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Adriatic Metals (ADT1) has just started construction of its flagship high-grade Vares Silver Project in Bosnia & Herzegovina. The project boasts robust economics from its recent Definitive Feasibility Study, released in August this year, of $1.1 billion post-tax net present value, with a 134% internal rate of return and an upfront capital expenditure of $168 million.
Adriatic’s flagship Vares Silver Project is one of the highest grade undeveloped polymetallic mining projects in the world, with an Ore Reserve of 7.3Mt at 485g/t silver equivalent. It is this exceptionally high grade ore which makes it one of the lowest cost silver mining projects globally, with an all-in sustaining cash cost of $7.3 per ounce silver equivalent. Once production commences in Q2 2023, the project is expected to generate $200-250 million in post-tax free cashflow per annum. The current market capitalisation of Adriatic is circa $530 million.
Founded in 2017, Adriatic’s Vares Silver Project has advanced at record pace. The project has gone from discovery to being fully permitted and financed for construction within as little
as four and a half years. A process that typically takes other mining peers well over a decade.
TRANSFORMATIONAL 2021
The company has had a transformational past 12 months. The year began with receipt of its Project Environmental Permit. This was subsequently followed, mid-year, with the Exploitation Permit, the last required permit for construction.
In August, just 10 months following the completion of the 2020 Pre-Feasibility Study, the company released its 2021 Definitive Feasibility Study, with further improved economics.
Shortly thereafter, in October, the company announced a $244.5 million project finance package, consisting of $102.0 million in equity and $142.5 million in debt. Of the funding package, private equity group Orion Resource Partners provided $50.0 million of the equity requirement, as well as the entire debt package. This package now fully finances the Vares Silver Project into production, whilst leaving a healthy budget for ongoing exploration.
Within the past few weeks, Adriatic has announced the discovery of a high-grade northwest extension to its underground deposit called Rupice. This significantly increases the potential of adding mine life to the existing 10 year life of mine. The delineated strike length of the Rupice underground deposit is just 650 metres. The recent drilling encountered high-grade mineralisation as far as 145 metres northwest from the Rupice deposit - a possible strike extension of over 20%.
In addition, recent drilling has shown there is also potential for mineralisation to be open to the southeast. In the New Year, the company will be focused on stepping up exploration efforts to further test the extents of the mineralisation, with the aim of delineating additional resources in both directions along strike.
ESG FOCUS
In April 2021, the company set up a charitable trust in Bosnia called the ‘Adriatic Foundation’. The objective of the Foundation is to support the communities around the Vares project, investing in initiatives that will create a positive long-term legacy, thereby creating alignment between the company and the communities that the Foundation supports. The initiatives will be specifically focussed on improving education, healthcare and environmental protection.
The Foundation is managed by a board of trustees, that includes four representatives from the local communities surrounding the Vares Silver Project. The board of trustees will be responsible for the community investment decisions of the Foundation.
Adriatic Metals provided an initial funding of €100,000, as well as an ongoing commitment of 0.25% of profits from Project operations. In addition, Adriatic’s CEO and managing director, Paul Cronin, and non-executive Director Sanela Karic, have personally made further contributions that are in total worth almost €450,000.
In November 2021, the company released its Project Environmental and Social Impact Assessment. Adriatic Metals is the first foreign direct investor in Bosnia & Herzegovina to produce an ESIA. Not only that, it was also produced to the highest possible international standards, as set out by its shareholder, the European Bank for Reconstruction and Development.
The ESIA is currently under public review until the end of the year, and thus far, has been very positively received by the local communities around Vares.
2022: Another Big Year
2022 is set to be another transformative year for Adriatic. The top priority is to build the Vares Silver Project. With Project construction now underway, production is expected to commence in the second quarter of 2023.
Concurrent with Project construction, exploration activities will continue. The focus will be to determine the extent of the high-grade mineralisation recently intercepted both northwest and south east of the Rupice underground deposit. In addition, there are a number of identified high-conviction greenfield targets across its 41 square kilometres of Project concession area that Adriatic will also start turning its attention to in the New Year.
DISCLAIMER: This article was written by Adriatic Metals and published by Shares under a commercial agreement. It is not a recommendation to buy or sell the shares. The article originally appeared in Shares’ Spotlight report on 23 December 2021.
