REG - Adriatic Metals - Corporate Update

Adriatic MetalsAnnouncement

22/04/2024 07:00

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RNS Number : 4166L  Adriatic Metals PLC  22 April 2024

22 April 2024

Adriatic Metals PLC

("Adriatic Metals" or the "Company")

 

CORPORATE UPDATE

 

Adriatic Metals PLC (ASX:ADT, LSE:ADT1, OTCQX:ADMLF) is pleased to announce
an update on recent corporate activity.

 

Transition to Mining Operator at Rupice Mine

 

In June 2022, Adriatic and Nova Mining and Construction d.o.o, ('Nova')
entered into a Mining Services Contract, which was focused on the development
of the Rupice Mine. As announced in June 2023, Adriatic took the decision to
implement an Accelerated Development Action Plan (ADAP) and onboarded
experienced international operators in order to significantly improve
productivity levels on the basis that the development rate was not in line
with contractual expectations.

 

Following the success of the ADAP, Adriatic and Nova have agreed to terminate
the Mining Services Contract and enter into a settlement and termination
agreement effective on 20 April 2024. Accordingly, Adriatic has commenced the
transition process to take over as the mining operator at Rupice Mine.

 

The ADAP has been overseen by the Adriatic management team and includes
several key measures to improve underground development and productivity, as
follows:

 

·   New mining methodology introduced by the Adriatic Mining team
experienced in this area - implementation of single unit bolt, mesh bore
development cycle reducing the development fleet size by 60% and cycle times
by 65%. Whilst used internationally, the methodology is a European first and
due to its success, a third drilling jumbo is currently being commissioned.

·     Recruitment of several staff with advanced health and safety skills
and rapid mine development experience, providing one-on-one training to
national staff to accelerate the necessary transfer of skills.

·     Transition from 8 hour to 12 hour shifts, which has increased
operational time and subsequent productivity.

·     Improved understanding of underground rock mass conditions and
structural geology through additional geotechnical drilling and mapping.

·     Improved procurement practices including building longer term
regional partnerships which the Company believes will realise reduced mining
costs over time.

·      A greater emphasis on health and safety measures and improved
risk management.

·      A focus on environmental protection via an enhanced water
management approach.

 

 

Since implementing the Accelerated Development Action Plan in June 2023,
underground quarterly development has increased 71% despite poor ground
conditions persisting. Q1 2024 represented a 98% improvement in underground
development and in March 2024 underground development was 250m - a project
development monthly record. Further improvements are expected in the coming
quarter with the commissioning of the third jumbo.

 

 

Development metres by quarter

 

 

Adriatic and Nova have agreed constructive transition arrangements to ensure a
seamless handover of operations. This will be undertaken while Adriatic
obtains an operating licence, which is currently held by Nova as mining
contractor.  The transition is envisaged to take approximately 60 days to
complete.

 

The termination will involve payments to Nova totalling approximately US$11
million, associated with the transfer of underground and surface equipment,
spares and consumables inventory, leases, various infrastructure components
and key personnel. The first payment to Nova is due shortly after signing of
the termination agreement, with the final payment due once Adriatic has
received the operating licence. Adriatic will also assume certain financing
liabilities amounting to approximately US$6.5 million for Sandvik underground
mining equipment to be acquired by Adriatic.

 

Adriatic is confident that the transition to mining operator will result in
enhanced productivity, operational efficiencies, cost reductions and
improvements in health, safety and environmental standards. Additionally,
noticeable improvements in procurement are anticipated as Adriatic will focus
on obtaining better value inputs from a wider range of local and international
suppliers.

 

 

US$25 million Additional Loan Facility from Orion Mine Finance

 

Adriatic has agreed an additional short-term loan facility with Orion Mine
Finance ('Orion') of US$25 million. This is in addition to the original US$120
million Senior Secured debt facility provided by Orion in January 2022, which
has been fully drawn down, and subject to the same drawdown conditions and
interest rate.

These funds will be available in a single tranche during the period 1
September 2024 - 31 December 2024 as required for project-related purposes.

The additional tranche must be repaid within six months of utilisation in cash
or, at Orion's option, in silver credits. The amount of any silver credits
used to repay the additional tranche shall be calculated by reference to a
market price discounted by 2%.

The first quarterly debt repayment to Orion is scheduled on 31 December 2024,
with 10 quarterly repayments of principal, accrued interest and fees in even
instalments thereafter.

The final capital cost for the Project remains at US$188.9 million, including
over US$22.7 million of scope changes resulting from design enhancements,
improved water management facilities and additional mobile fleet.

 

 

Paul Cronin, Adriatic's Managing Director and CEO, commented:

 

"I am pleased with the progress made by our leadership team since the
initiation of our Accelerated Development Action Plan in June 2023. It is the
opportune time for us to transition to mining owner-operator and I would like
to thank Nova for their support over the last few years. We have a highly
experienced mining team at Adriatic dedicated to driving development, as
demonstrated by achieving a record-breaking 250 meters of underground progress
in March this year.

 

The Vares Project is expected to be one of the lowest-cost silver producers
globally. Our focus remains on driving down mining costs further through
enhanced operational efficiencies, rigorous cost management and optimised
procurement processes.

 

Once again, I would like to extend my gratitude to Orion for their long term
ongoing financial support as we accelerate the Vares Project to nameplate
capacity in Q4 2024."

 

-ends-

 

 

MARKET ABUSE REGULATION DISCLOSURE

The information contained within this announcement is deemed by the Company
(LEI: 549300OHAH2GL1DP0L61) to constitute inside ‎information for the
purpose of Article 7 of EU Market Abuse Regulation (EU) No. 596/2014 as it
forms part of UK domestic law by virtue of the European Union (Withdrawal) ACT
2018, as amended. The person ‎responsible for arranging and authorising the
release of this announcement on behalf of the Company is Paul Cronin, Managing
Director and CEO.

 

 

Authorised by Paul Cronin, Managing Director & CEO

For further information please visit: www.adriaticmetals.com
(http://www.adriaticmetals.com/) ; email: info@adriaticmetals.com
(mailto:info@adriaticmetals.com) , @AdriaticMetals
(https://twitter.com/AdriaticMetals) on Twitter; or contact:

 

 Adriatic Metals PLC
 Paul Cronin / Klara Kaczmarek                     Via Buchanan

 Buchanan                                          Tel: +44 (0) 20 7466 5000
 Bobby Morse / Oonagh Reidy                        adriatic@buchanan.uk.com (mailto:adriatic@buchanan.uk.com)
 Morgans Corporate Limited
 Rob Douglas / Sam Warriner / Mitch Duffy          Tel: +61 7 3334 4888

 RBC Capital Markets
 Farid Dadashev / James Agnew / Jamil Miah         Tel: +44 (0) 20 7653 4000

 Stifel Nicolaus Europe Limited
 Ashton Clanfield / Callum Stewart / Varun Talwar  Tel: +44 (0) 20 7710 7600

 Citadel Magnus
 Cameron Gilenko                                   Tel: +61 2 8234 0100

 

 

ABOUT ADRIATIC METALS

Adriatic Metals PLC (ASX:ADT, LSE:ADT1, OTCQX:ADMLF) is a precious and base
metals developer that is advancing the world-class Vares Silver Project in
Bosnia & Herzegovina, as well as the Raska Zinc-Silver Project in
Serbia.  The Vares Silver Project is fully funded to production, which took
place in February 2024. Concurrent with ongoing construction activities, the
Company continues to explore across its highly prospective 44km(2) concession
package.

 

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