exchange (ASX:ADT)
OTC Market (OTCQX:ADMLF)
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
Brokers
RBC Europe Limited, 100 Bishopsgate, London
EC2N 4AA
Stifel Nicolaus Europe Limited,
One Broadgate, London EC2M 2QS
Morgans Corporate Limited,
Level 29 Riverside Centre, 123 Eagle Street
Brisbane QLD 4000
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
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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.
As a company with a standard listing on
the London Stock Exchange, Adriatic is
able to choose which governance code to
follow. The Board has decided to apply the
Quoted Company Alliance’s (QCA) Corporate
Governance Code (QCA Code) (revised in April
2018).
The Code is based on 10 principles and a set
of supporting disclosures. It sets out what the
QCA considers to be appropriate arrangements
for growing companies and asks companies,
by means of the prescribed disclosures, to
explain how they are meeting those principles
through the prescribed disclosures. We have
considered how we apply each principle and a
full description of our compliance with the QCA
code can be found on our website:
https://www.adriaticmetals.com/corporate-
governance/
The Chairman has overall responsibility for
implementing an appropriate corporate
governance regime at the Company.
The Board is committed to ensuring the
sustainability of its development strategy and to
delivering on its commitments to shareholders,
clients, employees, partners and other
stakeholders with sustainability in mind.
We believe that transparency and fair dealing,
particularly in relation to environmental
and community issues, are essential to the
Company’s ultimate success. At all times
Adriatic will aim to:
• Minimise its environmental impact;
• Meet legal and other requirements
applicable to it;
• Foster positive relationships in the local
community;
• Protect the health and wellbeing of
employees and encourage positive
relationships in the workplace; and
• Ensure the sustainability of the business for
shareholders and other stakeholders.
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.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Corporate Governance Report - Continued
A. BOARD COMPOSITION
At 31 December 2023, 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 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
had 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.
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B. BOARD PERFORMANCE
EFFECTIVENESS REVIEW
3
2
0
2
r
e
b
m
e
c
e
D
3
2
0
2
y
r
a
u
a
J
Board discussion on evaluation
and design
Skills matrix and discussion
sheet distributed
One-to-one interviews
Findings documented by Chairman
and Company Secretaries
Findings discussed with Independent
Non-Executive Directors
Findings discussed with CEO
Board discussion of findings and
action plan for implementation
The most recent board performance effectiveness
review was undertaken internally during December
2023 through one-to-one interviews conducted by
the Chairman, Michael Rawlinson, supported by the
UK Company Secretary.
The interviews were structured to seek the Directors’
views on a number of subject areas including those
outlined below.
• The overall composition of the Board was
considered, taking into account the balance of
skills represented by Board members relative
to the current and future requirements of the
Company together with gender diversity.
• The workings of the Board and interpersonal
dynamics
• Focus on leadership and corporate culture,
including succession planning.
• A review of strategic oversight and direction
• Discussion on the provision of information –
focus, relevance and quantity
• Views on governance and the composition and
workings of the main Board Committees was
evaluated.
Discussion around risk management including
evaluation and reporting
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:
Adriatic Board Skills Matrix Self Assessment Dec-23
M&A
Social & Community Management
Environmental Management
Corporate Governance
International/Balkan experience
Capital Management & Legal
Stakeholder Relations
Information Technology
Commodity Markets & Hedging
Treasury & FX Hedging
Risk Management
Financial Reporting
Project Development & Operations
Project Evaluation & Feasibility Studies
Exploration
Strategy
0
1
2
3
4
5
6
Expert - Deep knowledge / formal qualification or experience over many years
Moderate – Moderate skills / experience – knowledgeable but not highly skilled
Aware - Some knowledge and can follow a discussion
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Corporate Governance Report - Continued
Board composition
Directors were broadly happy with the size of
the Board and skills on the Board at the moment
(local/mining/exploration/financial/corporate/
legal), given the stage of the project. With changes
to composition expected in the coming year, the
focus was on the concept of the local advisory
committee to cover the need for local expertise
and advice, particularly as the Company moves into
the operational phase. Members recognised that
reshaping the Board and altering the skills mix were
questions that would naturally arise as the Company
moved forward.
2023 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.
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Overview
The Company has had a tough year of delivery
in 2023. We have worked safely, cleanly and
responsibly; kept a lid on capital budgets; and had
great success in exploration. The operational team
development has progressed well and the culture of
the Company has evolved positively.
As we complete construction, undertake
commissioning and move into the operational phase
of the Vareš project, the Board should maintain
focus on project delivery and ramp-up. At the same
time, both the complexity of the business and
the overall level of risks faced by the business will
continue to rise. This will imply an ongoing need
for focused oversight by the Board, including in
particular in relation to technical, operational and
ESG matters.
Value and role of the Board
The role of the Board remains well understood. The
Board has high confidence in the management
team and understands that it is management’s role
to manage the business, with the Board providing
oversight and strategic direction. The Board is there
to help management set the strategy, standards and
agenda and provide mentorship and support. Board
members report a very positive relationship with
management. Members feel valued and engaged
and particularly appreciate the opportunities for
interaction afforded by the on-site visits, which have
once again become a regular feature of the annual
board calendar.
Focus on major challenges
There was a strong sense that the Board was
spending the appropriate time and focus on the
things that mattered.
Recommendations:
• Board should focus on ramp-up, mindful
of the complexities involved in ensuring
successful project delivery and VPP
commissioning
• Specific increased focus on readiness
of information and reporting systems for
production; contractor management (and
related learnings); ESG and local in-country
expert advice.
• Board to explore setting up a local advisory
committee to provide in-country expert
advice to the Board.
Strategic direction
The Board considered that strategic direction at this
time should be firmly focused on project delivery,
and the associated challenges and risks.
Insight into the business and
information flows
The Board felt there was extremely good information
flow from management. The detail in the quarterly
Board reports was appreciated. The monthly
updates (Board calls) are highly valued. Individual
presentations from department heads are valued.
Management was extremely responsive to queries
outside the formal meetings and informal calls.
Committee Chairs should be actively involved in
agenda setting to make sure that key areas of focus
receive the appropriate attention. This process is to
be reviewed.
Risk discussion
The Board believed that there needs to be more
consistency with focus on risk in every quarterly
board meeting. The Board expected to see an
updated comprehensive risk register summary as
part of the quarterly reporting. This would allow the
Board to look at the top 10 risks more often and
ensure the register is updated as the risks evolve
(political /operational /people /contractors etc.). The
Board was pleased with the improved management
of this area.
Board members were most focused on evolving
risks with completion of construction; geotechnical
issues/ ground conditions; VPP commissioning;
electrical supply; haul road; health & safety; skills
acquisition and training; ERP and systems reporting;
and contractor management. Members flagged that
health & safety would require even more focus once
operations start.
The Board welcomed the appointment of the
new GM for Sustainability to take charge of that
important area.
Culture and behaviours
Members feel management is doing a fantastic
job in building a company-wide culture under the
CEO’s leadership. It is evident how much the CEO’s
efforts are shaping how the Company ‘looks’,
’feels’ and ‘performs’. The annual workforce survey
and whistleblower hotline both provide valued
insights. The board asked management to focus on
improving the culture and behavior of contractors to
the Adriatic standard.
People
The Board has been impressed with the quality of
the senior managers this year and are happy to
see that the CEO is well supported. The good work
on succession planning and talent development
should be continued. In relation to ESG, the
Board welcomed the appointment of the new GM
Sustainability.
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Corporate Governance Report - Continued
Board dynamics
Board members expressed positive views about
Board dynamics; members feel engaged and
included. The free and open discussions were
appreciated. Engagement is especially good where
all board members can be there for the twice yearly
on-site meetings, which were seen as particularly
valuable. Board members are encouraged to stay
on to get to know key team members post board
meetings. Supporting management is enhanced
where board members know the key people and are
across the key issues.
Members felt that interaction between the
Committees and the full Board should be improved,
with more background work done in Committee.
Linked to this, it was felt that Committee chairs
should interact more with senior management within
the scope of Committee mandates.
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C. BOARD TERMS OF REFERENCE AND
POWERS (SEE 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.
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 Adriatic
Metals BH d.o.o. (an operating subsidiary of Adriatic)
in respect of his role as Director of that company.
All Non-Executive Directors acknowledge in their
letter of appointment that the nature of the role
makes it impossible to be specific on maximum time
commitment and that at certain times of increased
activity, the preparation for and attendance at
meetings will increase. All Directors are expected
to attend all board meetings (either in person or by
telephone), the AGM, one annual Board strategy
meeting a year, committee meetings where
appropriate, meetings with the Non-Executive
Directors, meetings with shareholders, any meetings
forming part of the Board evaluation process, and
training meetings.
E. BOARD MEETINGS
The Board meets formally 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 or other Board meeting) in order to receive regular updates
from the Managing Director and Chief Executive Officer.
During the year, 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 2023 is set out below:
Director
Independent
Maximum
possible attendance
Actual
attendance
Michael Rawlinson
Peter Bilbe
Paul Cronin
Julian Barnes
Sandra Bates
Sanela Karic
Yes
Yes
No
Yes
Yes
No
10
10
10
10
10
10
10
9
10
9
10
10
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Corporate Governance Report - Continued
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.
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, UK Company
Secretary and other executives are invited to attend
Committee meetings, as necessary. The Committee
meets at least twice a year and met six 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.
The UK Company Secretary and other executives
are invited to attend Committee meetings, as
necessary.
The Company published its first stand-alone
Sustainability Report on 24 April 2023, containing
more detailed information on the Company’s
sustainability activity and the Committee’s
deliberations during the year.
Committee attendance during the year:
Director
Sandra Bates (Chair)
Michael Rawlinson
Julian Barnes
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Independent
Maximum
possible attendance
Actual
attendance
Director
Independent
Maximum
possible attendance
Actual
attendance
Yes
Yes
Yes
6
6
6
6
6
6
Sanela Karic (Chair)
Michael Rawlinson
Peter Bilbe
No
Yes
Yes
4
4
4
4
4
4
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Corporate Governance Report - Continued
86 of 170
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.
Committee attendance during the year:
Director
Peter Bilbe (Chair)
Julian Barnes
Sandra Bates
Independent
Maximum
possible attendance
Actual
attendance
Yes
Yes
Yes
5
5
5
5
5
5
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Corporate Governance Report - Continued
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.
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.
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K. LIST OF DIRECTORS
Michael Rawlinson
Non-Executive Chairman
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.
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 25 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 adequately to perform his role with the Company.
Sandra Bates
Non-Executive Director
Ms Bates is a commercial and strategic international lawyer
with over 20 years’ experience advising management teams
and boards of both listed and private companies in the UK
and internationally. She is a risk assessment specialist and
brings extensive experience of guiding clients in the natural
resources sector through complex negotiations often with
a cross-cultural element. Ms Bates is 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.
Peter Bilbe
Non-Executive Director
Mr. Bilbe is a mining engineer with over 40 years
Australian and international mining experience
in gold, base metals and iron ore in operational,
CEO and board positions. He is currently a Non-
Executive Director of Horizon Minerals Ltd, an
emerging gold producer and until November 2021
was Chair/Non-Executive Director of IGO Ltd, an
ASX100 company.
Julian Barnes
Non-Executive Director
Dr. Barnes is a geologist with extensive experience
in major exploration and development projects.
Previously, he was Executive Vice President 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.
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 and
Adriatic Metals BH.
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Corporate Governance Report - Continued
L. BOARD ADVICE DURING THE YEAR
FIT Remuneration Consultants were engaged
to advise the Remuneration Committee on its
remuneration policy. Advice was also provided to the
Board by the investment bank RBC Europe Limited.
M. INTERNAL ADVISORY ROLES
i) Company Secretary
The joint Company Secretaries during the year were
Gabriel Chiappini (Australia) and Jonathan Dickman
(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 2023 Board evaluation is set out in section
b above.
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.
O. BOARD DIVERSITY POLICY
STATEMENT: GENDER AND
ETHNICITY TARGETS
The Board is committed to ensuring that it has the
right balance of skills, experience and diversity, and a
Board composition that reflects the current areas of
operation of the Company, its employees and major
markets. The Board supports the targets of the
FTSE Women Leaders and Parker reviews on gender
and ethnic diversity.
Since August 2020, two (33.3%) of the 6 directors
have been female and one (17%) identifies as
minority ethnic. At at 31 December 2023 and the
date of this report, two (33.3%) of the 6 directors are
female and one (17%) identifies as minority ethnic.
Two of the Board sub-committee chairs are female,
i.e. the chairs of the Audit and Risk Committee
and the Sustainability Committee. In addition, a
majority of the Board have a nationality or place of
origin outside the UK. The Company satisfies the
targets in the UK Listing Rules in having at least
one Director from a minority ethnic background.
However, the Company does not currently meet the
UK Listing Rule targets of having at least 40% female
representation on its Board and that at least one
of the senior positions on its Board (defined under
the Listing Rules as the chair, chief executive, senior
independent director or chief financial officer) is held
by a woman. The additional diversity data required
under the UK Listing Rules is set out below.
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The Company considers that the experience and expertise of its Board, including the continuity of its
composition and relatively small size, best positioned the Company for its continued growth during 2023,
including the successful development of the Vareš Silver Project which enabled it to achieve its first
concentrate production in Q1 2024. Currently, the Company is at a relatively early stage of its development
and its operational footprint is primarily in the Balkan region, where ethnicity profiles and representation in
society differ considerably from those in the UK. The Board is also mindful that the mining industry has been
traditionally male-dominated when compared to several other sectors making up UK listed businesses. The
Board recognises the importance of addressing these gaps and is committed to implementing measures
to improve our board diversity. In considering plans to make further appointments to the Board as the
Company grows and succession plans for the Board evolve, and for the above-mentioned senior positions,
considerable effort will be made to the meet the targets. Appointments to the Board will be made on merit,
ensuring the overall composition of the Board and its committees continues to reflect a mix of capabilities,
experience and diversity (of gender, ethnicity, nationality, age and perspectives). We are confident that future
appointments will, as a whole, continue to support the Board’s diversity aims.
As required by UK Listing Rule 14.3.33, further details on board composition as at 31 December 2023 are
set out below.
i) Gender identity or sex
Number
of board
members
Percentage
of the board
4
2
66.7%
33.3%
Number of senior
positions on the
board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
2
-
7
2
77.8%
22.2%
Number
of board
members
Percentage
of the board
Number of senior
positions on the
board (CEO, CFO,
SID and Chair)
Number in
executive
management
Percentage
of executive
management
5
83%
2
8
89%
1
17%
1
11%
Men
Women
ii) Ethnic background
White British or other
White (including minority-
white groups)
Mixed/Multiple Ethnic
Groups
Asian/Asian British
Black/African/
Caribbean/Black British
Other ethnic group,
including Arab
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Audit & risk committee report
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 UK Company Secretary are invited to attend together with the external
auditors. Six 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
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 2023
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 assessment of going concern
covers a period of at least 12 months
from the date of signing the financial
statements.
The Vareš Feasibility Study was completed in August 2021and an equity raise was successfully
closed on 29 October 2021. Definitive documentation executed for the $142.5m Debt
Finance Package with Orion was announced on 10 January 2022 to provide sufficient funds
to complete the Vareš Project construction and cover ongoing owner costs until production
commenced. Of this total, $112.5m was drawn down prior to 31 December 2023, including the
$22.5m Copper Stream deposit, and $30m was drawn down in January 2024. In August 2023
the Company raised $30m equity, net of costs. In March 2024, the QRC convertible debt was
converted into shares.
As announced on 30 January 2024 in the Company’s Quarterly Activity Report for the quarter
ended 31 December 2023, the Project cost estimate was $188.9m, and on 28 February the
Company announced that it had produced its first concentrate, with production planned to
ramp up to its nameplate processing capacity of approximately 65,000t per month by Q4 2024.
Sensitivity analysis of production ramp up and potential revenue delays indicates that the Group
and Company have sufficient cash resources to continue in operation for a period in excess of
12 months from the date of signing the consolidated and Parent Company financial statements.
For a mining company at the start of its operating phase, uncertainty exists about operating
results and cash flows. In a challenging operational scenario, the Company would have the
option of reducing and/or deferring discretionary expenditure including overheads, sustaining
capex and general and administrative costs, as well as raising equity capital in the event of a
more severe impact on production and revenues.
A Debt-Service Coverage Ratio (“DSCR”) covenant is included in the Orion Debt Finance
Package, with the first DSCR testing period expected to be mid-2025, following the agreement
in January 2024 to defer the first repayment under the Debt Finance Package from June 2024
to December 2024. The DSCR is required to be above 1.25x and the Company’s forecasts show
substantial headroom above this.
The Directors therefore believe there is not a material uncertainty regarding going concern and
that it is appropriate to prepare the financial statements on a going concern basis.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Audit & risk committee report - Continued
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 $212.7m (31
December 2022: $77.9m) 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.
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 Vareš Project to key project inputs is considered within
the Feasibility Study. Analysis of sensitivities such as changes to metals price,
operating costs, initial capital cost and head grade, shows that significant
headroom exists over the Vareš 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 Vareš Project to date to determine
the estimated outstanding rehabilitation work required, as well as assess any
changes from the original conceptual mine closure plan. In addition, cost
estimates have been updated.
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 $3.7m recognised at 31 December 2023
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 up to that date.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Audit & risk committee report - Continued
Significant issue
Summary of Significant Issue
Actions and Conclusion
Copper Stream
The accounting and disclosure of the Copper Steam
is a complex area and should be accounted for at fair
value in accordance with IFRS 9.
QRC convertible
debt
The accounting and disclosure of the convertible
debt of $16.1m (31 December 2022: $16.3m) and
its embedded derivative liability valued at $9.9m (31
December 2022: $6.4m) is a complex area and should
be accounted for at fair value in accordance with
IFRS 9.
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.
It was considered whether there were any indicators
of impairment and whether the carrying amount of the
Raska Project USD 8.5m arising on acquisition remained
appropriate.
Consideration as to the substance of the agreement and the value of the Copper
Stream has been made in line with the requirements of IFRS. Regarding the
accounting treatment reference has been made to IAS16, IFRS9 and IFRS15 as
to the nature and substance of the agreement with the conclusion that IFRS9 is
the most appropriate treatment of financial liability because the liability can be
settled by cash or delivery of another financial instrument.
The fair value of the Copper Stream obligation has been valued by management,
assisted by its independent valuation experts. Assumptions developed by
management include: long term copper price curves; nominal discount rate
based on the Company’s weighted cost of capital; timing of cashflows relevant
to the stream arrangement. Initial recognition was at 13 February 2023, including
a day one fair value adjustment which has been deferred and is subject to
amortisation over the life of the mine. Subsequent changes in fair value are
recognised in the consolidated statement of comprehensive income.
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 2023. The QRC debt was
converted in March 2024.
In late 2022 the Company carried out a strategic review of the Raska Project which
resulted in changes to the development plan for the project. Focusing its resources
on Vareš Project construction and on exploration at Rupice and Rupice NW meant
that resources available for exploration in Serbia would be more focused and limited
in 2023, with development taking place over a longer horizon, including advancing
new prospects in the Company’s tenement area during 2023 to complement Kizevak
and Sastavci. In view of the longer horizon planned, the Company determined that it
was appropriate to recognise an impairment of $23.2m against the project’s carrying
amount, reducing the carrying amount to $8.5m at 31 December 2022.
During 2023, there was successful intersection of mineralization at several of the new
prospects from trench, surface and drill core sampling, while drilling results from the
Rudnica prospect indicated the potential for an increase in the size of the historic
Rudnica porphyry deposit. Nonetheless, further work is required before a maiden
mineral resource may be established. All permits remain in good standing.
Management has therefore concluded that there are no indicators that the carrying
amount of the Raska Project is not supported. As further work remains before a
maiden resource may be established, management considers that a reversal of the
previous inpairment would not be appropriate at this time.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Audit & risk committee report - Continued
External Auditors’ Fees
There was no significant non-audit work carried out
by BDO subsequent to their appointment. Details of
fees paid during the year may be found in note 16 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
2024 annual general meeting (“AGM”), and BDO has
expressed its willingness to continue in office.
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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
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Sustainability committee report
On behalf of the Committee,
I am pleased to present the
Sustainability Committee
Report for the year ended
31 December 2023.
Over the course of the year, the Sustainability
Committee has continued to oversee and drive
the company's commitment to Environmental,
Social, and Governance (ESG) initiatives. This report
encapsulates the discussions and actions taken
during four committee meetings held in January,
May, September and December.
Sanela Karic
Chair of the Sustainability Committee
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, the management of
stakeholder relationships, and the oversight of
permitting and relevant regulatory risks. We also
seek 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.
93 of 170
COMMITTEE MEMBER
ATTENDANCE LOG
Name
Position
Sanela
Karic
Non-Executive
Director & Chair
Michael
Rawlinson
Non-Executive
Director & Chairman
Peter
Bilbe
Non-Executive
Director
Number of
Meetings
Attended
4
4
4
KEY AGENDA ITEMS DURING
THE YEAR
2023 year can be characterised by a concerted
effort from the Sustainability Committee to reinforce
the Company’s commitment to high standards.
In early 2023, amendments were made to the
environmental permit for Rupice, securing approval
from the Federal Ministry of Environment and
Tourism. As part of the Environmental and Social
Management System (ESMS), management plans
will be revised to integrate mitigation and monitoring
measures in response to any changes identified
during this process.
Oversight of health and safety
From a governance perspective, the health and
safety team were realigned to be incorporated into
the broader framework of risk and compliance.
Understanding the importance of a robust
health and safety program in protecting our
workforce, this integration ensures a cohesive
approach towards mitigating operational risks
and upholding compliance standards. By aligning
the health and safety department with broader
governance principles, we aim to foster a culture of
accountability and responsibility.
Stakeholder engagement
Throughout the construction phase, the Company
maintained a specific focus on key matters related
to the development of the mine. Throughout this
period, a commitment to stakeholder engagement
and awareness remained at the forefront of
Sustainability Committee’s initiatives. The
Committee actively engaged in discussions with
stakeholders, soliciting both positive and negative
feedback. The outcome of these engagements and
the ensuing discussions will be outlined, shedding
light on the various perspectives and concerns
raised by stakeholders during the course of the year.
Addressing environmental concerns
Acknowledging the environmental impact of our
operations, the Committee delved into addressing
the root causes of environmental complaints.
Notably, we focused on the temporary use of Kakanj
roads during construction activities. This led to
insightful amendments in our plans, particularly in
the realms of water management, traffic control, and
biodiversity preservation.
Vildana Mahmutovic brought to our attention a
formal grievance raised by the Kakanj municipality,
underlining the importance of addressing local
concerns. The grievance, sparked by a supply truck
causing delays in civilian traffic due to snow-related
issues, prompted immediate action. In response, we
committed to providing advance warnings for heavy
goods movement through the municipality.
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Forward-looking sustainability initiatives
As we transition into the production phase, we
are committed to ensuring that our approach
remains aligned with the characteristics of being
a producer. We have outlined a proactive program
for the next year, underscoring our commitment to
sustainability and responsible business practices.
This comprehensive plan includes deep dives
into the Risk Register identifying and mitigating
potential risks associated with the production phase,
discussions on Occupational Health and Safety,
progress on the Community Development Plan,
and considerations for Net Zero initiatives. These
forward-looking initiatives reflect our dedication to
continuous improvement and aligning our business
practices with evolving ESG standards.
As the Chair of the Sustainability Committee, I would
like to echo our continued commitment to steering
Adriatic Metals towards sustainable practices. Our
collaborative efforts with various stakeholders
and continuous improvement initiatives reflect the
Company’s dedication to ESG principles.
Sanela Karic
Chair of the Sustainability Committee
Sustainability committee report - Continued
Female leadership
Recognising the significance of diversity in
leadership, our commitment extends to fostering
inclusivity through female representation. As the
Chair, I reiterate our dedication to training and
empowering more women for senior positions within
our Company. This commitment is rooted in the
belief that diverse leadership enhances innovation,
resilience, and the overall effectiveness of our
operations. Our actions in this regard align with our
broader goals of promoting equality and inclusivity in
the workplace.
Enhancing risk management strategies
With the dynamic nature of business risks, our
Committee, bolstered by the addition of Ben
Huxtable as Head of Risk, has prioritised efforts
towards improved tracking and reporting of
whole-company risks. This initiative is central to
our broader risk management strategy, ensuring
a comprehensive understanding of potential
challenges. Ben’s expertise enhances our
capabilities in identifying, assessing, and mitigating
risks effectively. By incorporating a dedicated focus
on risk management, we enhance the resilience and
sustainability of our business operations.
In January 2024, Alex Budden was appointed to a
newly created role as Chief Sustainability Officer.
Mr Budden’s role at Adriatic Metals will cover
government relations, sustainability and ESG issues,
including environmental services, community
relations and energy, working closely with Risk
& Assurance, Human Resources and Corporate
Development. Mr Budden has held senior Corporate
Affairs and Sustainability roles at Harbour Energy
and Lundin Energy, and has worked across the oil
& gas, mining, and renewable energy sectors. This
followed a twenty year career as a diplomat with the
UK Foreign, Commonwealth & Development Office,
where he was based in several locations, including
Croatia.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report
PART 1 – SUMMARY STATEMENT
FROM THE CHAIRMAN
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 2023. It has been
prepared in accordance with the requirements
of The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008
(the Regulations).
The Regulations apply to the Company because it
is a UK incorporated company and was admitted
to the Standard Segment of the Official List of the
Financial Conduct Authority and to trading on the
London Stock Exchange’s Main Market (Standard
Segment) on 12 December 2019. The Company
has resolved to comply with the provisions of the
Quoted Companies Alliance Corporate Governance
Code so far as is practicable given the Company’s
size, nature and stage of development. A summary
of the Remuneration & Nomination Committee’s role
and membership can be found in the Governance
section of this Annual Report.
After this introductory statement, this Report
contains the Annual Report on Remuneration
covering the year ended 31 December 2023,
reflecting the arrangements in place during that year.
The third part of this Report sets out a summary
of our Directors’ remuneration policy which was
approved at the 2023 AGM.
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.
Peter Bilbe
Chairman of Remuneration Committee
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At our 2024 AGM there will therefore be two
resolutions on pay matters:
• The annual advisory vote to approve this
Directors’ remuneration report (comprising both
the Annual Report on Remuneration and this
introductory statement); and
• A vote to approve a proposed LTIP share award
to Paul Cronin.
Remuneration policy – application in 2023
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 to 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’s fixed pay comprises
base remuneration (split between Director’s fees
and consultancy fees paid by the Company and its
wholly owned subsidiary Adriatic Metals BH d.o.o)
and a travel allowance of £50,000. He receives no
pension contributions. The travel allowance was
introduced during the course of 2023 for the costs
of Mr Cronin and his family’s travel requirements as a
result of his working on the Company’s business as
an expatriate and away from his family for sustained
periods.
Mr Cronin participated in the Company’s STIP
during 2023. As detailed later in this report, his STIP
payment in respect of 2023 was US$329,904, being
70% of the maximum of 100% of salary, reflecting
good performance across the target metrics.
As noted in last year’s report, in 2023 the Company
moved to a more standard LTIP structure with
forward-looking three year performance measures
from the time of award. As a result, Mr Cronin
received an LTIP award over 434,272 shares, which
can vest after 3 years, to the extent that the pre-set
performance conditions are met. As required by ASX
rules, Mr Cronin’s 2023 LTIP award was approved by
shareholders at the 2023 AGM.
Remuneration policy – proposed
application in 2024
Following approval of a new Directors’ remuneration
policy at the 2023 AGM, our intention is to continue
to apply remuneration in accordance with this policy
in 2024.
In terms of actions which we have already taken
for 2024, we have reviewed our CEO’s fixed pay. Mr
Cronin’s effective salary continues to comprise two
elements: board fees paid in BAM and consultancy
fees. While the board fees for 2024 remain
unchanged, the consultancy fees element has been
increased to £370,000 (2023: £328,000).
All other elements of fixed pay remain unchanged.
This is the second year in which Mr Cronin has
received an increase in his consultancy fees ahead
of normal “salary inflation” levels. In 2023, his
consultancy fees were increased to £328,000 (2022;
£225,000) and for 2024, his consultancy fees have
been increased to £370,000.
As a Committee we believe Mr Cronin’s overall base
remuneration (board fees paid in BAM and £370,000
consultancy fees) remain at a level which we believe
to be appropriate for a company of the size and
scale of Adriatic as the company has become
more established and commenced production;
the increases reflect Mr Cronin’s leadership and
contribution to Adriatic’s progression, and whilst
the new base remuneration levels are ahead of
the levels paid in our first years after IPO, the total
base remuneration paid to Mr Cronin is not ahead
of “market expected levels” for other international
mining companies of similar scale and stage of
development. His 2024 base remuneration is
consistent with the median of a peer group of
international mining companies.
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
Mr Cronin will participate in the Company’s STIP
during 2024 and it is proposed he will receive a 2024
LTIP award, subject to approval by shareholders
at the 2024 AGM. Further details of the 2024 STIP
and LTIP awards are provided in the Remuneration
Report below.
Remuneration & Nomination Committee
Remuneration & Nomination Committee meetings
are normally held at least once a year and the
Committee met 5 times during the year ended
31 December 2023. 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 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 its main objective of developing
the Vareš Project. In particular, all project-related
infrastructure construction is complete and
commissioning of the Vareš Processing Plant is
underway. The first major milestone was achieved
in Q1 2024 with first concentrate produced at the
Vareš Project.
Principal actions and decisions of the
Committee
The Remuneration & Nomination Committee have
taken the following principal actions and made the
following principal decisions during 2023 and after
the year end:
• 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.
• Obtaining approval from shareholders for a new
Directors’ remuneration policy that will apply for
up to 3 years from the 2023 AGM.
• Approving 2023 LTIP awards to the Executive
Director and senior management, including
setting the performance conditions and
associated targets.
• Approving the base remuneration increase
for the CEO for 2024 and base remuneration
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 2023, as well
as setting the KPI targets for the 2024 annual
STIP bonus.
• Approving the grant of LTIP awards to senior
management, including the in-principle grant
of a 2024 LTIP award to the CEO (subject to
approval at the 2024 AGM), including setting the
performance conditions and associated targets
for the 2024 LTIP awards.
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AGM
At our AGM held on 24 May 2023, each of the
proposed remuneration resolutions were passed
with strong support (details of the votes are set out
in the Annual Report on Remuneration, below). We
thank our shareholders for their continued support.
As we explained in the introduction to this
statement, at our 2024 AGM we will be asking
shareholders to approve:
• The normal annual advisory vote to approve this
Directors’ Remuneration Report; and
• A vote to approve the proposed share award to
Paul Cronin.
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
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
PART 2 – REMUNERATION REPORT (AUDITED)
The Group paid the following remuneration to each Director:
Year ended 31 December 2023
Total
salaries and
(a)
fees
(b)
Benefits
(c)
STIP
Share
awards
vesting in
(d)
year
(In USD)
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
Executive Directors
Paul Cronin
476,183
60,503
329,904
Non-Executive Directors
Michael
Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates
Sanela Karic
(e) (f)
Total Directors’
Remuneration
124,296
66,040
62,384
68,363
89,133
-
-
-
-
-
-
-
-
-
-
886,399
60,503
329,904
-
-
-
-
-
-
-
866,590
536,686
329,904
124,296
124,296
66,040
62,384
68,363
89,133
66,040
62,384
68,363
89,133
-
-
-
-
-
1,276,806
946,902
329,904
Year ended 31 December 2022
Total salaries
(c)
and fees
STIP
Share awards
vesting in
(d)
year
Total
remuneration
Total fixed
remuneration
Total variable
remuneration
(In USD)
Executive Directors
Notes:
a. Mr Cronin’s salary comprises two elements, being: (i) board fees paid in BAM ($54,963); and (ii) and
consultancy fees of £328,000 ($421,220). An overpayment of £10,000 ($12,842) was made in error to Mr
Cronin during 2023 which will be offset during 2024.
b. There were no taxable benefits or pension contributions in 2022 and no pension contributions in 2023.
Paul Cronin received an annual travel allowance of GBP 50,000 ($60,503) in 2023.
c. Cash bonus for Paul Cronin comprised $329,738 of accrued 2023 STIP bonus for the current year with
an additional $166 of realized foreign exchange gain in USD terms during 2023 for 2022 STIP bonus paid
in January 2023. This compares to the prior year accrued 2022 STIP bonus awarded of $279,887 with
a realized foreign exchange loss in USD terms of ($7,290). Details of the performance outcomes for the
2023 STIP bonus are set out below.
d. No options or performance rights held by Directors vested during 2023 or 2022.
e. Out of the total remuneration to Ms. Karic in 2023 set out above, $65,616 was paid in respect of director’s
fees and $23,517 was paid in respect of the separate consulting arrangement with Ms. Karic, which came
to an end during 2023.
f. The Company benefits from Sanela Karic’s continued involvement providing legal expertise to the
Group, through her law firm, Legal Solutions d.o.o. Whilst Legal Solutions provides these services, Ms.
Karic cannot be classified as an independent board member. Please refer to note 20 of the consolidated
financial statements regarding the provision of services by Legal Solutions d.o.o.
There were no gains on the exercise of performance rights by Directors in the current year or prior year.
Gains on the exercise of share options by Directors during the year ending 31 December 2023 were as
follows:
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
Paul Cronin
328,706 272,597
123,146
68,684
62,007
67,730
115,724
-
-
-
-
-
765,997 272,597
Non-Executive Directors
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates
(f)
Sanela Karic
Total Directors’
Remuneration
97 of 170
-
-
-
-
-
-
-
601,303
328,706
272,597
Sanela
Karic
06/11/
2020
06/11/
2020
10th
February
2023
A$2.20
1,000,000
326,216
A$3.40 US$829,297
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
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 were granted to Non-Executive Directors during the years ended 31 December 2022 and
2023.
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
Fixed remuneration of the Executive Director
The fixed remuneration of the Executive Director was US$476,183 during 2023 made up of a board fee being
BAM 99,352 stated gross of tax (BAM 54,144 stated net of taxes) and consultancy fees of £328,000 (the
basis of conversion being monthly average GBP to USD exchange rates throughout the year).
Note that in Bosnia taxes are deducted at source from board fees, as is customary under local tax practice.
This means that the gross amount is variable in order to achieve a fixed net amount after taxes are deducted
(net of tax, board fees were BAM 54,144 in both 2022 and 2023). This perspective of calibrating fees on a net
of tax basis reflects local custom and practice.
In addition, in 2023 the Executive Director received an annual travel allowance of GBP 50,000.
Annual STIP bonus in respect of 2023 performance
Mr. Cronin’s maximum opportunity under the STIP was set as 100% of base salary for 2023.
Objectives for the 2023 STIP bonus were set by the Remuneration and Nomination Committee at the
beginning of the year and assessment of performance during the year was undertaken at the January 2024
Committee meeting. The determination of the bonus payout is at the discretion of the Remuneration and
Nomination Committee, taking into account performance during the year against the scorecard set out
below.
The Remuneration & Nomination Committee’s actual assessment of the CEO’s performance for 2023
resulted in a STIP bonus of 70% of base salary ($329,738) which was paid in cash in January 2024.
Details of the STIP bonus outcome for the CEO for 2023, including the specific performance metrics,
weightings and performance against each of the metrics, are provided in the table below.
Target Details
Weighting
Low
25%
Expected
75%
High
100%
Achievement
Performance
outcome
Achievement Notes
Target thresholds (outcome)
Demonstrate
Exploration Potential
At least 5,000m of exploration drilling on expansion
targets (excl. Rupice)
5%
5,000m completed
Low Target plus new
potentially economic Ore
Body identified
Low Target plus 2 new
potentially economic
Ore Bodies identified
Increase to Resource and Reserves
15%
30% increase
50% increase
75% increase
High
High
High
5.0%
Two early stage projects
identified
15.0%
M&I Resource increase by 96%
15.0%
EAC at end Dec of $188.9m -
less $28.1m out of scope =
$160.8m
(a)
Demonstrate Rupice
Expansion Potential
Project Cost Control
Project Delivery
Ramp Up
OH&S
Total Cost of Vareš Project Development does
not exceed US$ 183m on commencement of
commercial production
Commercial Production commences before
30/9/2023
Daily Ore to stockpile exceeds 50% of plant
nameplate capacity by 31/12/23
Total Recordable Injury Frequency Rate decrease
from December 2022 Level
Project Finance
Compliance with all Covenants
Staff Engagement
The results of a general company-wide staff
engagement survey targeting an
‘unfavourable’ score of <15%
Diversity
Ensure that at least 20% of all staff are female but
excluding contractors
15%
Cost <$190m
Cost <$185m
Cost <$183
15%
Before 30/11/23
Before 15/10/23
Before 30/9/23
Not Achieved
0.0%
Not achieved.
15%
20%
5%
5%
5%
Exceeds 30%
Exceeds 50%
Exceeds 65%
Not Achieved
0.0%
Not achieved.
>20%
>30%
>40%
High
20.0%
Dec 22 was 4.24
Dec 23 is 1.4
2 Events of Default
Resolved within Cure
Period
1 Event of Default
Resolved within Cure
Period
No Events of Default
High
5.0%
No Events of Default
<30%
>17%
<30% >15%
>20%
<15%
>23%
High
5.0%
11% Unfavourable
High
Total
5.00%
Currently 28%
70.0%
a.
This excludes out of scope costs reflecting additional and necessary expenditure on items which were beyond the scope of the Definitive Feasibility Study (DFS) and which were approved by the Board in order to enhance the project. This includes expenditure reflecting
changes to the design of the plant, mine or haul road subsequent to the DFS being finalized and specifically the acquisition of Jameson cells and additional diesel generators, the temporary tailings storage facility and staff accommodation at Veovaca Camp. As the
expenditure was approved by the Board and considered to be in the long-term interests of shareholders, these costs items have accordingly been excluded by the Remuneration Committee for the calculation of the Project Cost Control metric.
98 of 170
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
Long term equity incentives
On 24 May 2023, Paul Cronin was granted two LTIP awards under the Adriatic Metals plc Employee Incentive
Plan 2019, following approval of each award by shareholders at the 2023 AGM, as follows:
• an award over 142,778 shares in respect of the 2022 financial year (FY22 Performance Rights); and
• a separate award over 434,272 shares in respect of the 2023 financial year (FY23 Performance Rights).
The new Directors’ Remuneration Policy approved at the 2023 AGM means that only awards in the form of the
FY23 Performance Rights (as described below) can be made in the continuing policy period.
Performance measure
Weighting
Summary of targets
Absolute Total Shareholder
Return (TSR) (measured as
compound annual growth (CAGR)
in TSR)
17% or more CAGR: 100% vesting
9% CAGR: 60% vesting
15%
5% CAGR: 25% vesting
i). FY22 Performance Rights
Vesting of the FY22 Performance Rights is subject to Mr Cronin remaining employed or otherwise engaged
by the Company as Managing Director and Chief Executive Officer until 1 January 2026. Any vested shares
resulting from the FY22 Performance Rights will be subject to a further two-year holding period.
Relative Total Shareholder Return
(measured against relative
performance of a group of peer
companies, listed below)
20%
ii). FY23 Performance Rights
Vesting of the FY23 Performance Rights is subject to Mr Cronin remaining employed or otherwise engaged
by the Company as Managing Director and Chief Executive Officer until 24 May 2026. In addition, the FY23
Performance Rights are subject to satisfaction of the performance conditions set out in the table below.
Any vested shares resulting from the FY23 Performance Rights will be subject to a further two-year holding
period.
Resource Growth
(measured as compound annual
resource growth)
35%
15% compound annual growth: 60% vesting
10% compound annual growth: 25% vesting
Below 5% CAGR: nil vesting
Straight-line vesting between these points
Upper quartile plus 20%* or better: 100% vesting
Upper quartile: 60% vesting
Median: 25% vesting
Straight-line vesting between these points
* Measured as % increase above TSR
performance of Upper Quartile ranked company
20% or more compound annual growth: 100%
vesting
Below 10% compound annual growth: nil vesting
Straight-line vesting between these points
(a) Diversity (15%): Measured against annual
targets for gender and disability diversity.
(b) National staff development (5%): Measured
against annual targets for national workforce at
operating sites.
(c) CO2 emissions reduction plan (10%): Measured
against annual targets for reduction in Scope 1
and Scope 2 CO2 emissions.
Sustainability Metrics
30%
Notes:
1. The performance conditions applicable to the FY23 Performance Rights will each be measured over the three
financial years 2023 to 2025.
2. Peer group for Relative TSR performance condition: Atalaya Mining PLC, Trilogy Metals Inc., Bear Creek Mining
Corporation, Discovery Silver Corp., Chaarat Gold Holdings Limited, Aurelia Metals Limited, Sandfire Resources
Limited, SilverCrest Metals Inc., MAG Silver Corp., New Pacific Metals Corp., Dundee Precious Metals Inc., Osisko
Mining Inc., Horizonte Metals PLC, Central Asia Metals PLC, Bellevue Gold Ltd.
3. Compound annual resource growth is measured by reference to annual growth of in-situ value of Group
resources (including measured, indicated and inferred), and multiplied without recovery adjustments by the
relevant commodity prices at the time.
Further details of the performance conditions that apply to the FY23 Performance Rights are provided in the
2023 AGM Notice.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
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 2023 who served during the year is set out below:
Shareholding
requirement
as a % of
salary
Number of
Ordinary
Shares
Percentage
of Issued
Share
Capital
Shareholding
guideline met?
Subject to
performance
measures
Not
subject to
performance
measures
Number of Performance
Rights
1
200%
17,301,332
1,050,000
5.91%
0.36%
n/a
n/a
n/a
n/a
n/a
411,960
0.14%
1,000,000
0.34%
-
-
326,216
0.11%
20,089,508
292,734,419
Yes
n/a
n/a
n/a
n/a
n/a
434,2722
142,7782
-
-
-
-
-
-
-
-
-
-
434,272
142,778
6.86%
27.98%
Paul Cronin
Peter Bilbe
Michael
Rawlinson
Julian Barnes
Sandra Bates
Sanela Karic
Total in issue at 31
December 2023
Percentage held
by Directors that
served during the
year
Notes:
1. At 31 December 2023, none of the Performance Rights in the table above held by Directors had vested.
2. Performance Rights over a total of 577,050 shares were granted to Paul Cronin during 2023. Further details are
set out above in the section headed ‘Long term equity incentives’.
100 of 170
2,062,071
-100%
9
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D
UK performance graph against CEO remuneration
The Directors have considered the requirement for a UK performance graph comparing the Company’s
relative shareholder return with that of a comparable indicator. The comparable indicators chosen are indexes
in similar industry classification on exchanges in which the Group are listed, being the FTSE 350 Mining Index
and S&P ASX 300 Metals & Mining. The chart below illustrates the Company’s share price performance during
the year compared to relevant market indices:
FTSE 350 Mining Index
S&P ASX 300 Metals & Mining
ASX : ADT
200%
150%
100%
50%
0%
-50%
CEO pay table (audited)
Period end
Dec 2023
Dec 2022 (12m)
Dec 2021 (12m)
Dec 2020 (6m)
June 2020 (12m)
Total
remuneration
$’000
867
601
2,060
140
1,083
Fixed
$’000
537
329
335
140
262
Annual bonus payment
level achieved (% of
maximum opportunity)
LTIP vesting level
achieved (% of maximum
opportunity)
70%
90%
50%
n.a.
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 of $37,812 in year ended June 2020 in respect of the achievement of the
London Stock Exchange Listing.
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Remuneration & nomination committee report - Continued
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.
Percentage change in remuneration of Directors and employees
The table below outlines the % change in salary, other pay and benefits and annual bonus for the year ended
31 December 2023 compared to the preceding year for each Director in comparison to the wider UK and
expatriate workforce.
Employees
1,2
Executive Director:
Paul Cronin
Non-Executive Directors:
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates
Sanela Karic
Notes:
% change from 2022 to 2023
% change from 2021 to 2022
Salary or fees
6.6%
Benefits
0%
Bonus
(40.3%)
Salary or fees
78.9%
Benefits
100%
44.9%
100%
21.0%
-1.8%
0.1%
-3.8%
0.1%
0.1%
-23.0%
n.a
n.a
n.a
n.a
n.a
n.a
n.a
n.a
n.a
n.a
79.0%
69.4%
50.2%
64.1%
446.4%
0%
n.a
n.a
n.a
n.a
n.a
Bonus
32.5%
19.5%
n.a
n.a
n.a
n.a
n.a
1. The strict legal requirement is to provide only
details of employees of Adriatic Metals plc. As
the listed entity has only a few employees, we
have decided to disclose voluntarily in respect of
all UK and expatriate group employees.
2. The average percentage change in employee
remuneration was calculated using the
movement in mean values (in respect of each
element of remuneration) between the relevant
years. The relevant mean values were calculated
by dividing the aggregate total of each element
of remuneration for all group employees during
the year (calculated on a full time equivalent
basis) by the total number of Group employees.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
CEO to employee pay ratio
During 2023 the average number of UK employees of the Company (and the wider Group) was not more than
250 and accordingly the Company is not required to provide CEO to employee pay ratio information. If in
future years, the Company meets the qualifying condition then this information will be produced.
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 2022 or 2023.
Advice on remuneration
During the year, in order to enable the Committee to reach informed decisions on executive remuneration,
advice on market data and trends was obtained from independent consultants FIT Remuneration Consultants
LLP (FIT). FIT are signatories to and abide by the Code of Conduct for Remuneration Consultants (which can
be found at www.remunerationconsultantsgroup.com). The fees paid to FIT in respect of work carried out
in 2023 were £67,795.50 ($85,475), excluding expenses and VAT, and were charged on the basis of FIT’s
standard terms of business for advice provided. Other than advice on remuneration and share schemes, no
other services were provided by FIT to the Company. The Committee is satisfied that the advice provided by
FIT in 2023 was independent and objective.
During the year, h2glenfern Remuneration Advisory (h2glenfern) 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 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.
(In USD)
Cash remuneration
Monetary value of vested share awards
12,703,118
1,129,518
7,148,757
569,633
Other disclosures on remuneration for the year ended 31 December 2023
No payments were made to Directors for loss of office during the year. There were no payments during the
year to past directors.
Year ended 31
December 2023
Year ended 31
December 2022
% change
Total remuneration
13,832,636
7,718,390
+79%
Average number of employees
296
158
Statement of voting at AGM
The table below shows the results of the binding vote on the Directors’ remuneration policy and of the
advisory vote on the 2022 Annual Report on Remuneration at our 2023 AGM:
G&A expenses*
Exploration expenses*
Property, plant and equipment
additions*
9,845,197
2,090,498
5,183,317
1,361,548
+90%
128,552,342
39,262,082
2023 Directors’
Remuneration Policy
2022 Annual Report
on Remuneration
Total number of
votes
% of
votes cast
Total number of
votes
% of
votes cast
Total exploration and capex
130,642,840
40,623,630
+222%
For (including discretionary)
122,729,918
99.95%
122,738,399
99.95%
* Adjusted to exclude remuneration included in the amounts set out in note 16
Against
64,419
0.05%
55,938
0.05%
Total votes cast
(excluding withheld votes)
122,794,337
122,794,337
Votes withheld
25,544
25,544
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
REMUNERATION POLICY IN 2024
Executive Director’s Fixed Remuneration
Effective 1 January 2024, the fixed remuneration of
the Executive Director will comprise board fees paid
in BAM (unchanged from 2023 ) and consultancy
fees of £370,000 (increased by 12.8% from
£328,000 in 2023).
The Executive Director is also entitled to a travel
allowance of up to £50,000 (unchanged from 2023
maximum allowance).
At the exchange rate on 31 December 2023 (being
GBP:USD 1.27312), the total amount of fixed
remuneration for the Executive Director for 2024 will
be approximately $589,673.
2024 Short Term Incentive Plan (STIP) and KPIs
The target areas for 2024 and their weightings within the bonus are:
Target Area
Target Area
Growth &
Profitability
Operational
Discipline
People
Sustainability
1.
2.
3.
4.
5.
1.
2.
3.
4.
1.
2.
3.
4.
1.
2.
3.
4.
Exploration Growth and ROI
Growth in Development Asset Pipeline
Effective Capital Management
Cost of Capital
Progress on refinancing and strategic advancement
through M&A
Effective Management of Project Cost
Operational Effectiveness - Production Ramp Up
Operational Effectiveness - Underground Development
Operational Effectiveness - Plant Performance
Increase Staff Engagement
Diversity
Maximise Staff Retention
Cultural Awareness
Occupational Health & Safety
Minimise frequency and impact of Environmental Incidents
Contractor Management Plan Implementation
Increase Stakeholder Perceptions of Company in
Local Community
Weighting
5.0%
5.0%
2.5%
5.0%
5.0%
5.0%
5.0%
8.0%
8.0%
5.0%
5.0%
5.0%
5.0%
12.0%
8.0%
4.5%
7.0%
Further details of the target thresholds are commercially sensitive and will be disclosed together with information on
actual performance in each area in our 2024 Directors’ remuneration report.
TOTAL 100%
The potential maximum percentage of base salary achievable as a bonus under the STIP for the Executive Director is
100% of base salary and consultancy fees. The Executive Director’s bonus is based solely on corporate objectives.
2024 STIP bonuses earned are expected to be paid in either cash or equity in early 2025.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
Long Term Incentive Plan (LTIP)
The Committee will make awards in 2024 to the Executive Director at a level of up to 200% of base salary and
consultancy fees. Vesting will be based on substantially the same performance measures as those set for the
FY23 LTIP awards (as disclosed in the 2023 AGM notice).
The proposed performance conditions for the FY24 LTIP awards as follows:
• Absolute Total Shareholder Return (15% weighting)
• Relative Total Shareholder Return (20% weighting)
• Resource Growth (35% weighting)
• Sustainability Metrics - diversity, national staff development and CO2 reduction plan (15%, 5%, 10%
weightings respectively)
Each performance condition is to be measured over the three financial years 2024 to 2026. Full details of the
performance measures will be provided in the Directors’ remuneration report for the 2024 financial year.
A two year holding period will apply to any vested shares resulting from the 2024 LTIP award.
Chairperson and Non-Executive Directors
The fees for the Chairperson and Non-Executive Directors have been set at a level to reflect the amount
of time and level of involvement required in order to carry out their duties as members of the Board and its
committees. Following a review of fee levels in 2023 which recognised the increasing workload for Non-
Executive Directors over a number of years, the fee levels will be increased from 1 January 2024, as set out in
the table below.
Position
Chairperson fee
Non-Executive Director base fee
Committee Chairperson fee
Annual fee level from 1 January 2024
(£’000 p.a.)
Previous fee level
(£’000 p.a.)
140
60
10
100
50
5
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.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
PART 3 – REMUNERATION POLICY
The Company’s Directors’ remuneration policy (‘Policy’) seeks to provide a strong and clear link between business strategy and incentive arrangements.
The current Policy for executive and non-executive directors was approved by shareholders at our 24 May 2023 AGM and can be found on pages 25 to 33 of the notice for the 2023 AGM.
The Remuneration Committee is not proposing to make any changes to the Policy approved by shareholders at the 2023 AGM.
Key extracts of the current Policy are shown below for information.
POLICY TABLE
The table below summarises the main elements of the remuneration package for Directors.
Element
Base salary
Purpose and link to
remuneration policy
Key features
and operation
Maximum
opportunity
Applicable
performance measures
There is no maximum value.
None.
Supports the recruitment and
retention of Executive Directors
of the calibre required to fulfil
the role without paying more
than necessary. Reflects skills,
experience, and contribution in the
role.
Base salaries are set by the Remuneration
& Nomination Committee (Committee) and
reviewed annually. Increases are effective
from 1 January, although increases
may be awarded at other times if the
Committee considers it appropriate. In
determining base salaries, the Committee
considers: pay levels at companies of
a similar size and complexity, external
market conditions; pay and conditions
elsewhere in the Group; role of individual
and personal performance. Directors may
be paid consultancy fees through service
companies.
Benefits
To help recruit, retain and motivate
high performing Executives.
None are provided or anticipated at present.
No maximum value. The Group may provide
additional market competitive benefits such
as private healthcare and car allowance.
None.
Pension
To help recruit, retain and motivate
high performing Executives.
None are provided or anticipated at present.
If introduced the levels would be aligned with
the contribution rate for the majority of group
employees.
If introduced, the maximum amount would
be 10% of base salary plus consultancy
fees.
None.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Purpose and link to
remuneration policy
Key features
and operation
Maximum
opportunity
Applicable
performance measures
Awards are based on performance typically
measured over one year.
Any payment is discretionary and pay-out
levels are determined by the Committee after
the year end based on performance against
pre-set targets.
Paid in cash following determination of
outcomes.
Bonuses are non- pensionable.
Bonuses may be paid in shares at the
Committee’s discretion.
Awards of performance rights or options
under either of the 2019 share incentive
plans which vest subject to performance
conditions triggering the payment of
specified amounts.
Awards will be granted with vesting
dependent on the achievement of
performance conditions set by the
Committee, with performance normally
measured over at least a three-year
performance period.
Shares acquired pursuant to the vesting of
awards (net of shares equal to any tax liability
and nominal cost of acquisition) will be
subject to a two-year holding period following
the end of the performance period.
Dividends or dividend equivalents may
accrue on awards, to the extent they vest.
Maximum potential values will not exceed
100% of base salary and consultancy fees
in any year.
Targets are set annually with measures linked to the Group’s strategy
and aligned with key financial, strategic and/or individual targets.
The performance measures applied may be financial or non-financial,
corporate, divisional or individual, and in such proportions as the
Remuneration Committee considers appropriate.
A graduated scale of targets is set for each measure, with no pay-out
for performance below a threshold level of performance, and up to
25% available at threshold.
The Committee has discretion to amend the vesting level should
any formulaic outcome not reflect the Committee’s assessment of
overall business performance, including consideration of shareholder
experience.
Market value of award will not normally
exceed 200% of the individual’s salary and
consultancy fees for any financial year.
In exceptional circumstances, such as initial
awards, awards to facilitate hiring and/or new
strategic periods, market value at award may
be up to 300% of salary and consultancy
fees for any financial year.
In applying market values for these
purposes the Committee will apply one-
month averaging periods prior to the
commencement of a relevant financial year
and appropriate FX rates where needed.
LTIP performance measures may include, but are not limited to,
financial, TSR, strategic and ESG-related objectives.
The Committee retains discretion to set alternative measures and
weightings for awards over the life of the Remuneration Policy.
Targets are set and assessed by the Committee in its discretion.
A maximum of 25% of any element vests for achieving the threshold
performance target and 100% for maximum performance.
The Committee has discretion to amend the vesting level should
any formulaic outcome not reflect the Committee’s assessment of
overall business performance, including consideration of shareholder
experience.
Remuneration & nomination committee report - Continued
Element
Bonus
Rewards and incentivises the
achievement of annual objectives
which are aligned with key strategic
goals and supports the enhancement
of shareholder value.
Long term
incentive plan
Incentivises executives to achieve
the Company’s long term strategy
and create sustainable shareholder
value. Aligns with shareholder interests
through the potential delivery of
shares.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Remuneration & nomination committee report - Continued
Applicable
performance measures
None.
Element
Chairman
and Non-
executive fees
Purpose and link to
remuneration policy
Key features
and operation
Maximum
opportunity
Fees for the Chairman and for
Non-Executive Directors are set at
an appropriate level to recruit and
retain directors of a sufficient calibre
without paying more than is necessary
to do so. Fees are set taking into
account the following factors: the time
commitment required to fulfil the role,
typical practice at other companies
of a similar size, and salary levels of
employees throughout the Group.
The Company’s Articles of Association
(Articles) provide that each Director is
entitled to such remuneration from the
Company as the Directors decide, but
the total amount of fees provided to all
Non-Executive Directors must not currently
exceed £400,000 per annum, being the
quantum approved by Shareholders at the
annual general meeting held on 6 November
2020. This includes fees paid to the
Company Chairman.
It is proposed to increase this limit to
£600,000 subject to shareholder approval at
the AGM 2023.
Fees are reviewed at appropriate intervals
(normally once every year) by the Board
with reference to individual experience,
the external market and the expected time
commitment required of the director.
The Chairman is paid an all-inclusive fee for
all Board responsibilities.
Fees for the other Non-Executive Directors
may include a basic fee and additional fees
for further responsibilities (for example,
chairing of Board committees or holding the
office of Senior Independent Director).
The Company repays any reasonable
expenses that a Non-Executive Director
incurs in carrying out their duties as a
Director, including travel, hospitality-related
and other modest benefits and any tax
liabilities thereon, if appropriate.
In exceptional circumstances, if there is a
temporary yet material increase in the time
commitments for Non-Executive Directors,
the Board may pay extra fees on a pro rata
basis to recognise the additional workload.
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Malus and Clawback
Both the annual bonus plan and the LTIP will include provisions which enable the Committee to recover
or withhold value from these incentive plans in the event of certain defined circumstances (i.e. a material
misstatement of the Company’s financial results, an error of calculation (including on account of inaccurate
or misleading information) or in the event of serious misconduct, serious reputational damage or corporate
failure).
Shareholding guidelines
In order to further align the Executive Directors’ long-term interests with those of shareholders, the Group
operates share ownership guidelines. The guidelines provide that the Executive Directors are required to
build up and maintain (as relevant) a level of shareholding in the Company equivalent in value to 200% of base
salary. This guideline will apply whilst in the role and for a period of two years post cessation of employment.
Executive Director’s service contracts
Prior to 1 January 2021, the services of the CEO and Managing Director had been provided under a service
contract between the Company and Swellcap Limited with a commencement date of 1 July 2019. This was
not of a fixed duration and was terminable by either party giving six months’ written notice.
Following Mr. Cronin’s permanent relocation to Bosnia & Herzegovina on 1 January 2021, the Company,
Swellcap Limited and Mr. Cronin entered into an agreement pursuant to which the service contract between
Swellcap Limited and the Company dated 1 July 2019 was terminated. The Company entered into a new
consultancy agreement on substantially the same terms directly with Mr. Cronin with a commencement
date of 1 January 2021. No compensation was paid or will be paid to either Swellcap Limited or Mr. Cronin in
connection with these changes. The contract is not of a fixed duration and is terminable by either party giving
six months’ written notice.
Non-Executive Directors
The Non-Executive Directors signed letters of appointment with the Company upon appointment for the
provision of Non-Executive Directors’ services, terminable by three months’ written notice given by either
party.
Non-Executive Director
Michael Rawlinson
Peter Bilbe
Julian Barnes
Sandra Bates
Sanela Karic
Appointment date
4 March 2019
16 February 2018
16 February 2018
11 November 2019
3 August 2020
When recruiting a new Non-Executive Director, the Remuneration & Nomination Committee will follow the
policy set out in the table above. The letters of appointment do not include any provisions for the payment of
pre-determined compensation upon termination of appointment and notice may be served by either party. All
appointments are subject to the Articles and re-election by shareholders in accordance with the provisions
contained in the Articles.
The terms and conditions of appointment and letters of appointment of Non-Executive Directors and all the
Directors’ service contracts are available for inspection at the Company’s registered office.
Contracts entered into with any additional Executive Directors will have a notice period not exceeding 12
months.
Peter Bilbe
Chairman of Remuneration Committee
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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 2023. 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
2023 are set out in the Financial Review on page
[36].
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 Vareš Project, no
interim dividend was paid and no final dividend is
recommended for the year ended 31 December
2023.
SHARE CAPITAL
The Company was granted authority at the 2023
AGM to allot shares in the capital of the Company
up to a maximum nominal amount of £1,236,956,
(equivalent to 92,621,190 shares) in accordance with
Section 551 of the Companies Act 2006. Details of
the Company’s share capital are set out in note 13B
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 2024 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.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 SUBSTANTIAL SHAREHOLDINGS
The Company’s issued share capital as at 31 December 2023 was 292,734,419 ordinary shares and at
27 March 2024 was 306,222,045 ordinary shares with each share carrying the right to one vote. No shares
are held in treasury.
At 31 December 2023, the Company had been notified, pursuant to the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rule (DTR 5), or was otherwise aware of the following substantial
interests (3% or more) in the Company’s issued share capital.
Number of
ordinary shares
Percentage of
issued share capital
Shareholder
Helikon Investments
T Rowe Price
Orion Asset Management
Paul Cronin
Milos Bosnjakovic
Eric De Mori
52,720,344
29,370,081
24,191,000
17,301,232
12,000,000
10,501,631
135,595,576
At 29 February 2024, being the latest practicable date before the approval of the Annual Report and
Accounts, the Company had been notified, pursuant to DTR 5 that the above positions had changed.
Shareholder
Helikon Investments
Orion Asset Mgt
Mr Paul D Cronin
T Rowe Price
Mr Milos Bosnjakovic
T Rowe Price International
Mr Eric De Mori
Old West Investment Mgt
Shares
53,042,555
24,191,000
17,301,232
17,202,981
12,000,000
11,606,199
10,501,613
9,160,278
Changes in interests that have been notified to the Company pursuant to DTR 5 since 29 February 2024 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/.
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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 capitalized
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 [95]
Remuneration & Nomination
Committee Report page [95]
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Not 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
Not applicable
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreement with controlling shareholder
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 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 12 to
the consolidated financial statements, and in the
sections on Corporate Governance and Internal
Control on page [81] and Risk Management on page
[40].
18.01
10.03
8.26
5.91
4.10
3.59
46.32
% ICl
17.97
8.19
5.86
5.83
4.06
3.93
3.56
3.10
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Directors’ report - Continued
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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.
exists about operating results and cash flows. In a challenging
operational scenario, the Company would have the option of
reducing and/or deferring discretionary expenditure including
overheads, sustaining capex and general and administrative
costs, as well as raising equity capital in the event of a more
severe impact on production and revenues.
A Debt-Service Coverage Ratio (“DSCR”) covenant is included
in the Orion Debt Finance Package, with the first DSCR testing
period expected to be mid-2025, following the agreement
in January 2024 to defer the first repayment under the Debt
Finance Package from June 2024 to December 2024. The
DSCR is required to be above 1.25x and the Company’s
forecasts show substantial headroom above this.
The Directors therefore believe there is not a material
uncertainty regarding going concern and that it is appropriate
to prepare the financial statements on a going concern basis.
Going concern
The Vareš Feasibility Study was completed in August 2021
and an equity raise was successfully closed on 29 October
2021. Definitive documentation executed for the $142.5m
Debt Finance Package with Orion was announced on 10
January 2022 to provide sufficient funds to complete the
Vareš Project construction and cover ongoing owner costs
until production commenced. Of this total, $112.5m was
drawn down prior to 31 December 2023 , including the
$22.5m Copper Stream deposit, and $30m was drawn down
in January 2024. In August 2023 the Company raised $30m
equity, net of costs. In March 2024, the QRC convertible debt
was converted into shares.
As announced on 30 January 2024 in the Company’s
Quarterly Activity Report for the quarter ended 31 December
2023, the Project cost estimate was $188.9m, and on 28
February the Company announced that it had produced its
first concentrate, with production planned to ramp up to its
nameplate processing capacity of approximately 65,000t per
month by Q4 2024.
Sensitivity analysis of production ramp up and potential
revenue delays indicates that the Group and Company have
sufficient cash resources to continue in operation for a
period in excess of 12 months from the date of signing the
consolidated and Parent Company financial statements. For a
mining company at the start of its operating phase, uncertainty
Post balance sheet events
Please refer to note 25 in the consolidated financial
statements for a detailed report on major events that occurred
after 31 December 2023.
Likely future developments
The Company’s key future development is completion of
the production ramp up at the Vareš Mine with nameplate
processing capacity of approximately 65,000t per month
targeted to be reached by Q4 2024.
Annual General Meeting (“AGM”)
The date and location of the 2024 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.
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Directors’ report - Continued
Corporate Governance Statement
The Disclosure Guidance and Transparency Rules
(DTR 7.2) require certain information to be included
in a Corporate Governance Statement set out in a
Company’s Directors’ Report. In common with many
companies, Adriatic Metals PLC has an existing
practice of issuing, within its Annual Report, a
Corporate Governance Report that is separate from
its Directors’ Report.
Electronic communications
A copy of the 2023 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.sedarplus.ca
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 2024 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.
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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 27 March 2024.
By order of the Board
Michael Rawlinson
Chairman of the Board
Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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.
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 are required to prepare the
Group financial statements in accordance with UK
adopted international accounting standards and
have elected to prepare the company financial
statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law).
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.
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 Financial Statements have been prepared in
accordance with the applicable set of accounting
standards, 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.
In preparing these Financial Statements, the
Directors are required to:
• prepare a director’s report, a strategic report and
director’s remuneration report which comply with
the requirements of the Companies Act 2006;
• select suitable accounting policies and then
apply them consistently;
• make judgements and accounting estimates that
are reasonable and prudent;
• state whether they have been prepared in
accordance with UK adopted international
accounting standards; and
• prepare the Financial Statements on the going
concern basis unless it is inappropriate to
presume that the company will continue in
business.
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Governancewww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Financial
Statements
Strong capital control
& cash position
Independent auditors’ report to the members of Adriatic Metals PLC
Consolidated statement of comprehensive income
Consolidated statement of financial position
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 (unaudited)
115
122
123
124
125
126
155
156
157
161
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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 2023 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. Please refer to the KAM section
for the detailed explanation on our evaluation of the Directors’ assessment of the Group and the Parent
Company’s ability to continue as a going concern.
•
•
•
the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
the Parent Company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
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.
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in
the relevant sections of this report.
We have audited the financial statements of Adriatic Metals Plc (the ‘Parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 31 December 2023 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, 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 material accounting policies.
OVERVIEW
Coverage
92% (2022: 97%) of Group loss before tax
99% (2022: 99%) of Group total assets
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.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is
consistent with the additional report to the audit and risk committee.
Independence
Following the recommendation of the audit and risk committee, we were appointed by the Board of Directors
on 28 May 2020 to audit the financial statements for the period ending 30 June 2020 and subsequent
financial periods. The period of total uninterrupted engagement including retenders and reappointments is
5 years, covering the period ended 30 June 2020 and the years ended 31 December 2021 to 31 December
2023. 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.
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Going concern
Valuation and accounting for the Orion Copper streaming
arrangement
Valuation of subsidiary investment balances in the Parent
Company accounts
Carrying value and impairment of exploration and evaluation
assets, and license compliance
Key audit
matters
2023
2022
Yes
Yes
No
No
No
No
Yes
Yes
Valuation of subsidiary investment balances in the Parent Company accounts and
the carrying value and impairment of exploration and evaluation assets and license
compliance are no longer considered to be key audit matters because there were no
further indicators of impairment in the current year.
Materiality
Group financial statements as a whole
$4,350,000 (2022: $2,600,000) based on 1.5% (2022: 1.5%) of total assets
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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 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 of the annual report for consistency with other
disclosures made in the financial statements.
Based on our risk assessment procedures, we did not identify there to be any Key Audit Matters materially
impacted by climate-related risks and related commitments.
Independent auditors’ report to the members of Adriatic Metals PLC - Continued
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
two significant components, Adriatic Metals Plc (the Parent Company) and Adriatic Metals BH d.o.o, which is
the holder of the mining licences pertaining to the Veovaca and Rupice assets in Bosnia & Herzegovina. The
Parent Company was a subject to a full-scope audit by the Group audit team. A full-scope audit of Adriatic
Metals BH 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.
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KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Going concern
Note 2c for details relating to
this key audit matter.
The Group produced its first concentrate at the Vares processing
plant in February 2024. There is a risk that delays to the ramp-up
to commercial production, places stress on the Group’s and
Parent Company’s liquidity position and therefore their ability to
continue as going concerns.
The Group also needs to comply with loan covenants linked to
the Orion Senior Secured Loan and pay its first instalment on the
loan in December 2024. There is a risk that the Group may not
comply with future loan covenants linked to the Orion Loan.
Due to significant judgements involved in estimating future cash
flows and forecasting covenants compliance in the Directors’ and
Management’s going concern assessment, we have identified
going concern as a significant 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 the following:
Reviewed Directors’ and Management’s assessment and conclusion for preparing the Group and Parent Company’s financial
statement on a going concern basis.
Checked that Management’s forecasts cover a period of at least twelve months from the expected approval of the financial
statements.
Checked the mathematical accuracy of the cash flow forecasts.
Challenged the cash flow forecasts by assessing the reasonableness of key judgements such as corporate and capital
expenditure, production ramp-up, and commodity prices. We assessed the reasonableness of judgments by evaluating
Management’s historical forecasting accuracy, performing commodity prices benchmarking, agreeing production to approved
budgets, and checking for consistency between the inputs in the forecast and other information obtained during the audit.
Examined committed expenditure on the Vares project and exploration costs on the Raska project that our contractual, and other
spend under the Group’s license arrangements and the general and administrative costs (G&A) within the forecast and ensuring
that this is consistent with other information obtained during the audit.
Challenged management’s reverse stress testing scenario to determine the point at which liquidity breaks, taking into
consideration the ability to secure future funding. Our challenge of management also incorporated other plausible scenarios not
considered by management.
Assessed committed and discretionary expenditure and minimum spending requirements as well as ensuring that these have been
appropriately included in the cashflow projections. We also reviewed stress test scenarios including scenarios relating to delays in
production ramp-up and capital and operating expenditure.
Assessed compliance of covenants in the Orion debt facility and forecast adherence thereof.
Reviewed and recalculated forecast covenants.
Verified post-year-end cash position in the going concern model to bank statements.
Reviewed the adequacy of disclosures in the financial statements in respect of going concern.
Key observations:
Our conclusions are set out in the conclusions related to going concern section of our report.
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Key audit matter
Valuation and
accounting
for the Orion
Copper streaming
arrangement
See Note 4b, Note 5 and Note
6 for details relating to this
key audit matter.
How the scope of our audit addressed the key audit matter
On 10 January 2022 definitive documentation was executed for
a US$142.5 million Project Finance Debt Package with Orion. The
terms of the Orion Debt Package have not changed since they
were originally announced on the 12 October 2021 and comprise
of:
US$120.0 million senior secured debt (the “Senior Secured Debt”);
and US$22.5 million copper stream (the “Copper Stream”).
The Group drew down on the copper stream facility in Feb 2023.
The Group’s obligations under the Copper Stream agreement are
accounted for as a financial liability at fair value through profit or
loss.
The streaming arrangement is a financial instrument for which
the accounting and valuation can be complex, with key estimates
and judgements such as applying the correct accounting policy,
determining the appropriate discount rate, and forecasting
production volumes and commodity prices. As a result, we have
identified this as a significant risk and a key area of focus for our
audit.
Our specific audit testing in regard to this included the following:
With the assistance of our technical experts, we assessed Management’s conclusion that the stream should be recognised as
a financial liability and accounted for at fair value through profit or loss, and we also checked if this was in accordance with the
requirement of the relevant accounting standard.
Reviewed the terms of the copper stream loan agreement to understand the accounting implications.
With the assistance of our internal valuation experts, we recalculated the discount rate, reperformed the fair value calculation of
the stream and reviewed the suitability of Management’s valuation methodology used to value the stream.
Reviewed the updated Rupice economic model by checking the reasonableness of inputs such as the reserves estimate,
production profile, and commodities prices based on other information obtained during the audit and our understanding of the
Group of the mining industry.
We also checked the integrity of the model and evaluated the competence and objectivity of the management expert who
compiled the report.
Compared the underlying production cash flows used in the valuation model to the cash flows used in the revised Vares economic
model, which is based on the revised ore reserves for Rupice, and challenged management on the nature of differences identified.
Reviewed the stream’s accounting policy, fair value adjustments, and disclosures in the financial statements and checked that they
are in accordance with the requirements of the applicable standard.
Key observations:
Based on the procedures performed, we found the judgement and estimates made by Management regarding the valuation and
accounting for the Orion copper streaming arrangement to be reasonable.
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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
2023 $m
4,350,000
2022 $m
2,600,000
2023 $m
1,700,000
2022 $m
1,040,000
Basis for determining materiality
1.5% of total assets
1.5% of total assets
40% of Group materiality
Rationale for the
benchmark applied
The materiality has been based on total assets as the Group is in the exploration and
development phase of its operations and is not revenue generating or profit making.
We consider total assets to be one of the principal considerations for users of the
financial statements.
Capped at 40% of Group materiality given the assessment of the component’s
aggregation risk.
Performance materiality
3,000,000
1,820,000
1,190,000
728,000
Basis for determining performance
materiality
Rationale for the percentage
applied for performance materiality
70%
70%
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.
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 71% (2022: 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 $1,700,000 to $3,100,000 (2022: $1,040,000 to $1,560,000). In the audit of each component,
we further applied performance materiality levels of 70% (2022: 70%) of the component materiality to our
testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in
excess of $86,000 (2022: $52,000). We also agreed to report differences below this threshold that, in our
view, warranted reporting on qualitative grounds.
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Independent auditors’ report to the members of Adriatic Metals PLC - Continued
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information
included in the annual report other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to
read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
OTHER COMPANIES ACT 2006 REPORTING
Based on the responsibilities described below and our work performed during the course of the audit, we are
required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described
below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic report and the Directors’ report for the
financial year for which the financial statements are prepared is consistent with
the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance
with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent
Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the Directors’ report.
Directors’
remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• 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
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or
the Parent Company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
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 and
ASX listing rules, the QCA corporate governance code and environmental regulations;Reviewing minutes
of meetings 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.
•
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
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.
• 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.
Matters on which we
are required to report
by exception
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Based on our risk assessment, we considered the area most susceptible to fraud to be the inappropriate
capitalisation of expenses into property, plant and equipment, 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;
• Testing samples of capitalised costs to supporting documentation and approval;
• Assessing management’s judgement for bias in relation to capitalising non-procurement items such as
depreciation, interest on borrowings and payroll costs.
• 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
27 March 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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For the year ended 31 December 2023
(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 derivative liability
Revaluation of deferred consideration
Loss before taxation
Tax charge
Note
15
16
13F
8
19
17
17
6
14
Year Ended
31 December
2023
Year Ended
31 December
2022
(2,090,498)
(1,361,548)
(17,229,927)
(10,639,784)
(1,561,020)
-
2,442
(1,295,293)
(23,186,959)
9,024
(20,879,003)
(36,474,560)
948,775
(5,461,991)
(3,540,640 )
-
334,497
(7,072,693)
(4,081,401)
151,339
(28,932,859)
(47,142,818)
-
-
Loss for the year attributable to owners
of the parent
(28,932,859)
(47,142,818)
Other comprehensive gain that might be reclassified to profit or loss in subsequent years:
Exchange gain arising on translation of foreign
operations
Total comprehensive expense for the year
attributable to owners of the parent
Net loss per share
Basic and diluted (cents)
50,372
187,119
(28,882,487)
(46,955,699)
13G
(10.24)
(17.59)
The accompanying notes on pages 126 - 154 are an integral part of these consolidated financial statements.
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At 31 December 2023
Note
31 December 2023
31 December 2022
(In USD)
Note
31 December 2023
31 December 2022
(In USD)
ASSETS
Current assets
Cash and cash equivalents
Receivables and prepayments
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Exploration and evaluation assets
Receivables and prepayments
Total non-current assets
Total assets
5
7
10
8
5
44,856,215
13,211,757
1,552,781
59,620,753
LIABILITIES AND EQUITY
Current liabilities
60,585,277
Accounts payable and accrued liabilities
18,830,315
Lease liabilities
-
Borrowings
79,415,592
Derivative Liability
Total current liabilities
212,730,670
77,860,563
Lease liabilities
8,319,826
8,500,000
1,680,314
8,953,835
8,500,000
Provisions
Borrowings
-
Derivative liability
231,230,810
95,314,398
Total non-current liabilities
290,851,563
174,729,990
Total liabilities
The accompanying notes on pages 126 – 154 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 27 March 2024 and were signed on its behalf by:
Paul Cronin
Managing Director & Chief Executive Officer
Mike Norris
Chief Financial Officer
Equity
Share capital
Share premium
Merger reserve
Warrants reserve
Share-based payment reserve
Foreign currency translation reserve
Retained earnings
Total equity
9
10
6
6
10
22
6
6
13B
13B
13B
13D
13E
13H
17,672,820
1,495,296
47,373,197
9,909,859
76,451,172
6,641,271
3,673,787
93,427,367
-
103,742,425
180,193,597
5,341,740
2,379,000
-
-
7,720,740
5,807,741
4,431,212
42,498,052
6,369,219
59,106,224
66,826,964
5,712,782
5,376,349
174,145,606
143,829,631
23,497,730
23,497,730
2,743,303
3,591,220
1,310,705
(100,343,380)
110,657,966
2,743,303
4,943,436
1,260,333
(73,747,756)
107,903,026
Total liabilities and equity
290,851,563
174,729,990
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For the year ended 31 December 2023
Share
Capital
Share Premium
5,279,546
143,259,675
Merger
Reserve
23,019,164
Share Based
Payment
Reserve
Warrants
Reserve
Foreign Currency
Translation Reserve
Retained
Deficit
Total
Equity
5,778,882
2,743,303
1,073,214
(28,735,675)
152,418,109
Exercise of options and performance rights
13B, 13E
91,224
(In USD)
31 December 2021
Loss for the year
Other comprehensive income
Total comprehensive expense
Share issue costs
Note
13H
13B
Issue of options and performance rights
2022 STIP awards
Expiry/Cancellation of options and performance
rights
Acquisition of subsidiary
31 December 2022
Loss for the year
Other comprehensive income
Total comprehensive expense
Issue of share capital
Share issue costs
13E
13E
13E
13B
13H
13B
13B
-
–
-
-
-
-
-
5,579
-
–
-
(86,199)
656,155
-
-
-
-
5,376,349
143,829,631
-
-
-
-
-
-
251,055
31,427,918
-
(2,111,505)
Exercise of options and performance rights
13B, 13E
81,196
469,929
Issue of options and performance rights
2022 STIP awards
Expiry/Cancellation of options and
performance rights
31 December 2023
13E
13B,13E
13E
-
4,182
-
-
529,633
-
The accompanying notes on pages 126 – 154 are an integral part of these consolidated financial statements.
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-
–
-
-
-
-
-
-
478,566
23,497,730
-
-
-
-
-
-
-
-
-
-
–
-
(2,130,739)
873,155
576,000
(153,862)
-
-
-
-
-
-
-
-
-
-
-
(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
4,943,436
2,743,303
1,260,333
(73,747,756)
107,903,026
-
-
-
-
-
(2,337,235)
1,644,777
(576,000)
(83,758)
-
-
-
-
-
-
-
-
-
-
(28,932,859)
(28,932,859)
50,372
50,372
-
50,372
(28,932,859)
(28,882,487)
-
-
-
-
-
-
-
-
31,678,973
(2,111,505)
2,337,235
551,125
-
-
-
1,644,777
(42,185)
(83,758)
5,712,782
174,145,606
23,497,730
3,591,220
2,743,303
1,310,705
(100,343,380)
110,657,966
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Consolidated statement of cash flows
For the year ended 31 December 2023
(In USD)
Cash flows from operating activities:
Loss for the year
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Share-based payment expense
Finance Income
Finance expense
Fair value movements in derivative liabilities
Revaluation of deferred consideration
Exploration and evaluation asset impairment
Changes in working capital items:
Increase in receivables and prepayments
Increase in inventory
Increase/(decrease) in accounts payable and
accrued liabilities
Year Ended
31 December
2023
Year Ended
31 December
2022
Note
(In USD)
Note
Year Ended
31 December
2023
Year Ended
31 December
2022
(28,932,859)
(47,142,818)
Purchase of property, plant and equipment
7
(94,408,470)
(42,231,895)
Cash flows from investing activities:
7
10
13F
17
17
6
8
475,950
390,192
1,561,020
(948,775)
5,461,991
3,540,640
-
-
1,295,293
(334,497)
7,072,693
4,081,401
(151,339)
23,186,959
Prepaid property, plant and equipment
232,206
Interest received on cash holdings
(6,585,108)
(16,432,347)
1,508,143
-
1,059,717
Net cash used in investing activities
(99,485,435)
(58,664,242)
Cash flows from financing activities:
Net proceeds from the issue of ordinary shares
13B, 13I
30,656,083
661,180
Proceeds from draw down of borrowings net of
transaction costs
Settlement of deferred consideration
Interest paid on loans and borrowings
Interest received on cash holdings
(4,815,690)
(1,552,781)
(171,789)
-
Capital payments on leases
Interest paid on leases
1,933,899
(360,894)
Net cash generated from financing activities
6
6
5
10
10
81,060,421
26,176,885
-
(1,895,000)
-
(1,719,291)
(1,103,318)
(525,785)
(1,700,000)
277,383
(1,890,191)
(589,377)
106,998,895
22,410,095
(15,372,954)
(47,487,215)
Net cash used in operating activities
(22,886,414)
(11,233,068)
Net decrease in cash and cash equivalents
Exchange losses on cash and cash equivalents
(356,108)
(4,433,976)
Cash and cash equivalents at beginning of the year
60,585,277
112,506,468
Cash and cash equivalents at end of the year
44,856,215
60,585,277
The accompanying notes on pages 126 – 154 are an integral part of these consolidated financial statements.
125 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 C. Going concern
The Vareš Feasibility Study was completed in August 2021 and an equity raise was successfully closed on
29 October 2021. Definitive documentation executed for the $142.5m Debt Finance Package with Orion was
announced on 10 January 2022 to provide sufficient funds to complete the Vareš Project construction and
cover ongoing owner costs until production commenced. Of this total, $112.5m was drawn down prior to 31
December 2023, including the $22.5m Copper Stream deposit, and $30m was drawn down in January 2024.
In August 2023 the Company raised $30m equity, net of costs. In March 2024, the QRC convertible debt was
converted into shares.
As announced on 30 January 2024 in the Company’s Quarterly Activity Report for the quarter ended 31
December 2023, the Project cost estimate was $188.9m, and on 28 February the Company announced that
it had produced its first concentrate, with production targeted ramp up to its nameplate processing capacity
of approximately 65,000t per month by Q4 2024.
Sensitivity analysis of production ramp up and potential revenue delays indicates that the Group and
Company have sufficient cash resources to continue in operation for a period in excess of 12 months from
the date of signing the consolidated and Parent Company financial statements. For a mining company at
the start of its operating phase, uncertainty exists about operating results and cash flows. In a challenging
operational scenario, the Company would have the option of reducing and/or deferring discretionary
expenditure including overheads, sustaining capex and general and administrative costs, as well as raising
equity capital in the event of a more severe impact on production and revenues.
A Debt-Service Coverage Ratio (“DSCR”) covenant is included in the Orion Debt Finance Package, with the
first DSCR testing period expected to be mid-2025, following the agreement in January 2024 to defer the
first repayment under the Debt Finance Package from June 2024 to December 2024. The DSCR is required
to be above 1.25x and the Company’s forecasts show substantial headroom above this.
The Directors therefore believe there is not a material uncertainty regarding going concern and that it is
appropriate to prepare the financial statements on a going concern basis.
Notes to the consolidated financial statements
1. CORPORATE INFORMATION
The consolidated financial statements present the financial information of Adriatic Metals PLC and its
subsidiaries detailed in note 3 (collectively, the “Group”) for the year ended 31 December 2023. Adriatic
Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England
and Wales. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham
GL50 1HX, United Kingdom.
The Group’s principal activity is precious and base metals exploration and development. The Group owns the
Vareš Project in Bosnia and Herzegovina and the Raška Project in Serbia.
Bosnia and Herzegovina and Serbia are well-positioned in central Europe and boast strong mining history,
pro-mining environment, highly skilled workforce as well as extensive existing infrastructure and logistics.
2. BASIS OF PREPARATION
A. Statement of compliance
The consolidated financial statements have been prepared in accordance with the recognition, measurement
and presentation requirements of UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act 2006 (the “Companies Act”).
The consolidated financial statements were authorised for issue by the Board of Directors on 27 March 2024.
B. Basis of preparation
The consolidated financial statements have been prepared under the historical cost convention, as modified
by the revaluation of certain financial assets and liabilities (including derivative instruments), at fair value
through profit or loss. A summary of the Group’s accounting policies is set out below in note 3.
The consolidated financial statements are presented in United States Dollars (“USD” or “$”) which reflects the
fact that the USD is a more widely recognised currency for the mining sector in which the Group operates and
that its Project Finance Debt Package, offtake agreements and mining services contract are denominated in
USD.
Unless otherwise stated, all amounts indicated by “$” represent USD.
126 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
3. ACCOUNTING POLICIES
The preparation of consolidated financial statements in compliance with IFRS requires management to make
certain critical accounting estimates. It also requires management to exercise judgement in applying the
Group’s accounting policies. Below are the principal accounting policies applied by management. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are material
to the consolidated financial statements are disclosed in note 4.
A. Basis of consolidation
The consolidated Group Financial Statements consist of the financial statements of the ultimate Parent
Company (Adriatic Metals plc, a company registered in the UK), and all its subsidiary undertakings made up
to the same accounting date. Subsidiary undertakings are those entities controlled by Adriatic Metals plc.
Control exists where the Group is exposed to, or has the rights to, variable returns from its involvement with
the investee and has the ability to use its power over the investee to affect its returns.
Subsidiaries are consolidated in the Group’s financial statements from the date on which control is obtained.
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup
transactions are eliminated in preparing the consolidated financial statements. The accounting policies of
subsidiaries have been changed where necessary to ensure consistency with accounting policies adopted
by the Group.
127 of 170
The consolidated financial statements comprise the financial statements of the Company and its following
subsidiaries at 31 December 2023:
Name of subsidiary
Adriatic Metals BH d.o.o.
(Formerly Eastern
Mining d.o.o.)
Country of
incorporation
Registered
Address
Shareholding
at 31 Dec.
2023
Shareholding
at 31 Dec.
2022
Nature of
business
Bosnia and
Herzegovina
Tisovci bb, Vareš, 71 330,
Bosnia and Herzegovina
100%
100%
Mineral exploration
and development
Adriatik Metali d.o.o.
Bosnia and
Herzegovina
Bulevar Meše Selimovića
81A, Sarajevo, 71 000,
Bosnia and Herzegovina
100%
100%
Adriatic Metals Jersey
Ltd (formerly Tethyan
Resource Corp)
Jersey (formerly
Canada)
35-37 New Street, St. Helier,
Jersey, Channel Islands,
JE2 3RA
100%
100%
Adriatic Metals Services
(UK) Limited (formerly
Tethyan Resources
Limited)
England and
Wales
Regent House, 65 Rodney
Road, Cheltenham, GL50
1HX, UK
100%
100%
Adriatic Metals Trading
and Finance Ltd
Jersey
35-37 New Street, St. Helier,
Jersey, Channel Islands,
JE2 3RA
100%
100%
Adriatic Metals Trading
& Finance B.V.
The Netherlands
liquidated
n/a
100%
Adriatic Metals Holdings
BIH Limited
England and
Wales
Tethyan Resources
Jersey Ltd
Jersey
Taor d.o.o.
Serbia
Tethyan Resources
d.o.o.
Global Mineral
Resources d.o.o.
Adriatic Metals d.o.o.
(formerly RAS Metals
d.o.o.)
Serbia
Serbia
Serbia
Regent House, 65 Rodney
Road, Cheltenham, GL50
1HX, UK
35-37 New Street, St. Helier,
Jersey, Channel Islands,
JE2 3RA
Kneza Milosa 93(street) /4
floor, Belgrade, Serbia
Kneza Milosa 93(street) /4
floor, Belgrade, Serbia
Kneza Milosa 93(street) /4
floor, Belgrade, Serbia
Kneza Milosa 93(street) /4
floor, Belgrade, Serbia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Mineral exploration
and development
Holding company
- financing mining
exploration of
subsidiary
Holding company
and management
services company
- financing mining
exploration of
subsidiary and
providing services
to other group
companies.
Trading and finance
company
Trading and finance
company (liquidated
during year ended
31 December 2023)
Holding company
- financing mining
exploration of
subsidiary
Holding company
- financing mining
exploration of
subsidiary
Mineral exploration
and development
Mineral exploration
and development
Mineral exploration
and development
Mineral exploration
and development
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
B. Standards, amendments and interpretations adopted
The following amended standards and interpretations were adopted by the Group during the year ending 31
December 2023:
• Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS 2 Practice Statement
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.
• Definition of Accounting Estimates – Amendments to IAS 8
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12
These amended standards and interpretations have not had a significant impact on the consolidated
Financial Statements.
C. Standards, amendments and interpretations effective in future years
At the date of authorisation of these consolidated financial statements, the following amendments to existing
standards had been published and had not been adopted early by the Group:
The following amendments are effective for the year beginning 1 January 2024:
• Lease Liability in a Sale and Leaseback – Amendments to IFRS 16
• Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants –
Amendments to IAS 1
F. Receivables
All receivables are held at amortised cost less any provision for impairment. A loss allowance for expected
credit losses is made to reflect changes in credit risk since the initial recognition.
G. Exploration and evaluation assets
Pre-licence costs
Pre-licence costs relate to costs incurred before the Group has obtained legal rights to explore in a specific
area. Such costs may include the acquisition of exploration data and the associated costs of analysing that
data. These costs are expensed in the year in which they are incurred.
Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for mineral resources, the determination of technical
feasibility and the assessment of commercial viability of an identified resource.
• Disclosures: Supplier Finance Arrangements – Amendments to IAS7 and IFRS 7
The following amendments are effective for the year beginning 1 January 2025:
• Lack of exchangeability – Amendments to IAS 21
The Group anticipates that the above amendments will be adopted in its accounting policies for the first
period beginning after their effective date and does not expect them to have a material impact on the
consolidated financial statements.
D. Foreign currency transactions and translations
The Group determines the functional currency of each entity as set out in note 4Ba and items included in the
consolidated financial statements are measured using that functional currency.
Exploration and evaluation activity includes:
•
•
licence costs paid in connection with a right to explore;
researching and analysing historical exploration data;
• gathering exploration data through geophysical studies;
• exploratory drilling and sampling;
• determining and examining the volume and grade of the resource;
• surveying transportation and infrastructure requirements; and
• conducting market studies.
Exploration and evaluation costs include directly attributable employee remuneration, materials and fuel used,
surveying costs, drilling costs and payments made to contractors.
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.
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.
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.
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.
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
Exploration and evaluation assets acquired in a business combination are initially recognised at fair value,
including resources and exploration potential that is considered to represent value beyond proven and
probable reserves. Similarly, the costs associated with acquiring an exploration and evaluation asset (that
does not represent a business) are also capitalised and subsequently measured at cost less accumulated
impairment.
Once a JORC-compliant reserve is established and development is sanctioned, exploration and evaluation
assets are tested for impairment and transferred to mine under construction and amortised in line with the
useful economic life of the mine or on a unit of depletion basis. Exploration and evaluation assets are not
amortised during the exploration and evaluation phase and are considered to have an indefinite life until
determined to be part of a mine plan.
H. Property, plant and equipment
i ) Land
Land is held at cost less accumulated impairment losses. Once a JORC-compliant reserve is established
and development is sanctioned, land is tested for impairment and transferred to mine under construction
and depreciated in line with the useful economic life of the mine or on a unit of depletion basis. Land is not
depreciated during the exploration and evaluation phase and is considered to have an indefinite life until
determined to be part of a mine plan.
Expenditure which is necessarily incurred whilst commissioning the mine under construction, in the period
prior to being capable of operating in the manner intended by management, are capitalised. Development
costs incurred after the commencement of production are capitalised to the extent they are expected to give
rise to a future economic benefit.
iv ) Depreciation and amortisation
The assets’ residual values, useful lives and methods of depreciation and amortisation are reviewed at each
financial year-end and adjusted prospectively if appropriate.
I. Leases
The Group has various lease arrangements for buildings. Lease terms are negotiated on an individual basis
locally and subject to domestic rules and regulations. At the inception of the lease contract, the Group
assesses whether the contract conveys the right to control the use of an identified asset for a certain period
in exchange for consideration, in which case it is identified as a lease. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value
assets. Low value leases are those with an underlying asset value of USD 5,000 or less. For those leases, the
Group recognized the lease payments as an operating expense on a straight-line basis over the term of the
lease.
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:
i ) Right-of-use assets
At the commencement date of the lease right-of-use assets are measured at cost which comprises the
following:
• The initial measurement of the lease liability;
• Prepayments before commencement date of the lease
•
Initial direct costs; and
• Costs to restore.
Buildings and Leasehold improvements
Shorter of 10% or lease term
Plant and equipment
15% - 33%
Subsequent to initial recognition, right-of-use assets depreciated on a straight-line basis over the duration of
the contract.The right-of-use assets are assessed for impairment where indicators of impairment are present.
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.
ii ) Lease liabilities
At the commencement date of the lease, lease liabilities are measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed payments (including in-substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a
rate, and amounts expected to be paid under residual value guarantees. The lease payments also include
the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of
penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate.
Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they
are incurred to produce inventories) in the period in which the event or condition that triggers the payment
occurs.
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
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.
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.
iii ) 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.
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.
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.
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
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.
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.
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.
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.
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible
assets to determine whether there is an indication that the assets are impaired. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.
Where the asset does not generate largely independent cash inflows, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest
identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets.
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.
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.
O. Earnings or Loss per share (“EPS”)
Basic EPS is calculated by dividing the earnings attributable to the owners of the parent by the weighted
average number of common shares in issue during the year.
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.
Diluted EPS is calculated by dividing the attributable to the owners of the parent by the weighted average
number of common shares in issue during the year plus the weighted average number of common shares
that would be issued on the conversion of all the potentially dilutive common shares, which comprise share
options and warrants granted, except where these are anti-dilutive. .
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
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.
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.
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.
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.
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.
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.
ii ) Equity-settled transactions
The costs of equity-settled transactions are measured by reference to the fair value at the grant date and are
recognised, together with a corresponding increase in equity, over the period in which the performance and/
or service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled
to the award (the “vesting date”). The cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the Company’s best estimate of the number of equity
instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement
in cumulative expense recognised at the beginning and end of that period and the corresponding amount is
represented in share option reserve. No expense is recognised for awards that do not ultimately vest.
Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as
if the terms had not been modified. An additional expense is recognised for any modification which increases
the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as
measured at the date of modification.
Where equity-settled transactions are awarded to employees, the fair value of the options at the date of
grant is charged to the profit and loss statement over the vesting period. Non-market performance vesting
conditions are taken into account by adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the
number of the options that will eventually vest. Market performance vesting conditions are incorporated into
the fair value of the equity instrument at the grant date.
Where equity-settled transactions are entered into with non-employees and some or all of the goods or
services received by the entity as consideration cannot be specifically identified, they are measured at the
fair value of the equity instruments issued. Otherwise equity-settled transactions with non-employees are
measured at the fair value of the goods or services received.
R. Other reserve accounts
Foreign currency translation reserve include gains or losses arising on retranslating the net assets of entities
from their functional currencies into the Group presentation currency.
Retained earnings include all other net gains and losses and transactions with owners, including dividends,
not recognised elsewhere.
S. Segmental reporting
The reportable segments represent all of the Group’s activities. The reportable segments are an aggregation
of the operating segments within the Group as prescribed by IFRS 8. The reportable segments are based on
the Group’s management structures and the consequent reporting to the chief operating decision maker, the
Board of Directors. These reportable segments also correspond to geographical locations such that each
reportable segment is in a separate geographic location. Income and expenses included in profit or loss for
the period are allocated directly or indirectly to the reportable segments.
The Group’s operating segments are as follows:
• Bosnia and Herzegovina (principally the Vareš Project);
• Serbia (principally the Raška Project); and
• Corporate (which supports the activities of the other two segments, principally the UK).
The Vareš and Raška 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.
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 b) Copper Stream
The Group entered into an agreement with Orion Partners under which it received a prepayment of $22.5m on
13 February 2023 in respect of future deliveries of copper warrants under the Copper Stream. Consideration
as to the substance of the agreement and the value of the Copper Stream has been made in line with the
requirements of IFRS. Regarding the accounting treatment reference has been made to IFRS9 and IFRS15 as
the nature and substance of the agreement with the conclusion that IFRS9 is the most appropriate treatment
of financial liability because the liability can be settled by cash or delivery of another financial instrument.
The fair value of the Copper Stream obligation was valued by management on a nominal basis. The significant
assumptions included the nominal future copper curve prices, the latest Mine plan and nominal weighted
average cost of capital which was calculated by the company’s nominated experts.
Notes to the consolidated financial statements - Continued
T. Adriatic Foundation
The Adriatic Foundation (the “Foundation”) is a not-for-profit trust which was created in Bosnia and
Herzegovina with the objective of supporting the communities around the Vareš Project. The Company
provided the initial funding required for the formation of the Foundation.
The Company has the ability to appoint the Board of Trustees of the Foundation and hence transactions
between the Company and the Foundation have been classified as related party on the basis of the company
yielding significant influence.
An assessment has been performed to determine whether the Company controls the Adriatic Foundation
in accordance with IFRS 10. The conclusion of this assessment is that whilst the company is able to yield
significant administrative influence over the Foundation, it is not able to affect returns to the Company.
The Foundation statute prevents the Company as the founder, and any other person associated with the
Foundation, from directly or indirectly deriving profit, or any other material or financial benefit, from the
activities of the Foundation. For the purposes of IFRS 10, the Directors have therefore concluded that the
Company does not control the Foundation and as a result the Foundation is not included in the consolidated
financial statements of the Group.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the consolidated financial statements in accordance with IFRS requires management
to make certain judgements, estimates, and assumptions about recognition and measurement of assets,
liabilities, income and expenses. The actual results are likely to differ from these estimates. The significant
judgements, estimates, and assumptions that have the most significant effect on the recognition and
measurement of assets, liabilities, income and expenses are highlighted below.
A. Estimates
a) Exploration and evaluation asset impairment testing
The Group reviews and tests the carrying amount of assets when its judges that an indicator of impairment
has occurred, including events or changes in circumstances that suggest that the carrying amount may not
be recoverable.
When such indicators exist, management determines the recoverable amount by performing value in use
and fair value calculations. These calculations require the use of estimates and assumptions. When it is not
possible to determine the recoverable amount for an individual asset, management assesses the recoverable
amount for the cash generating unit to which the asset belongs. The key estimates include discount rates,
including the Group’s weighted average cost of capital, future prices, future exploration and evaluation costs,
production levels and foreign currency exchange rates.
Exploration and evaluation assets at 31 December 2023 comprised the Raska Project of $8,500,000, at a
value based on the revised carrying value following the Company carried out a strategic review of the Raska
Project in late 2022. See note 8 for details of the estimates made in establishing the revised carrying value.
No further indicators of impairment or reversal of previous impairment have been identified in the year to
31 December 2023.
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
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.
Country of
incorporation
Functional
currency at 31
December 2023
Functional
currency at 31
December 2022
Name of entity
Adriatic Metals plc
Adriatic Metals BH 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
Jersey
Adriatic Metals Holdings BIH Limited
England and Wales
Tethyan Resources Jersey Ltd
Adriatic Metals d.o.o.
Taor d.o.o.
Tethyan Resources d.o.o.
Global Mineral Resources d.o.o.
Jersey
Serbia
Serbia
Serbia
Serbia
134 of 170
USD
USD
BAM
USD
USD
USD
USD
GBP
RSD
RSD
RSD
RSD
USD
USD
BAM
USD
USD
USD
USD
GBP
RSD
RSD
RSD
RSD
b) Capitalisation of exploration costs
The Group uses its judgement to determine whether costs meet the capitalisation requirements in
accordance with IFRS 6 and its accounting policy on exploration and evaluation assets, including whether the
activities performed are directly attributable to increasing the value of the project.
Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that
economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the
licence as exploration and evaluation assets. There is an element of judgement involved by management
as to which costs are directly attributable to increasing the value of the project. Broadly, activities in relation
to scoping, exploration and development are deemed directly attributable, whilst activities in relation to
supporting and administrative duties are deemed not to be directly attributable.
Indicators of impairment
c)
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.
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
No changes in circumstances or other indicators of impairment occurred during the year in respect of the
Raska Project exploration and evaluation asset.
5. RECEIVABLES AND PREPAYMENTS
Current (USD)
Accrued interest income
Vareš Project prepayments and deposits
Unamortised deferral of day one fair value
adjustment for Copper Stream
Taxes receivable
Other receivables
Non-Current
Unamortised deferral of day one fair value adjustment
for Copper Stream
Total
31 December 2023
31 December 2022
59,321
6,585,108
98,843
6,363,960
104,524
1,680,315
14,892,071
57,114
17,119,197
-
1,618,066
35,938
-
18,830,315
Accrued interest income relates to interest earned on cash holdings. Of the total interest income recognised
during the year of $1,567,464 (prior year: $334,497), $1,508,143 was received in cash during the year (prior
year: $277,383) with the remaining $59,321 (prior year: $57,114) recognised as accrued interest income.
$827,515 (prior year: $nil) has been capitalised within additions to the mine under construction asset.
Vareš Project prepayments and deposits represent advance payments in respect of equipment purchases,
as well as mobilisation costs paid in respect of the mining services contractor equipment that had not
reached site prior to the period end dates.
Copper Stream deposit was subject to a day 1 fair value adjustment of $1,871,124 with a corresponding day
one deferral in other debtors, which will be amortised over the life of the stream. Amortisation at 31 December
2003 amounts to $91,966 (note 17), resulting in an unamortised balance of $1,779,158 at 31 December 2023
of which $98,843 is current.
No changes in circumstances or other indicators of impairment occurred during the year in respect of the
Vareš Project mine under construction.
d) Rehabilitation provision
The Group recognises provisions for contractual, constructive or legal obligations, including those associated
with the reclamation of mineral interests and property, plant and equipment, when those obligations result
from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the
rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition
of the liability, an amount equal to the liability is added to the carrying amount of the related asset and this
amount is amortised as an expense over the economic life of the asset. Following the initial recognition of the
rehabilitation provision, the carrying amount of the liability is increased for the passage of time by unwinding
the discount, and adjusted for changes to the current market-based discount rate and to the amount or
timing of the underlying cash flows needed to settle the obligation.
Management uses its judgement and experience to determine the potential scope of closure rehabilitation
work required to meet the Group’s legal, statutory and constructive obligations, and any other commitments
made to stakeholders, and the options and techniques available to meet those obligations and estimate the
associated costs and the likely timing of those costs.
Significant judgement is also required to determine both the costs associated with that work and the
other assumptions used to calculate the provision. External experts support the cost estimation process
where appropriate but there remains significant estimation uncertainty. The key judgement in applying this
accounting policy is determining when an estimate is sufficiently reliable to make or adjust a closure provision.
Management has previously engaged with experts Ausenco and Wardell Armstrong as part of the feasibility
study to determine total costs of closure, restoration and environmental costs over the life of the mine.
Management applied judgement to determine the impact of activity on the Vareš Project in the year ended 31
December 2023, which is a key factor in calculating the provision, and the Group recorded a provision based
on the discounted value of the expected cashflows. See note 22 for further details.
e) Entities not consolidated
The Adriatic Foundation has not been consolidated, for reasons set out in note 3T.
Deep Research d.o.o. (DR) is determined to be outside of the control of the Group because although Adriatic
Metals Jersey Ltd (the option agreement holder) has the ability to control DR via exercise of the option it does
not have the intent to do so at present until further exploration work has been completed to determine the
economic value of DR to the Group relative to the consideration that would be payable on exercise of the
option.
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the consolidated financial statements - Continued
The segmental analysis of receivables and prepayments is as follows:
31 December 2023
Bosnia
Serbia
Corporate
Accrued interest income
-
Prepayments and deposits
6,299,029
-
70,900
59,321
215,179
Total
59,321
6,585,108
Unamortised deferral of day
one fair value adjustment for
Copper Stream
Taxes receivable
Other receivables
Total
1,779,158
-
-
1,779,158
6,215,399
100,381
53,988
4,143
94,573
6,363,960
-
104,524
14,393,967
129,031
369,073
14,892,071
6. BORROWINGS AND DERIVATIVE LIABILITY
A. Total borrowings and derivative liability
Orion Senior
Secured Debt
Copper
Stream
(In USD)
At 31 December 2020
Interest expense
Foreign Exchange gain
Payment of Interest
Revaluation of fair value
embedded option
At 31 December 2021
-
-
-
-
-
-
QRC
Convertible
Debt
Total
Borrowings
Derivative
Liability on QRC
Convertible
Debt
(15,980,753)
(15,980,753)
(4,160,918)
(1,699,740)
(1,699,740)
-
(232,240)
(232,240)
(104,823)
1,841,667
1,841,667
-
-
-
1,763,318
(16,071,066)
(16,071,066)
(2,502,423)
-
(26,176,885)
(1,700,012)
(1,735,496)
-
-
-
-
214,605
1,700,000
1,700,000
(214,605)
(214,605)
-
-
-
-
(4,081,401)
(16,285,683)
(42,498,052)
(6,369,219)
-
-
-
-
-
-
-
-
-
-
-
-
-
31 December 2022
Accrued interest income
Prepayments and deposits
Taxes receivable
Other receivables
Total
Bosnia
-
16,802,323
1,468,539
608
18,271,470
Serbia
Corporate
-
57,114
Total
57,114
Additions
Interest expense
(26,176,885)
(35,484)
114,756
75,343
3,105
193,204
202,118
17,119,197
74,184
32,225
1,618,066
35,938
365,641
18,830,315
Foreign Exchange gain
Payment of Interest
Revaluation on
modification
Revaluation of fair value
embedded option
-
-
-
-
At 31 December 2022
(26,212,369)
Additions
(58,560,421)
(22,500,000)
-
(81,060,421)
Interest expense
(12,999,260)
Foreign Exchange gain
Payment of Interest
Day one fair value
adjustment
Fair value adjustment
Revaluation of fair value
embedded option
-
-
-
-
-
-
-
(1,718,284)
(14,717,544)
-
-
1,895,000
1,895,000
(1,871,124)
(2,548,423)
-
-
-
-
(1,871,124)
(2,548,423)
-
(3,540,640)
-
-
-
-
-
-
At 31 December 2023
(97,772,050)
(26,919,547)
(16,108,967)
(140,800,564)
(9,909,859)
136 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Orion Senior
Secured Debt
Copper
Stream
QRC
Convertible
Debt
Total
Borrowings
Derivative
Liability on QRC
Convertible Debt
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.
Notes to the consolidated financial statements - Continued
Year end balances are analysed below:
Orion Senior
Secured Debt
Copper
Stream
QRC
Convertible
Debt
Total
Borrowings
Derivative
Liability on QRC
Convertible Debt
Non-current liability
(26,212,369)
(26,212,369)
-
-
-
-
-
-
-
(16,285,683)
(42,498,052)
(6,369,219)
(16,285,683)
(42,498,052)
(6,369,219)
(In USD)
At 31 December 2022
Current liability
(In USD)
At 31 December 2023
Current liability
(30,177,441)
(1,086,789)
(16,108,967)
(47,373,197)
(9,909,859)
Non-current liability
(67,594,609)
(25,832,758)
-
(93,427,367)
-
(97,772,050)
(26,919,547)
(16,108,967)
(140,800,564)
(9,909,859)
B. Orion Senior Secured Debt
On 10 January 2022, the Group announced the completion of a $142.5m debt financing package (“Orion
Debt Finance Package”), with Orion Resource Partners (UK) LLP (“Orion”) comprising:
• $120m Senior Secured Debt; and
• $22.5m Copper Stream
Under the terms of this agreement, the Senior Secured Debt maturity date is 30 June 2027. Interest accrues
daily at an annual rate equal to a margin of 7.5% plus the greater of (i) a floor of 0.26161% plus the CME Term
SOFR for a period equal to three months and (ii) the floor of 0.26161%. Interest is payable on each interest
repayment date, on the final maturity date, and on any earlier date on which a loan is prepaid in full or in part.
The First Repayment Date is the earlier of the Project Completion Longstop Date of 30 June 2024 and
the last business day of the quarter following the quarter in which the Project Completion Date falls. The
repayment schedule provides for the repayment of the loan in 10 equal quarterly installments in each of the
10 successive quarters, with the first such quarterly repayment occurring on the First Repayment Date and
the repayment in each successive quarter occurring on the last Business Day of the relevant quarter.
The Orion Debt Finance Package contains covenants and restrictive covenants typical for a project financing,
including in relation to financial reporting. It also contains security customary for a project financing,
principally security over the assets of Adriatic Metals BH and material project-related contracts held by the
Adriatic Group. A DSCR covenant of above 1.25x is included in the Orion Debt Finance Package.
137 of 170
Post year end, on 22 January 2024, the Group amended the terms of the original Senior Secured Debt
agreement as below:
• The Project Completion Longstop Date of 30 June 2024 is extended to 31 December 2024 and becomes
the First Repayment Date;
• A fee applicable to the amendment (“the Front End Fee”) of $750,000 becomes payable immediately
following the utilisation date for the fourth draw down and added to the principal amount of the loans then
outstanding;
• The Company is required to ensure that prior to 31 July 2024, the QRC Convertible Debt is finally, fully and
irrevocably discharged or converted into equity without incurring financial indebtedness in relation to the
same.
During 2023 the applicable CME Term SOFR has fluctuated between 4.56% and 5.39%, meaning that the
total interest rate applicable has fluctuated between 12.32% and 12.89% during the year to 31 December
2023. The first DSCR testing period is expected to be late-2024, and six monthly thereafter. The Company’s
forecasts show substantial headroom above the requirement of 1.25x.
During 2023, the Orion Senior Secured Debt second and third tranches totaling $60,000,000 were drawn net
of associated $1,439,579 legal and other fees incurred by Orion as lender, with a net amount of $58,560,421
received. As at 31 December 2023, these Orion fees have been recognised as a deduction from the value of
borrowings in accordance with IFRS 9, on the basis that they represent transaction costs directly attributable
to the acquisition of the borrowings.
As a result of the total IFRS 9 deduction of $5,262,694, which will be amortised over the life of the facility
using the effective interest rate method, the Orion Senior Secured Debt balance is reduced from $90,000,000
drawn down to $84,737,306. This impact will be reversed over the life of the facility as the deduction is
unwound through amortisation of the deduction.
The Group is entitled to deduct the amount of any payment it makes to the Adriatic Foundation on behalf of
the Lenders from any interest accrued in the last quarter of each year.
C. Copper Stream
On 13 February 2023 the Company announced that all conditions precedent for the $22.5m Copper Stream
had been satisfied and that the Copper Stream deposit funds had been received as a prepayment for the
Copper Stream.
In accordance with the Copper Stream agreement signed on 8 January 2022, the Group will deliver to Orion
copper warrants purchased on the London Metal Exchange with a value equal to 24.5% of the payable
copper in concentrates sold at the official LME copper cash price. Orion will pay 30% of the value of copper
warrants with the remaining 70% being credited to the prepayment. The agreement will be effective for an
initial term of 40 years from the signing date and thereafter will automatically be extended for any successive
20 year additional periods unless there have been no active mining operations during the last 20 years of the
initial term or throughout such additional periods, in which case the agreement will terminate at the end of the
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the consolidated financial statements - Continued
initial term or such additional period, as applicable. The agreement may also be terminated by the parties on
mutual written consent or in the event of default.
The Group’s obligations under the Copper Stream agreement are accounted for as a financial liability at fair
value through profit or loss and comprise the following at 31 December 2023:
D. QRC convertible debt
The Company issued $20m 8.5% convertible debt through a deed of covenant dated 30 November 2020.
The debt was convertible into fully paid equity securities in the share capital of the issuer, subject to the
conditions of the debt issue. The debt was converted into shares in March 2024.
(In USD)
Deposit funds received during the Year
Day one fair value adjustment in respect of future delivery of copper
warrants
Fair value at initial recognition
Fair value adjustment at 31 December 2023
Balance at 31 December 2023
31 December 2023
22,500,000
1,871,124
24,371,124
2,548,423
26,919,547
As the fair value of copper warrants depends on copper price volatilities and a risk-adjusted discount rate
which are unobservable inputs, the financial liability above is classified within Level 3 of the fair value hierarchy.
A day one fair value adjustment has been made to recognise the initial fair value at the date on which the
Copper Stream deposit was received during the Period. This adjustment has been deferred at 13th February
2023 to reflect the fact that it will be amortised over the Vareš Mine production period which had not yet
started at that date.
The valuation of the Copper Stream financial liability was prepared by management on a nominal basis. The
assumptions used were the life of mine, copper production, the nominal copper forward price curve and the
nominal discount rate based on the Company’s weighted average cost of capital.
The following table contains sensitivities showing the impact of a 10%, 20% and 25% discount factor
compared with the companies weighted average cost of capital (WACC). The company used 20.5% for the
calculation of the day one fair value adjustment and 18.9% for the fair value adjustment at 31 December
2023.
Discount Rate
Day one fair value adjustment
At 31 December 2023
15.00%
29,738,197
32,311,242
20.00%
24,768,916
25,715,201
25.00%
21,015,051
21,068,867
Modification
In December 2022, concurrently with the first draw down of the Orion Senior Secured Debt, Adriatic and
QRC executed an amendment to the 30 November 2020 deed of covenant, providing that the cash coupon
had been increased from 8.5% to 9.5% per annum effective from 10 January 2023. The amendment also
confirmed that Adriatic was not required to redeem the debt following completion of the Orion project
financing. This was a change from the original terms of the convertible debt which provided that where the
Company secured a project financing before the final maturity date of the debt, the bondholder could require
the issuer to redeem the debt at its principal amount together with the accrued but unpaid interest to such
date. All other terms of the original deed remained unchanged.
Management considered the quantitative and qualitative nature of the amendment and concluded the
changes constituted a non-substantial modification under IFRS 9 accounting standards.
The carrying amount of the liability was adjusted to the present value of the modified cashflows and a loss
was recognised in the profit or loss in the year ended 31 December 2022. Subsequent interest expense was
calculated based on the updated internal rate of return.
Key terms and conditions of the debt agreement dated 30 November 2020 between the Company and QRC
are provided below.
Voluntary conversion
The debt shall be convertible into equity securities of the Company at the option of the bondholder at any
time from the issue date 1 December 2020 until 30 November 2024. The number of equity securities to
be issued will be determined by the conversion price in effect on the relevant conversion date. The initial
conversion price is AUD 2.7976 per ordinary share.
Redemption and Purchase
a) Final redemption: Where the debt is not converted, redeemed, purchased, or cancelled by the
Company prior to the final maturity date, the debt shall be redeemed by the Company at its principal
amount;
b) Redemption at the option of the issuer: Option to the issuer to redeem all the debt outstanding, prior to
the final maturity date, at its principal amount together with accrued but unpaid interest to such date if:
• At any time prior to maturity date, the volume weighted average price of the equity securities for 20
consecutive days has exceeded 125% of the conversion price; or
• The issuer delivers an optional redemption notice that contains an optional redemption date which
falls on or after the third anniversary of the issue date;
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the consolidated financial statements - Continued
c) Redemption at the option of bondholder if a change of control event occurs: the bondholder receives
an option to require the issuer to redeem the debt prior to the final maturity date. In the event of a
change of control, the debt shall be redeemed at:
• 130% of the principal amount, if the change of control event occurs on or prior to the second
anniversary of the issuance date, together with accrued and unpaid interest till such date. This
redemption ratio is no longer applicable as no change of control event occurred on or prior to the
second anniversary of the issuance date; or
• 115% of the principal amount, if the change of control event occurs after the second anniversary of
issuance date, together with accrued and unpaid interest till such date
d) Redemption at the option of the debt holder in the event of project financing: In any event where the
Company secures a project financing before the final maturity date of the debt, the debt holder can
require the issuer to redeem the debt at its principal amount together with the accrued but unpaid
interest to such date. The amendment in December 2022 removed this option.
E. Derivative liability on QRC convertible debt
QRC’s option to convert the debt into equity and the associated potential issue of shares gave rise to a
variable amount of cash receivable by the Company and therefore the debt fails to meet the requirements to
be classified as equity. The conversion feature of the debt has therefore been accounted for as a derivative
liability, with the value of the conversion feature dependent on factors as set out below.
Management engaged external experts to review the terms of the agreement and perform a valuation. It was
concluded that the call option in the hands of the bondholder satisfied the conditions stipulated by IFRS 9
Financial Instrument – Recognition and Measurement for the recognition of a derivative liability in the Group
and Company accounts and required a separate fair valuation.
The redemption options in the hands of the bondholder were concluded to fall outside the exemptions of
IFRS 9 and to be closely related to the debt host contract. Therefore, the redemption options need not be
separated from the debt host contract and hence need not be valued separately. The Group has accounted
for both the embedded option and liability at fair value through profit and loss and at amortised cost
respectively.
Valuation Model
The Black Scholes model was chosen as the most appropriate pricing model to value QRC’s option to
convert the debt into equity and the valuation was updated at 31 December 2023 and 31 December 2022.
The main assumptions and inputs used in the options pricing model were as follows:
• Dividend yield – assumed to be nil because the Company has not declared or paid any dividends in prior
years on ordinary shares.
• Strike price – The initial conversion price of AUD 2.7976 per ordinary share.
• Expected term – Judgement applied to assign probability to the various redemption and put options in the
contract. Expected term of redemption calculated as 0.92 years from the valuation date.
• Expected volatility – Weekly volatility over the 0.92 years (48 weeks) was calculated as 37.10% prevailing
on ASX as of the valuation date.
• Risk-free rate – Risk free yield obtained from Australian Treasury bond issues converted into continuous
compound yields.
• Value of underlying common stock price – The closing price of ordinary shares AUD 4.01 on the valuation
date on the ASX.
Using the assumptions set out above, the Black Scholes value of the call option in the hands of the debt
holder is $9,909,859.
Sensitivity Analysis
Inputs to the Black Scholes model are based on management estimates regarding probabilities of future
events. The results are sensitive to changes in key assumptions, namely the expected term of the debt and
the volatility of the Company’s share price.
Sensitivity of the debt value to reasonably possible changes in the assumptions of expected term and
volatility of the Company’s share price are as follows:
Change in volatility of Company’s share price
30%
Unchanged (37.10%)
45%
26 Weeks
$0.8m Decrease
$0.6m Decrease
$0.4m Decrease
Change in
expected term
Unchanged
(48 weeks)
65 Weeks
$0.3m Decrease
-
$0.6m Increase
$0.1m Increase
$0.5m Increase
$1.0m Increase
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the consolidated financial statements - Continued
7. PROPERTY, PLANT AND EQUIPMENT
Cost (In USD)
Note
Land &
Buildings
Plant &
Machinery
Mine under
Construction
Net Book Value (in USD)
Land &
Buildings
Plant &
Machinery
Mine under
Construction
Total
Total
31 December 2022
4,719,698
1,529,077
71,611,788
77,860,563
1,110,227
852,631
28,446,606
30,409,464
31 December 2023
5,523,955
3,138,591
204,068,124
212,730,670
31 December 2021
Additions
Recognition of rehabilitation
provision
Foreign exchange difference
31 December 2022
Additions
Capitalised net interest
Capitalised depreciation
Reassessment of rehabilitation
provision
3,670,590
1,170,962
38,926,044
43,767,596
-
-
-
4,431,212
4,431,212
2,546
-
2,546
4,780,817
2,026,139
71,803,862
78,610,818
828,149
2,061,572
119,035,126
121,924,847
Mine under construction amounts relate to the Vareš Project, located in Bosnia and Herzegovina. The balance
of exploration and evaluation asset was transferred to mine under construction at the completion of the
Feasibility Study in 2021.
The segmental analysis of property, plant and equipment net book value is as follows:
6,17
10
22
-
-
-
-
-
-
12,171,745
12,171,745
Cost (In USD)
2,006,890
2,006,890
31 December 2022
(757,425)
(757,425)
Bosnia and Herzegovina
4,703,342
1,420,191
71,611,788
77,735,321
Land &
Buildings
Plant &
Machinery
Mine under
Construction
Total
Serbia
Corporate
Total
31 December 2023
-
16,356
89,837
19,049
-
-
89,837
35,405
4,719,698
1,529,077
71,611,788
77,860,563
Bosnia and Herzegovina
5,509,956
2,990,655
204,068,124
212,568,735
Serbia
Corporate
-
102,119
13,999
45,817
-
-
102,119
59,816
5,523,955
3,138,591
204,068,124
212,730,670
31 December 2023
5,608,966
4,087,711
204,260,198
213,956,875
Additions of $121,924,847 (31 December 2023: $43,767,596) excludes prior year prepaid capex of
$17,119,197 and creditor balances of $10,397,180 (31 December 2022: 1,535,701). The investment
in purchase of property, plant and equipment of $94,408,470 (31 December 2022: $42,231,895) in the
consolidated statement of cash flows excludes prior prepaid CAPEX and creditor balances.
Capitalised interest consists of accrued interest expense in the year of $12,999,260 on the Orion Senior Debt
Finance Package as set out in note 6, less $827,515 interest income, as set out in note 17.
Land &
Buildings
Plant &
Machinery
Mine under
Construction
Total
Total
47,946
291,670
192,074
531,690
13,173
219,033
-
(13,641)
-
-
232,206
(13,641)
61,119
497,062
192,074
750,255
23,892
452,058
-
475,950
85,011
949,120
192,074
1,226,205
Depreciation (in USD)
31 December 2021
Charge for the year
Foreign exchange difference
31 December 2022
Charge for the year
31 December 2023
140 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the consolidated financial statements - Continued
8. EXPLORATION AND EVALUATION ASSETS
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Cost (In USD)
31 December 2021
Foreign exchange difference
Impairment
31 December 2022
31 December 2023
Net Book Value
31 December 2022
31 December 2023
Raska Project
in Serbia
Exploration & Evaluation
Assets
(In USD)
Trade payables
31,901,709
(214,750)
(23,186,959)
8,500,000
8,500,000
31,901,709
Accrued liabilities
(214,750)
Other payables
(23,186,959)
8,500,000
8,500,000
8,500,000
8,500,000
8,500,000
8,500,000
Exploration and evaluation assets relate to the Raska Project in Serbia.
The Raska exploration and evaluation balance at 31 December 2021 of $31,901,709 mainly reflects the
$31,804,990 value recorded on the acquisition of the Tethyan group, by which the Company acquired the Kremice,
Kizevak and Sastavci licences.
In late 2022 the Company carried out a strategic review of the Raska Project which resulted in changes to the
development plan for the project. Focusing its resources on Vareš Project construction and on exploration at
Rupice and Rupice NW meant that resources available for exploration in Serbia would be more focused and
limited in 2023, with development taking place over a longer horizon, including advancing new prospects in
the Company’s tenement area during 2023 to complement Kizevak and Sastavci. In view of the longer horizon
planned, the Company determined that it was appropriate to recognise an impairment of $23.2m against the
project’s carrying amount, reducing the carrying amount to $8.5m at 31 December 2022.
During 2023, there was successful intersection of mineralization at several of the new prospects from trench,
surface and drill core sampling, while drilling results from the Rudnica prospect indicated the potential for an
increase in the size of the historic Rudnica porphyry deposit. Nonetheless, further work is required before a maiden
mineral resource may be established. All permits remain in good standing.
The Raska Project is managed as a single project and if advanced to the production stage, it is anticipated that
there would be a single processing plant. The project is therefore treated as a single cash generating unit, with the
post-impairment value of $8,500,000 attributed to the Raska Project as a whole instead of to specific tenements.
No further indicators of impairment or reversal of previous impairment have been identified in the year to 31
December 2023, the carrying value $8,500,000 remains unchanged from prior year.
141 of 170
31 December 2023
31 December 2022
13,719,583
3,415,895
537,342
17,672,820
2,585,755
2,617,585
138,400
5,341,740
Trade payables increased during the year due to the increased activity on development/construction phase
of Vareš project which went into production phase in Q1 2024.
10. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
Set out below are the carrying amounts of right-of-use assets accounted for in accordance with IFRS 16 and
the movements during the year:
(In USD)
31 December 2021
Additions
Modification
Depreciation
Foreign exchange difference
31 December 2022
Additions
Depreciation
Foreign exchange difference
31 December 2023
Land & buildings
Plant & Machinery
Total
733,246
297,468
26,404
(155,602)
(107,937)
793,579
1,097,289
(346,201)
64,327
1,608,994
-
733,246
9,064,201
9,361,669
-
26,404
(904,115)
(1,059,717)
170
(107,767)
8,160,256
8,953,835
599,552
1,696,841
(2,050,881)
(2,397,082)
1,905
66,232
6,710,832
8,319,826
The largest right-of-use asset relates to mining equipment delivered under a five year mining services
contract with Nova Mining & Construction d.o.o. Remaining leases relate to administrative buildings and
coresheds for the Group.
Depreciation relating to right-of-use assets includes capitalised depreciation of $2,006,890 taken to Mine
under construction, as set out in note 7 (31 December 2022: $nil). The corresponding charge in the income
statement is $390,192 (31 December 2022: $1,059,717).
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the consolidated financial statements - Continued
Set out below are the carrying amounts of lease liabilities and the movements during the year:
11. FINANCIAL INSTRUMENTS
(In USD)
31 December 2021
Additions
Modification
Interest expense
Payments
Foreign exchange difference
31 December 2022
Additions
Interest expense
Payments
Foreign exchange difference
31 December 2023
Land & buildings
Plant & Machinery
Total
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:
767,098
297,468
16,850
130,771
-
9,062,598
-
458,606
767,098
9,360,066
16,850
589,377
(270,236)
(2,209,332)
(2,479,568)
(57,590)
884,361
981,918
104,598
(465,643)
85,262
1,590,496
(9,492)
7,302,380
599,552
998,720
(67,082)
8,186,741
1,581,470
1,103,318
(2,356,966)
(2,822,609)
2,385
87,647
6,546,071
8,136,567
• quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
•
•
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); or
inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
(level 3).
Fair value is the amount at which a financial instrument could be exchanged in an arm’s length transaction.
Set out below are the financial instruments held at amortised cost and fair value through profit or loss and
their fair value measurement hierarchy.
See note referenced for further detail on inputs to fair value for each financial instrument.
At 31 December 2023
(In USD)
Note
At
amortised
cost
At fair value
through profit
or loss
Total
Fair Value
Hierarchy
Of the total amount at 31 December 2023, $1,495,296 (31 December 2022: $2,379,000) is recognised as
a current liability and the remainder $6,641,271 is shown within non-current liabilities (31 December 2022:
$5,807,741). The maturity analysis of contractual undiscounted cash-flows is in note 12b .
The following are the amounts recognised in the statement of comprehensive income:
Financial assets
Cash and cash equivalents
Accrued interest receivable
Total financial assets
Cost (In USD)
Depreciation expense of right-of-use assets
Less: right-of-use asset depreciation capitalised to mine
under construction
Interest expense on lease liabilities
Total amount recognised in profit or loss
12 months to
December 2023
2,397,082
(2,006,890)
1,103,318
1,493,510
12 months to
December 2022
1,059,717
Financial liabilities
Accounts payable and accrued
liabilities
-
Borrowings
589,377
1,649,094
Derivative liability
Lease liabilities
5
9
6
6
44,856,215
59,321
44,915,536
17,672,820
-
-
-
-
44,856,215
59,321
44,915,536
N/A
N/A
17,672,820
N/A
113,881,017
26,919,547
140,800,564
-
9,909,859
9,909,859
10
8,136,567
-
8,136,567
The following are the amounts recognised in statement of cashflow:
Cost (In USD)
Capital payments on leases
Interest paid on leases
Total amount paid in respect of lease liabilities
12 months to
December 2023
12 months to
December 2022
(1,719,291)
(1,103,318)
(2,822,609)
(1,890,191)
(589,377)
(2,479,568)
142 of 170
Total financial liabilities
139,690,404
36,829,406
176,519,810
Net financial assets/(liabilities)
(94,774,868)
(36,829,406)
(131,604,274)
Level 3
Level 3
Level 3
-
-
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
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
5
9
6
6
At
amortised
cost
At fair value
through profit
or loss
Note
Total
Fair Value
Hierarchy
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
10
8,186,741
–
8,186,741
Total financial liabilities
56,026,533
6,369,219
62,395,752
Net financial assets/(liabilities)
4,594,682
(6,369,219)
(1,774,537)
Level 3
Level 3
Level 3
-
-
12. FINANCIAL RISK MANAGEMENT
A. Credit risk
Credit risk arises from the risk that a counter party will fail to perform its obligations. Financial instruments
that potentially subject the Group to concentrations of credit risk consist of cash and cash equivalents and
receivables (excluding prepayments).
Due to the nature of the business, the Group’s exposure to credit risk arising from routine operating activities
is currently inherently low. However, the Audit & Risk Committee considers the risks associated with new
material counterparties where applicable to ensure the associated credit risk is of an acceptable level.
The total carrying amount of cash and cash equivalents and receivables represents the Group’s maximum
credit exposure.
The Group’s cash is held in major UK, Jersey, Australian, Serbian and Bosnian financial institutions, and as
such the Group is exposed to credit risks of those financial institutions. The Group’s main cash holdings are
located in UK and Jersey A1 or A2 rated institutions and as such are considered to have low credit risk.
143 of 170
Borrowings
Derivative liability
Lease liabilities
Borrowings
Derivative liability
Lease liabilities
The Group’s receivables primarily relate to value added tax receivables due from governments in the UK
and Bosnia and Herzegovina. These amounts are excluded from the definition of financial instruments in
the accounts and in any event are considered to have low credit risk. Of the remaining receivables and
prepayments, any changes in management’s estimate of the recoverability of the amount due will be
recognised in the period of determination and any adjustment may be significant.
The Board of Directors, with input from the Audit & Risk Committee, is ultimately responsible for monitoring
exposure to credit risk on an ongoing basis and does not consider such risk to be significant at this time. As
such, the Group considers all of its financial assets to be fully collectible.
B. Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due.
The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses.
The following table analyses the Group’s financial liabilities and derivatives into the relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. The
contractual gross financial liabilities shown below are undiscounted estimated cash outflows which, where
applicable, include estimated future interest payments, and certain amounts therefore differ from the amounts
presented in the consolidated financial statements and elsewhere in the accompanying notes.
As at 31 December 2023
(In USD)
Within
30 days
30 days to
6 months
6 to 12
months
Over 12 months
Accounts payable and accrued liabilities
17,672,820
-
-
-
-
-
47,373,197
93,427,367
9,909,859
-
124,608
623,040
747,648
7,946,031
17,797,428
623,040
58,030,704
101,373,398
As at 31 December 2022
(In USD)
Within
30 days
30 days to
6 months
6 to 12
months
Over 12 months
Accounts payable and accrued liabilities
5,341,740
–
-
-
-
-
-
-
46,316,489
6,369,219
7,995,030
198,250
991,250
1,189,500
5,539,990
991,250
1,189,500
60,680,738
-
-
-
-
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 13. EQUITY
A. Authorised share capital
The authorised share capital of the Company consists of an unlimited number of voting ordinary shares with a
nominal value of £0.013355.
B. Common shares issued
Ordinary
Shares
Share Capital
(In USD)
Share Premium
(In USD)
Merger Reserve
(In USD)
31 December 2021
266,073,240
5,279,546
143,259,675
23,019,164
Shares issued as consideration for
acquisition of subsidiary
332,000
5,579
-
478,566
Share Issue costs
-
-
(86,199)
Shares issued on exercise of options
and performance rights
6,341,052
91,224
656,155
-
-
31 December 2022
Issue of share capital
Share Issue costs
Shares issued on exercise of options
and performance rights
272,746,292
5,376,349
143,829,631
23,497,730
14,807,632
251,055
31,427,918
-
-
(2,111,505)
5,180,495
85,378
999,562
-
-
-
31 December 2023
292,734,419
5,712,782
174,145,606
23,497,730
The average price paid for shares issued in the year was $1.64 per share (31 December 2022: $0.19 per
share).
Notes to the consolidated financial statements - Continued
C. Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices,
and interest rates will affect the value of the Group’s financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable limits, while maximising long
term returns.
The Group conducts development and exploration projects in Bosnia and Herzegovina and in Serbia. As a
result, a portion of the Group’s expenditures, receivables, cash and cash equivalents, accounts payable and
accrued liabilities are denominated in Bosnian Marks, Serbian Dinar, Great Britain Pounds, Australian Dollars,
and Euros and are therefore subject to fluctuation in exchange rates.
At 31 December 2023, a 10% change in the exchange rate between USD and the Euro, Bosnian Mark and
Serbian Dinar, which is a reasonable estimation of volatility in exchange rates, would have an impact of
approximately $1.4m on the Group’s total comprehensive loss, and approximately $1.6m on the balance of
cash and cash equivalents.
D. Fair values
The fair value of cash, receivables, accounts payable and accrued liabilities approximate their carrying
amounts due to the short term nature of the instruments.
As set out in note 11, fair value measurements recognised in the consolidated statement of financial position
subsequent to their initial fair value recognition can be classified into Levels 1 to 3 based on the degree to
which fair value is observable.
There were no transfers between any levels of the fair value hierarchy in the current or prior years.
E. Capital management
The Group’s objectives in managing capital are to safeguard its ability to operate as a going concern while
pursuing exploration and development and opportunities for growth through identifying and evaluating
potential acquisitions of assets or businesses. The Group defines capital as the equity attributable to
equity shareholders of the Group which at 31 December 2023 was $110,657,966 (31 December 2022:
$107,903,026).
The Group sets the amount of capital in proportion to its risk and corporate growth objectives. The
Group manages its capital structure and adjusts it in light of changes in economic conditions and the risk
characteristics of the underlying assets.
See note 6 for details of the Group’s borrowings and derivative liability.
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C. Share options and performance rights
All share options and performance rights are issued under the Group’s share option plan.
The following table summarises movements of the Company’s share option plan:
Weighted average
exercise price
of options (USD)
Number of
options
Number of
performance
rights
Total options and
performance rights
31 December 2021
0.39
12,212,480
Granted
Exercised
Expired
31 December 2022
Granted
Exercised
Expired
31 December 2023
N/A
0.12
1.28
0.46
N/A
0.13
1.47
2.25
-
(7,016,600)
(21,580)
5,174,300
990,000
548,012
(290,000)
(306,418)
941,594
-
1,811,174
(5,018,260)
(14,940)
(588,194)
(102,503)
141,100
2,062,071
13,202,480
548,012
(7,306,600)
(327,998)
6,115,894
1,811,174
(5,606,454)
(117,443)
2,203,171
At 31 December 2022
Grant date
27 April 2018
8 October 2020
(1)
8 October 2020
8 October 2020
8 October 2020
8 October 2020
Options
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
Expiry date
Number
exercisable
4,000,000
A$0.20
0.5
1 July 2023
4,000,000
3,320
29,880
91,300
24,900
24,900
£1.06
£1.06
£1.80
£2.22
£1.20
-
5 December 2022
0.1
3 January 2023
1.2
28 February 2024
1.2
1.6
7 March 2024
19 August 2024
3,320
29,880
68,060
14,940
14,940
6 November 2020
1,000,000
A$2.20
0.9
7 November 2023
1,000,000
5,174,300
5,131,140
1. The conditions to exercise were met prior to the expiry date of 5 December 2022 and the shares were
subsequently issued on 17 January 2023.
Performance rights outstanding:
At 31 December 2023
On exercise, holders of performance rights are required to pay £0.013355 for each performance right
exercised, being the nominal value of one ordinary share.
No options were granted during the year or prior year. Performance rights granted in the year were valued
using the Black-Scholes method (see note 13F).
Options outstanding:
At 31 December 2023
Grant date
8 October 2020
8 October 2020
8 October 2020
Options
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
Expiry date
Number
exercisable
91,300
24,900
24,900
141,100
£1.80
£2.22
£1.20
0.2
28 February 2024
0.2
0.6
7 March 2024
19 August 2024
91,300
24,900
24,900
141,100
Grant date
17 February 2022
17 February 2022
17 February 2022
5 April 2022
5 April 2022
23 February 2023
24 May 2023
24 May 2023
18 September 2023
Performance
rights outstanding
Weighted average
remaining contractual
life (Years)
100,000
100,000
23,765
100,000
25,000
225,189
142,778
434,272
911,067
2,062,071
0.0
0.5
2.0
0.0
1.0
3.0
4.0
4.4
4.4
Expiry date
31 December 2023
30 June 2024
31 December 2025
31 December 2023
31 December 2024
Number
exercisable
100,000
100,000
14,537
100,000
-
31 December 2026
78,193
1 January 2028
24 May 2028
24 May 2028
-
-
-
392,730
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the consolidated financial statements - Continued
At 31 December 2022
31 December 2023
Grant date
6 August 2020
17 February 2022
17 February 2022
17 February 2022
5 April 2022
5 April 2022
5 April 2022
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
D. Warrants reserve
Warrants were issued as part of Tethyan Resource Corp acquisition.
The following table presents movements in the Group’s warrants reserve:
Number
exercisable
Grant date
Warrants
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
Expiry date
Number
exercisable
-
-
-
-
-
-
-
-
29 November 2019
2,651,020
£0.88
0.1
30 January 2024
2,651,020
2,651,020
2,651,020
At 31 December 2022
Grant date
Warrants
outstanding
Exercise
price
Weighted average
remaining contractual
life (Years)
Expiry date
Number
exercisable
29 November 2019
2,651,020
£0.88
1.1
30 January 2024
2,651,020
2,651,020
2,651,020
E. Share-based payment reserve
The following table presents changes in the Group’s share-based payment reserve during the year ended 31
December 2023:
(In USD)
31 December 2021
Exercise of warrants
Expired warrants
31 December 2022
Exercise of warrants
Expired warrants
31 December 2023
146 of 170
Warrants reserve
2,743,303
(In USD)
31 December 2021
-
-
2,743,303
-
-
2,743,303
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
Exercise of share options and performance rights
Short term incentive plan awards
Issue of performance rights
Expiry/cancellation of share options and performance rights
31 December 2023
Share-based payment reserve
5,778,882
(2,130,739)
873,155
576,000
(153,862)
4,943,436
(2,337,235)
(576,000)
1,644,777
(83,758)
3,591,220
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the consolidated financial statements - Continued
By agreement with the Company, in the prior year certain members of the Company’s executives elected
to reinvest their short term incentive plan cash bonuses in respect of performance in the year ended
31 December 2022. In lieu of paying such cash bonuses, on 13 February 2023 the Company issued an
aggregate of 258,760 new ordinary shares at an issue price of £1.70 per share. This transaction falls under
the scope of IFRS 2 and for the year ended 31 December 2022, $576,000 has been recognised in the share-
based payment reserve (current year; nil).
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:
F. Share-based payment expense
During the year ended 31 December 2023; the Group recognised share-based payment expenses of
$1,561,020 (31 December 2022: $1,295,293).
(In USD)
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 2023
Year Ended
31 December 2022
934,674
-
(79,776)
854,898
710,104
(3,982)
706,122
367,525
576,000
(3,971)
939,554
505,630
(149,891)
355,739
1,561,020
1,295,293
Risk-free interest rate
Expected volatility
(1)
Expected life (years)
Fair value per performance right
Year Ended
31 December 2023
Year Ended
31 December 2022
3.01% - 3.93%
0.33% -1.31%
39% - 56%
3.85-5.01
33% - 36%
1.7 – 3.9
$1.03 - $2.23
$1.50 – $1.79
1. Expected volatility is derived from the Company’s historical share price volatility.
All options and performance rights have both market and non-market vesting conditions with the exception
of those issued to Non-Executive Directors in prior periods. Non-market vesting conditions include Group
and individual performance targets such as permitting milestones, exploration drilling rates or completion of
business improvement projects. Details of the vesting condition relating to options and performance rights
issued to executive Directors are included in the Remuneration & Nomination Committee Report.
G. Per share amounts
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)
Diluted loss per share (cents)
Year Ended
31 December 2023
Year Ended
31 December 2022
28,932,859
47,142,818
282,504,794
267,970,085
282,504,794
267,970,085
(10.24)
(10.24)
(17.59)
(17.59)
As at 31 December 2023, there are 2,792,478 potentially dilutive share options (31 December 2022:
14,201,426 potentially dilutive share options) which were not included in the calculation of diluted earnings
per share as their conversion to ordinary shares would have decreased the loss per share.
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Notes to the consolidated financial statements - Continued
H. Foreign currency translation reserve
The table below reconciles the tax credit/(charge) on the Group’s loss for the year with the standard rate of
corporation tax in the United Kingdom:
I. Cash flow from financing activities
In the year to 31 December 2023, net cash flow proceeds from the issue of ordinary shares in the year were
$32,767,588 (31 December 2022: $747,379). Transaction costs arising from equity financing activities
totaled $2,111,505 (31 December 2022: $86,199), as set out in note 13B.
Foreign Currency
Translation Reserve
1,073,214
(In USD)
187,119
1,260,333
50,372
1,310,705
Loss before tax
Tax credit on loss at standard UK rate of 23.52%
(2022 - 19%)
Effects of:
Year Ended
31 December 2023
Year Ended
31 December 2022
28,932,859
47,142,818
6,805,008
8,957,135
Expenses not deductible for tax purposes
(1,463,970)
(4,405,522)
Income not taxable
Effects of overseas tax rates
Unrecognised taxable losses and timing differences
Total income taxes
58,545
(1,889,159)
(3,510,424)
-
(525,663)
(4,025,950
-
B. Deferred tax
Deferred tax assets on certain corporation tax losses and other short-term temporary differences totaling
$75.6m (31 December 2022: $56.1m) have not been recognised because of uncertainty regarding
recoverability against future taxable profits. These assets will be recognised if utilization of the losses and
other temporary differences becomes probable.
Year Ended
31 December 2023
Year Ended
31 December 2022
-
-
-
-
-
-
(In USD)
UK
Bosnia and Herzegovina
Serbia
-
-
-
-
-
-
31 December
2023
31 December
2022
44,923,652
17,094,404
13,582,218
75,600,274
37,864,738
6,808,636
11,377,330
56,050,704
(In USD)
31 December 2021
Other comprehensive income
31 December 2022
Other comprehensive income
31 December 2023
14. TAXATION
A. Current taxation
The tax credit/(charge) for the year comprises:
(In USD)
Current tax expense
Prior year tax expense
Overseas tax
Deferred tax expense
Adjustments to deferred tax liability
Total tax credit/(charge)
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15. EXPLORATION ACTIVITIES EXPENSED
17. FINANCE INCOME AND EXPENSE
(In USD)
Year Ended
31 December 2023
Year Ended
31 December 2022
(In USD)
Note
Year Ended
31 December 2023
Year Ended
31 December 2022
Exploration activities expensed
2,090,498
1,361,548
Interest income
Exploration activities expensed during the year represent costs incurred at the Raska Project, for which a
JORC-compliant resource has not yet been established.
Foreign exchange gain
Interest capitalised within property,
plant and equipment
7
16. GENERAL AND ADMINISTRATIVE EXPENSES
Finance income
1,567,464
208,826
(827,515)
948,775
334,497
-
-
334,497
Note
Year Ended
31 December 2023
Year Ended
31 December 2022
10
7
6,459,385
1,128,926
7,588,311
2,810,932
390,192
475,950
330,069
38,900
557,497
172,652
1,714,045
609,299
339,967
1,312,956
889,157
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
17,229,927
10,639,784
Interest income of $827,515 above and accrued interest expense of $12,999,260 on the Orion Senior Debt
Finance Package has been capitalised within additions to the mine under construction asset, a net capitalised
amount of $12,171,745, as shown in note 7.
Interest income relates to interest earned on cash holdings.
(In USD)
Interest expense
Interest expense on lease liabilities
Amortisation of day one fair value gain on
Copper Stream
Fair value Copper Stream liability revaluation
Foreign exchange loss
Finance expense
Note
Year Ended
31 December 2023
Year Ended
31 December 2022
6
10
5
6
1,718,284
1,103,318
91,966
2,548,423
-
5,461,991
1,890,937
589,377
-
-
4,592,379
7,072,693
$1,718,284 of interest expense above, as shown in note 6, relates to the QRC convertible bond. See note 6 d)
for further details.
(In USD)
Wages and salaries
Consultancy fees
Cash remuneration in respect of
qualifying services
Professional fees
Amortisation
Depreciation
Audit fee
Non audit services
Marketing
Stock exchange fees
Property Costs
IT expense
Insurance
Transportation costs
Other costs
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18. SEGMENTAL INFORMATION
The segmental analysis of the Group’s loss after tax and movement in non-current assets is as follows:
Year ended 31 December 2023
Year ended 31 December 2022
(In USD)
Exploration costs
General and administrative expenses
Share-based payment expense
Exploration and evaluation impairment
Other income
Operating Loss
Finance income
Finance expense
Revaluation of derivative liability
Revaluation of deferred consideration
Loss before taxation
Tax charge
Loss for the year
Bosnia
-
(9,311,012)
-
-
-
(2,090,498)
(2,058,972)
Serbia
Corporate
Total
-
(2,090,498)
Bosnia
(775)
(5,859,942)
(17,229,927)
(3,444,901)
-
-
-
(1,561,020)
(1,561,020)
-
2,442
-
2,442
-
-
Serbia
Corporate
Total
(1,360,773)
(1,203,301)
-
(1,361,548)
(5,991,582)
(10,639,784)
-
(1,295,293)
(1,295,293)
(23,186,959)
(23,186,959)
9,024
9,024
(9,311,012)
(4,149,470)
(7,418,520)
(20,879,003)
(3,445,676)
(2,564,074)
(30,464,810)
(36,474,560)
-
-
(1,055,737)
(28,394)
-
-
-
-
948,775
(4,377,860)
(3,540,640)
-
948,775
(5,461,991)
(3,540,640)
-
-
-
(735,100)
(64,253)
-
-
-
-
334,497
(6,273,340)
(4,081,401)
151,339
334,497
(7,072,693)
(4,081,401)
151,339
(10,366,749)
(4,177,864)
(14,388,245)
(28,932,859)
(4,180,776)
(2,628,327)
(40,333,715)
(47,142,818)
-
-
-
-
-
-
-
-
(10,366,749)
(4,177,864)
(14,388,245)
(28,932,859)
(4,180,776)
(2,628,327)
(40,333,715)
(47,142,818)
Purchase of mining under construction assets
108,637,946
-
-
108,637,946
37,390,342
-
-
37,390,342
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19. OTHER INCOME
(In USD)
Recharge of corporate office facilities and services
Year Ended
31 December 2023
Year Ended
31 December 2022
2,442
2,442
9,024
9,024
Recharge of corporate office facilities and services relates to shared facilities of the Company’s registered UK
office address. See related party disclosures for further details.
20. RELATED PARTY DISCLOSURES
A. Related party transactions
The Group’s related parties include key management personnel, companies which have directors in common
and their subsidiaries and any entities over which the Company may exert significant influence. The Company
has identified the following related parties:
• Swellcap Limited, an entity controlled by Paul Cronin;
• Black Dragon Gold Corp, an entity of which Paul Cronin is the Non Executive Chairman and substantial
shareholder;
• Legal Solutions d.o.o., an entity of which Sanela Karic is Chief Executive Officer and substantial
shareholder;
• OMF Fund III (F) Ltd an entity controlled by Orion Resource Partners (UK) LLP, a major shareholder in
Adriatic Metals PLC and provider of the Senior Secured Debt to Adriatic Metals Trading and Finance Ltd.;
• Ventura Trustees Limited provides administration and accountancy services to Adriatic Metals Trading
and Finance Ltd. Darren English and Stuart Hodgson are directors, and Paulina Harvey is an employee, of
Ventura Trustees Limited, in which capacity they are also directors of subsidiary Adriatic Metals Trading
and Finance Ltd.,
• Baccata Secretaries Limited provides company secretarial services to Adriatic Metals Trading and Finance
Ltd. Darren English and Stuart Hodgson are directors of Baccata Secretaries Limited, in which capacity
Darren English is a director, and Stuart Hodgson was a director until his resignation during the year, of
Adriatic Metals Trading and Finance Ltd.; and
• The Adriatic Foundation is a not-for-profit trust which was created in Bosnia and Herzegovina with the
objective of supporting the communities around the Vareš Project. Adriatic Metals PLC provided the initial
funding required for the formation of the Foundation. The Company has the ability to appoint the Board
of Trustees of the Foundation and the Foundation has therefore been classified as a related party on the
basis that the Company is in a position to yield significant influence over it.
151 of 170
Transactions and balances with these related parties were as follows:
Year ended
31 December 2023
Year ended
31 December 2022
(Paid to)/
received from
the related party
Balance (owed
to)/due from
the related
party
(Paid to)/
received from
the related
party
Balance (owed
to)/due from the
related party
2,442
-
-
-
8,973
1,543
(6,276)
-
Travel Expenses
Nature of
transactions
Corporate office
facilities and
services
(193,468)
(25,610)
(14,381)
(2,875)
Legal Services
60,000,000
(100,591,470)
30,000,000
(30,030,806)
Senior Secured
Debt
22,500,000
-
-
Copper Stream
(16,930)
-
(10,242)
(15,813)
(34,104)
(3,400)
396
(1,513)
-
-
-
-
Administration
and accountancy
services
Company
secretarial
services
Related Party
(In USD)
Black Dragon
Gold Corp
Black Dragon
Gold Corp
Legal Solutions
d.o.o
OMF Fund III
(F) Ltd
OMF Fund III
(F) Ltd
Ventura Trustees
Limited
Baccata
Secretaries
Limited
Adriatic
Foundation
The Company announced on 9 June 2021 its intention to donate 0.25% of the future profits from its
operations in Bosnia and Herzegovina to the Foundation.
Transactions with key management personnel are disclosed in note 20b below.
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
B. Key management personnel compensation
Compensation for key management personnel is shown in the table below. Key management personnel are
those persons having authority and responsibility for planning, directing and controlling the activities of the
Group. Key management personnel are considered to be the Non-Executive Directors and the Managing
Director and Chief Executive Officer in the year ended 31 December 2023. The year ended 31 December
2022 key management personnel also included the previous Chief Financial Officer up until departure.
21. DIRECTORS AND EMPLOYEES
Employees of the Group are all employees including Directors, key management personnel and personnel in
management positions engaged under management services contracts. The table below shows total costs
for all employees, including costs capitalised during the year.
(In USD)
Board fees
Consultancy fees
Short term incentive plan bonus
Other
Cash remuneration in respect of qualifying services
Share-based payments expense
Social security costs
Year Ended
31 December 2023
Year Ended
31 December 2022
441,662
444,737
329,904
-
1,216,303
290,244
28,687
1,535,234
385,455
465,257
272,597
117,561
29,512
1,270,382
(In USD)
Wages and salaries
Consultancy fees
Cash remuneration in respect of qualifying services
Social security costs
Defined contribution pension cost
1,240,870
Share-based payments expense
-
Total
Average number of employees
Year Ended
31 December 2023
Year Ended
31 December 2022
8,219,438
4,483,680
12,703,118
4,758,788
13,598
1,561,020
19,036,524
296
4,775,218
2,373,539
7,148,757
2,365,912
12,172
1,295,293
10,822,134
158
Share-based payments expense is stated at fair value at the time of grant using the Black-Scholes option
pricing model. Further details are available in note 13F of the accounts.
The average number of employees during the year increased to 296 in the year (31 December 2022 – 158
employees). This is due to the progression of the Vareš Project.
Exploration
Mining
Administration
Total
Serbia
Bosnia
23
-
8
31
39
156
60
255
UK
-
-
10
10
Share-based payments expense is stated at fair value at the time of grant using the Black-Scholes option
pricing model. Further details are available in note 13F of the accounts.
Consultancy fees above include amounts paid to related party companies controlled by key management
personnel.
The balances owed at 31 December 2023 in respect of STIP bonuses was $329,738 to the Managing
Director and Chief Executive Officer (prior year $279,887). There were no other balances outstanding with
related parties at 31 December 2023 (31 December 2022: $nil)
152 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
Directors’ remuneration is set out below:
(In USD)
Board fees
Consultancy fees
Accrued cash bonus
Benefits
Cash remuneration in respect of
qualifying services
Average number of Directors
Year Ended
31 December 2023
Year Ended
31 December 2022
441,662
444,737
329,904
60,503
385,455
380,542
272,597
-
1,276,806
1,038,594
6
6
There were no directors’ share awards that vested in the year (31 December 2022: nil).
The highest paid Director in the year ended 31 December 2023 received cash remuneration, excluding
notional gains on share options or performance rights, of $866,590 (31 December 2022: $601,303).
22. REHABILITATION PROVISION
Based on construction activity on the Vareš Project during the year, the Group has recognised a provision
for the discounted future costs of closure, restoration and environmental obligations of $3,673,787 (31
December 2022: $4,431,212). The main reason for the reduction in the provision is due to the increase in the
mine life resulting in heavier discounting of future cashflows.
(In USD)
At 1 January
Note
31 December 2023
31 December 2022
4,431,212
-
Recognition of rehabilitation provision
-
4,431,212
Impact of life of mine extension
7
At 31 December
(757,425)
3,673,787
-
4,431,212
The provision represents the net present value of the Company’s best estimate of the Vareš mine’s future
closure, restoration and environmental obligations, based on the extent of land and other disturbance at
period end caused by construction and other activities.
The Vareš mine is not yet operational, and the estimated mine life has increased from ten to eighteen years to
2041. Expenditure for rehabilitation will therefore occur more than 5 years after the balance date.
153 of 170
The present value of the above provision is measured by unwinding the discount on expected future cash
flows over the period up to closure, using a discount factor of 4.2% that reflects the risk-free rate of interest.
The yield of US Treasury bonds with a maturity profile commensurate with the anticipated rehabilitation
schedule has been used to determine the discount factor applied to anticipated future rehabilitation costs.
The sensitivity of the provision to a 1% change in the discount factor is shown below:
• a decrease from 4.2% to 3.2% would increase the provision by $0.7m with a corresponding increase in
Property, plant and equipment; and
• an increase from 4.2% to 5.2% would decrease the provision by $0.6m with a corresponding decrease in
Property, plant and equipment.
Future climate change risks could impact the rehabilitation provision both in terms of the nature of
decommissioning and rehabilitation required, as well as the cost of these activities given its long-term nature.
Climate change risks and mitigations have been considered in the TCFD Climate Disclosure within the
Directors report, based on scenario analysis of potential future transition and physical risks. Specific detailed
analysis of the potential impacts of climate risks will be carried out in future periods, which could result in
adjustments to the provision.
23. COMMITMENTS AND CONTINGENCIES
At 31 December 2023, the Group had entered into a number of supply and works contracts as part of the
development of the Vareš Project. The expected payments in relation to these contracts which were not
required to be recognised as liabilities at 31 December 2023 amounted to approximately $11m. Of this total,
approximately $6m relates to contracts that the Group is able to terminate at any point in time. The amount
payable following termination would be less than this total, with the precise amount depending on the timing
of termination in each case. In addition, of the same total of approximately $11m, all relate to contracts that
can be suspended by the Company, with the Company paying only direct costs that are reasonably incurred
and directly related to any such suspension for the time the supply of the goods is suspended.
At 31 December 2023, the Group has also entered into a five-year mining services contract with Nova
Mining & Construction d.o.o. The Group is able to terminate the contract for convenience at any point in time.
Amounts payable following such termination would include demobilisation and similar costs, as well as a
compensation payment of up to $5m, depending on the timing of termination. As this amount reduces on a
straight line basis over the life of the contract, the termination for convenience amount at 31 December 2023
would be $3.4m. In addition, the Group has committed to purchase the mining equipment provided by Nova
Mining & Construction d.o.o., in order to ensure continuity of operations.
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the consolidated financial statements - Continued
24. NET CASH AND BORROWINGS
25. SUBSEQUENT EVENTS
An analysis of net cash and borrowings, including lease liabilities, and movements in each year is shown
below.
(In USD)
Cash and cash equivalents
Borrowings
Lease liabilities
Note
31 December 2023
31 December 2022
6
10
44,856,215
(140,800,564)
(8,136,567)
(104,080,916)
60,585,277
(42,498,052)
(8,186,741)
9,900,484
Borrowings
Lease
liabilities
Cash and cash
equivalents
Total
Net cash/(borrowings) at 1 January 2022
(16,071,066)
(767,098)
112,506,468
95,668,304
Net cash used in operating activities
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
-
On 24 January 2024, the Company announced that the fourth and final Senior Secured Debt tranche
of $30m had been drawn down under the Orion Senior Secured Debt Facility, and that the first quarterly
debt repayment to Orion had been rescheduled from 30 June 2024 to 31 December 2024, with quarterly
repayments thereafter..
On 27 February 2024, the Vareš Project in Bosnia and Herzegovina produced its first concentrate. The
Vareš Processing Plant will continue ramping up with campaign processing, via the down blending of high-
grade stockpiled ore with lower grade stockpiles. The campaign processing is intended to facilitate plant
performance optimisation. The Project will continue to ramp up to consistent production to nameplate
processing capacity of approximately 65,000t per month targeted to be reached by Q4 2024.
On 4 March 2024, the Company allotted 10,981,770 new ordinary shares of £0.013355 each in connection
with the conversion by Queens Road Capital Investment Ltd of unsecured convertible bonds in the principal
amount of $20m at a conversion price of A$2.7976 ($1.8212 or £1.4394) per share. The shares rank pari
passu with the Company’s existing ordinary shares.
Lease additions
Foreign exchange movements
-
-
Changes in fair value due to modifications
(214,605)
(9,360,066)
67,082
(16,850)
-
(9,360,066)
(4,433,976)
(4,366,894)
-
-
(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
Interest expense
Net interest payments
Capital payments on leases
Settlement of deferred consideration
Net cash arising from issue of equity
Net cash/(borrowings) at 31 December 2022
(42,498,052)
(8,186,741)
60,585,277
9,900,484
Net cash used in operating activities
Net cash used in investing activities
-
-
Net proceeds from loans and borrowings
(81,060,421)
-
-
-
(22,886,414)
(22,886,414)
(99,485,435)
(99,485,435)
81,060,421
-
Lease additions
Foreign exchange movements
Changes in fair value
Interest expense
Net interest payments
Capital payments on leases
Net cash arising from issue of equity
-
-
(1,581,470)
-
(1,581,470)
(87,647)
(356,108)
(443,755)
(4,419,547)
-
(14,717,544)
(1,103,318)
-
-
(4,419,547)
(15,820,862)
1,895,000
844,592
(2,739,592)
1,978,017
(1,978,017)
-
-
-
30,656,083
30,656,083
-
-
Net cash/(borrowings) at 31 December 2023
(140,800,564)
(8,136,567)
44,856,215
(104,080,916)
154 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Parent company statement of financial position
At 31 December 2023
(In USD)
Equity
Share capital
Share premium
Merger reserve
Warrants reserve
Foreign currency translation reserve
Share-based payment reserve
Retained deficit
Total equity
Total liabilities and equity
Note
31 December 2023
31 December 2022
5,712,782
5,376,349
174,145,606
143,829,631
23,497,730
23,497,730
2,743,303
2,513,538
3,591,220
2,743,303
2,513,538
4,943,436
(74,494,561)
(64,256,654)
137,709,618
118,647,333
165,661,107
142,765,930
The accompanying notes on pages 157-160 are an integral part of these Parent Company Financial
Statements.
The Company’s loss after tax for the year ended 31 December 2023 was $12,575,142 (year ended 31
December 2022: $48,630,562).
The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were
approved and authorised for issue by the Board of Directors on 27 March 2024 and were signed on its behalf
by:
Paul Cronin
Managing Director & Chief Executive Officer
Mike Norris
Chief Financial Officer
(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 EQUITY
Current liabilities
Accounts payable and accrued liabilities
Lease liabilities
Borrowings
Derivative liability
Total current liabilities
Non-current liabilities
Accounts payable and accrued liabilities
Lease liabilities
Borrowings
Derivative liability
Total non-current liabilities
Total liabilities
155 of 170
Note
31 December 2023
31 December 2022
f
i
f
g
m
h
n
o
o
h
n
o
o
29,676,016
33,158,466
62,834,482
34,929,119
67,652,967
28,576
215,963
27,143,743
22,674,681
49,818,424
34,929,119
57,733,284
35,406
249,697
102,826,625
92,947,506
165,661,107
142,765,930
1,676,757
49,239
16,108,967
9,909,859
27,744,822
-
206,667
-
-
206,667
27,951,489
1,171,031
48,889
-
1,219,920
5,240
238,535
16,285,683
6,369,219
22,898,677
24,118,597
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Parent company statement of changes in equity
For the year ended 31 December 2023
(In USD)
31 December 2021
Comprehensive expense for the year
Loss for the year
Total comprehensive expense
Share issue costs
Exercise of options
Issue of options
2022 STIP awards
Expiry/cancellation of options/warrants
Acquisition of subsidiary
31 December 2022
Comprehensive expense for the year
Loss for the year
Total comprehensive expense
Issue of share capital
Share issue costs
Exercise of options
Issue of options
2022 STIP awards
Expiry/cancellation of options/warrants
Note
Share
Capital
Share
Premium
Merger
Reserve
Share-based
Payment Reserve
Warrants
Reserve
Foreign Currency
Translation Reserve
(Restated*)
Retained earnings
Total
Equity
5,279,546
143,259,675
23,019,164
5,778,882
2,743,303
2,513,416
(17,756,831)
164,837,155
e
j
j
j
j
j
e
j
j
j
j
j
j
-
-
-
91,224
-
-
-
5,579
-
-
(86,199)
656,155
-
-
-
-
-
-
-
-
-
-
-
478,566
-
-
-
(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
-
-
-
-
251,055
31,427,918
-
(2,111,505)
81,196
469,929
-
-
4,182
529,633
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,337,235)
1,644,777
(576,000)
(83,758)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(12,575,142)
(12,575,142)
(12,575,142)
(12,575,142)
-
-
2,337,235
-
-
-
31,678,973
(2,111,505)
551,125
1,644,777
(42,185)
(83,758)
31 December 2023
5,712,782
174,145,606
23,497,730
3,591,220
2,743,303
2,513,538
(74,494,561)
137,709,618
See note b to the Parent Company Financial Statements for details of the restatement of the prior year comparatives.
The accompanying notes on pages 157-160 are an integral part of these Parent Company Financial Statements.
156 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Notes to the parent company financial statements
A. Corporate information
These Financial Statements represent the individual financial statements of Adriatic Metals PLC (the “Parent
Company”), the parent company of the Adriatic Metals Group for the year ended 31 December 2023.
C. Accounting policies
In addition to the accounting policies in note 3 of the Group consolidated financial statements, the following
accounting policies are relevant only to the Parent Company Financial Statements.
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 27 March
2024.
ii ) Basis of preparation
These Financial Statements have been prepared on a historical cost basis, except for certain financial
instruments that have been measured at fair value.
These Parent Company Financial Statements are presented in USD. Unless otherwise stated, all amounts
indicated by “$” represent USD.
iii ) Going concern
Refer to accounting policies in note 2C to the notes to the consolidated financial statements.
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.
D. Critical accounting estimates and judgements
The preparation of the Parent Company’s Financial Statements requires management to make certain
judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income
and expenses. The actual results are likely to differ from these estimates. In addition to the critical accounting
estimates and judgements in note 4 to the consolidated financial statements, the following information about
the material judgements, estimates, and assumptions that have the most significant effect on the recognition
and measurement of assets, liabilities, income and expenses that are relevant only to the Parent Company
Financial Statements are discussed below.
i ) Value of investments in subsidiaries
The Parent Company’s investments in subsidiaries, which are made via capital contributions or arise upon
acquisition, are reviewed for impairment if events or changes indicate that the carrying amount may not be
recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to
the net present value of expected future cash flows of the relevant generating unit or disposal value if higher.
As set out in note i, following a reorganisation of the entities holding exploration tenements in Serbia, as a
result of which all four licences were transferred to Ras Metals d.o.o., Adriatic Metals Jersey Limited was no
longer the owner of any tenements with licences at 31 December 2022. This was identified as an impairment
indicator in relation to the Parent Company’s investment in Adriatic Metals Jersey Limited, as it cast doubt
on Adriatic Metals Jersey Limited’s fair value. A judgement was made to recognise a full impairment of
$3,973,286 against the investment balance.
157 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the parent company financial statements - Continued
As also set out in note i, impairment indicators were identified in the year ended 31 December 2022 in
relation to the Raska Project and judgement was made to recognise an impairment of $22,177,477 against
the carrying amount of the investment in Ras Metals d.o.o., holder of the Raska Project tenements, resulting
in a carrying amount of $8,500,000 at 31 December 2022. The carrying amount has been determined by a
benchmarking exercise using industry standard valuation measures. No further indicators of impairment have
been noted at 31 December 2023.
Intercompany loans
ii )
As set out in note f, judgement has been made to establish a provision of $11,932,591 (31 December 2022:
$7,489,859) against foreign exchange adjusted receivables on the basis that the Raska Project impairment
cast doubt on the subsidiaries’ ability to repay the balances outstanding in the future.
E. Loss for the year
The Parent Company has taken advantage of the exemption under section 408 (3) of the Companies Act
2006 and thus has not presented its statement of comprehensive income in these Parent Company Financial
Statements. The Parent Company’s loss after tax for the year ended 31 December 2023 is $12,575,142 (year
ended 31 December 2022: $48,630,562).
F. Receivables and prepayments
Receivables contain amounts receivable for VAT, prepaid expenses and deposits paid. All receivables are held
at cost less any provision for impairment.
The Raska Project impairment set out in note d cast doubt over the ability of the subsidiaries to repay
intercompany balances owed to the Parent Company and a provision of $11,932,591 at 31 December 2023
(prior year: $7,489,859) was recognised, representing 100% of the balance of the receivables relating to the
Raska Project reducing the non current amounts receivable from subsidiaries from $79,585,558 to a net
receivable $67,652,967 (31 December 2022: from $65,223,143 to net receivable $57,733,284).
All current receivables due within one year as follows:
(In USD)
Accrued interest income
Prepayments and deposits
Taxes recoverable
Amounts receivable from subsidiaries
Other receivables
31 December 2023
31 December 2022
59,321
215,179
94,574
32,789,392
-
33,158,466
57,114
202,118
74,184
22,309,041
32,224
22,674,681
All non-current receivables due more than one year as follows:
(In USD)
Amounts receivable from subsidiaries
31 December 2023
31 December 2022
67,652,967
67,652,967
57,733,284
57,733,284
G. Property, plant and equipment
(In USD)
Cost
31 December 2021
Additions
Foreign exchange difference
31 December 2022
Additions
31 December 2023
Depreciation
31 December 2021
Charge for the year
31 December 2022
Charge for the year
31 December 2023
Net Book Value
31 December 2022
31 December 2023
Land & Buildings
Plant and machinery
Total
23,570
-
-
23,570
-
23,570
4,857
2,356
7,213
2,358
9,571
16,357
13,999
79,800
10,110
2,546
92,456
1,612
94,068
52,011
21,396
73,407
6,084
79,491
19,049
14,577
103,370
10,110
2,546
116,026
1,612
117,638
56,868
23,752
80,620
8,442
89,062
35,406
28,576
158 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Notes to the parent company financial statements - Continued
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 2023
31 December 2022
337,525
1,284,135
55,097
-
89,199
918,861
70,472
92,499
1,676,757
1,171,031
The breakdown of non-current accounts payable and accrued liabilities is as follows:
(In USD)
31 December 2023
31 December 2022
Amounts payable to subsidiaries
-
-
5,240
5,240
Investments in subsidiaries
I.
The breakdown of the investments in subsidiaries is as follows:
(In USD)
31 December 2021
Impairment
Foreign currency revaluation
31 December 2022 and 31 December 2023
Eastern Mining d.o.o.
-
-
-
-
Adriatic Metals
Holdings BIH Limited
26,426,143
-
20
26,426,163
Adriatik Metals d.o.o.
RAS Metals d.o.o.
2,956
-
-
2,956
30,677,477
(22,177,477)
-
8,500,000
Adriatic Metals
Jersey Ltd
3,973,286
(3,973,286)
-
-
Total
61,079,862
(26,150,763)
20
34,929,119
Following a reorganisation of the entities holding exploration tenements in Serbia, as a result of which all four
licenses were transferred to Ras Metals d.o.o., Adriatic Metals Jersey Limited was no longer the owner of
any tenements with licenses at 31 December 2022. This was identified as an impairment indicator in relation
to the Parent Company’s intercompany receivable from Adriatic Metals Jersey Limited, as it cast doubt on
Adriatic Metals Jersey Limited’s ability to repay the balance in the future. A judgement was made to recognise
a full impairment of $3,973,286 against the receivable balance.
During the year ended 31 December 2022, impairment indicators were noted in relation to the Raska Project,
see note 8 to the Consolidated Finance Statements for further information. This resulted in an impairment of
$22,177,477 against the investment in Ras Metals d.o.o., down to a carrying amount of $8,500,000 on the
basis that the recoverable amount of the investment value is equal to the fair value less cost of disposal of the
exploration and evaluation asset in line with the requirements of IAS 36.
No further indicators of impairment or reversal of previous impairment have been identified in the year to 31
December 2023.
The list of subsidiaries of the Parent Company is presented in note 3A to the notes to the consolidated
financial statements.
J. Equity
The balances and movements in share capital, share premium, merger reserve, share-based payment reserve
and warrants reserve are as detailed in note 13 to the Group consolidated financial statements.
159 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Of this amount, $49,239 is recognised as a current liability (31 December 2022: $48,889) and the remainder
$206,667 is shown within non-current liabilities (31 December 2022: $238,535).
Borrowings and derivative liability
The movements in the QRC convertible debt and its embedded derivative liability are as detailed in notes 6 a)
to 6 c) to the Group consolidated financial statements.
The Orion Senior Secured Debt referred to in note 6b to the consolidated financial statements is held in
Jersey based Group subsidiary, Adriatic Metals Trading and Finance Limited, and is therefore not included in
the Parent Company Financial Statements.
O. Commitments
Commitments relating to the Parent Company have been disclosed in note 23 to the Group consolidated
financial statements.
The Parent Company has provided a Letter of Support to its subsidiaries Adriatic Metals (UK) Ltd and Adriatic
Metals Holdings BIH Limited (“BIH”), confirming that it does not intend to recall intragroup payables should
they not have the financial capability to settle them. The Parent Company will continue to support both in
meeting its liabilities as they fall due, for a period of not less than 12 months from the date of signing of these
financial statements.
P. Subsequent events
Subsequent events relating to the Parent Company have been disclosed in note 25 to the Group consolidated
financial statements.
Notes to the parent company financial statements - Continued
K. Related party disclosures
The Parent Company’s related parties include key management personnel, companies which have directors
in common and its subsidiaries.
Ownership of subsidiaries is disclosed in note 3A of the Group consolidated financial statements.
Transactions with its Directors and key management personnel and transactions with companies which have
directors in common during the year have been disclosed in notes 20 and 21 to the Group consolidated
financial statements.
L. Financial assets at fair value through profit and loss
The movements in financial assets at fair value through profit and loss are as detailed in note 11 to the
Group consolidated financial statements. There are no differences compared with the Parent Company’s
transactions other than as stated in note o below.
M. Right-of-use asset
Under IFRS 16, the Parent Company’s registered office has been recognised as a right-of-use asset and the
carrying amounts of right-of-use assets and the movements during the year are set out below:
(In USD)
31 December 2021
Depreciation
31 December 2022
Depreciation
31 December 2023
Land & buildings
283,169
(33,472)
249,697
(33,734)
215,963
N. Lease liabilities
Set out below are the carrying amounts of lease liabilities and the movements during the year:
(In USD)
31 December 2021
Interest expense
Payments
31 December 2022
Interest expense
Payments
31 December 2023
160 of 170
316,224
21,369
(50,169)
287,424
19,187
(50,705)
255,906
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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 20 March
2024. 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
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.
161 of 170
Principles and recommendations
Comment
1.2
1.3
1.4
1.5
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.
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.
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 2023
and 2024.
Further detail on the Diversity Policy is included in the
Strategic Report of the 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.
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Additional ASX information (unaudited) - Continued
Principles and recommendations
Comment
Principles and recommendations
Comment
1.6
1.7
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.
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 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.
2.
2.1
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.
The Company’s Corporate Governance Plan includes
a section on performance evaluation practices
adopted by the Company.
The Chairman monitors the Board and the Board
monitors the performance of any senior executives
who are not Directors, including measuring actual
performance against planned performance.
The most recent performance evaluation of the
Managing Director and CEO was performed during
January 2024.
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.
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.
2.3
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.
162 of 170
’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.
The Board’s skills matrix is set out below.
The matrix reflects the Board’s objective to have
an appropriate mix of industry and professional
experience including skills such as leadership,
governance, strategy, finance, risk, IT, HR. policy
development, international business and customer
relationship.
Additionally, external consultants may be brought it
with specialist knowledge to complement the board’s
matrix of skills in the event that a deficiency were to
exist in required areas.
Those directors who are considered to be
independent are specified in the Directors Report.
The length of service of each of the Company’s
directors is included in the Directors Report.
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Additional ASX information (unaudited) - Continued
Principles and recommendations
Comment
Principles and recommendations
Comment
2.4
2.5
2.6
3.
3.1
A majority of the board of a listed entity
should be independent directors.
The majority of the Company’s directors are
independent.
The Chair of the board of a listed entity should
be an independent director and, in particular,
should not be the same person as the CEO of
the entity.
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.
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.
163 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Additional ASX information (unaudited) - Continued
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.
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.
164 of 170
Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 Additional ASX information (unaudited) - Continued
Principles and recommendations
Comment
Principles and recommendations
Comment
7.
7.3
Recognise and manage risk - continued
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.
7.4
A listed entity should disclose whether it
has any material exposure to economic,
environmental and social sustainability risks
and, if it does, how it manages or intends to
manage those risks.
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.
8.
8.1
8.2
8.3
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.
A listed entity should separately disclose
its policies and practices regarding the
remuneration of Non-Executive directors and
the remuneration of executive directors and
other senior executives.
A listed entity which has an equity-based
remuneration scheme should: (a) have a policy
on whether participants are permitted to enter
into transactions (whether through the use
of derivatives or otherwise) which limit the
economic risk of participating in the scheme;
and (b) disclose that policy or a summary of it.
The Company has established a Remuneration &
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.
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.
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023 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-23
M&A
Social & Community Management
Environmental Management
Corporate Governance
International/Balkan experience
Capital Management & Legal
Stakeholder Relations
Information Technology
Commodity Markets & Hedging
Treasury & FX Hedging
Risk Management
Financial Reporting
Project Development & Operations
Project Evaluation & Feasibility Studies
Exploration
Strategy
0
1
2
3
4
5
6
Expert - Deep knowledge / formal qualification or experience over many years
Moderate – Moderate skills / experience – knowledgeable but not highly skilled
Aware - Some knowledge and can follow a discussion
Additional ASX information (unaudited) - Continued
BOARD SKILLS MATRIX
Michael Rawlinson
Peter Bilbe
B. Economics. Master of Science
B. Engineering Mining
Investment banking
Resources
Mining Finance
NED – LSE, ASX
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
Paul Cronin - CEO
B.Com & MBA
Resource Finance
CEO experience
M&A
Exec & NED ASX, LSE, TSX
Sanela Karic
LLB
Bosnian Law
Corporate affairs
M&A
Human Resources
NED – LSE
Julian Barnes
BSC (Hons), PhD
Geologist
Exploration & development
Balkan experience
Project generation & DD
NED – TSX, LSE, ASX
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Financial Statementswww.adriaticmetals.comAdriatic Metals | Building a new European Mining Company | Annual Report for the Year Ended 31 December 2023
Additional ASX information (unaudited) - Continued
SHAREHOLDINGS
At the time of publishing this Annual Report there is no on-market buy-back.
SUBSTANTIAL SHAREHOLDINGS
The Directors are aware of the Company’s top 20 shareholders as follows at 20 March 2024, 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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
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