REG - Adriatic Metals - Final Results
28/03/2024 07:15
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RNS Number : 6706I Adriatic Metals PLC 28 March 2024
28 March 2024
Adriatic Metals PLC
("Adriatic Metals" or the "Company")
Annual Report and Audited Financial Statements
for the year ended 31 December 2023
Adriatic Metals PLC (ASX:ADT, LSE:ADT1, OTCQX:ADMLF) is pleased to announce
its Annual Report and Audited Financial Statements for the year ended 31
December 2023.
The Board advises all shareholders and interested stakeholders that the
Company's Annual Report including the audited results for the year ended 31
December 2023 is available on the Company's
website: https://www.adriaticmetals.com/downloads/2023-interactive-digital-annual-report_march-2024.pdf
(https://www.adriaticmetals.com/downloads/2023-interactive-digital-annual-report_march-2024.pdf)
An abridged version of the results for the year ended 31 December 2023 is
included below. The results for 2023 are presented in United States Dollars
A copy of the Annual Report 2023 will be submitted to the Financial Services
Authority's National Storage Mechanism and will be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
By order of the Board
Michael Rawlinson
Chairman of the Board
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.
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.
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 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.
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. 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%.
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.
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
CEO STATEMENT
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 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.
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 grown
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.
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.
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
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 31 DECEMBER 2023
Year Ended Year Ended
31 December 2023
31 December 2022
(In USD) Note
Exploration costs 15 (2,090,498) (1,361,548)
General and administrative expenses 16 (17,229,927) (10,639,784)
Share-based payment expense 13F (1,561,020) (1,295,293)
Exploration and evaluation impairment 8 - (23,186,959)
Other income 19 2,442 9,024
Operating loss (20,879,003) (36,474,560)
Finance income 17 948,775 334,497
Finance expense 17 (5,461,991) (7,072,693)
Revaluation of external derivative liability 6 (3,540,640) (4,081,401)
Revaluation of deferred consideration - 151,339
Loss before taxation (28,932,859) (47,142,818)
Tax charge 14 - -
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 50,372 187,119
Total comprehensive expense for the year attributable to owners of the parent (28,882,487) (46,955,699)
Net loss per share Basic and diluted (cents) 13G (10.24) (17.59)
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Financial Position
AT 31 DECEMBER 2023
(In USD) Note 31 December 2022
31 December 2023
ASSETS
Current assets
Cash and cash equivalents 44,856,215 60,585,277
Receivables and prepayments 5 13,211,757 18,830,315
Inventory 1,552,781 -
Total current assets 59,620,753 79,415,592
Non-current assets
Property, plant and equipment 7 212,730,670 77,860,563
Right-of-use assets 10 8,319,826 8,953,835
Exploration and evaluation assets 8 8,500,000 8,500,000
Receivables and prepayments 5 1,680,314
Total non-current assets 231,230,810 95,314,398
Total assets 290,851,563 174,729,990
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities 9 17,672,820 5,341,740
Lease liabilities 10 1,495,296 2,379,000
Borrowings 6 47,373,197 -
Derivative Liability 6 9,909,859 -
Total current liabilities 76,451,172 7,720,740
Lease liabilities 10 6,641,271 5,807,741
Provisions 22 3,673,787 4,431,212
Borrowings 6 93,427,367 42,498,052
Derivative liability 6 - 6,369,219
Total non-current liabilities 103,742,425 59,106,224
Total liabilities 180,193,597 66,826,964
Equity
Share capital 13B 5,712,782 5,376,349
Share premium 13B 174,145,606 143,829,631
Merger reserve 13B 23,497,730 23,497,730
Warrants reserve 13D 2,743,303 2,743,303
Share-based payment reserve 13E 3,591,220 4,943,436
Foreign currency translation reserve 13H 1,310,705 1,260,333
Retained deficit (100,343,380) (73,747,756)
Total equity 110,657,966 107,903,026
Total liabilities and equity 290,851,563 174,729,990
The accompanying notes (#_bookmark25) 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 28 March 2024 and were signed on its behalf by:
Paul Cronin Mike Norris
Managing Director and Chief Executive Officer Chief Financial Officer
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2023
(In USD) Share Premium Merger Reserve Share- Based Payment Reserve Warrants Reserve Foreign Currency Translation Reserve Total Equity
Note Share Capital Retained Deficit
31 December 2021 5,279,546 143,259,675 23,019,164 5,778,882 2,743,303 1,073,214 (28,735,675) 152,418,109
Loss for the year - - - - - - (47,142,818) (47,142,818)
Other comprehensive income 13H - - - - - 187,119 - 187,119
Total comprehensive expense - - - - - 187,119 (47,142,818) (46,955,699)
Share issue costs 13B - (86,199) - - - - (86,199)
Exercise of options and performance rights 13B, 13E 91,224 656,155 - (2,130,739) - - 2,130,737 747,377
Issue of options and performance rights 13E - - - 873,155 - - - 873,155
2022 STIP awards 13E - - - 576,000 - - - 576,000
Expiry/Cancellation of options and performance rights 13E - - - (153,862) - - - (153,862)
Acquisition of subsidiary 13B 5,579 - 478,566 - - - - 484,145
31 December 2022 5,376,349 143,829,631 23,497,730 4,943,436 2,743,303 1,260,333 (73,747,756) 107,903,026
Loss for the year - - - - - - (28,932,859) (28,932,859)
Other comprehensive income 13H - - - - - 50,372 - 50,372
Total comprehensive expense - - - - - 50,372 (28,932,859) (28,882,487)
Issue of share capital 13B 251,055 31,427,918 - - - - - 31,678,973
Share issue costs 13B - (2,111,505) - - - - - (2,111,505)
Exercise of options and performance rights 13B, 13E 81,196 469,929 - (2,337,235) - - 2,337,235 551,125
Issue of options and performance rights 13E - - - 1,644,777 - - - 1,644,777
2022 STIP awards 13E 4,182 529,633 - (576,000) - - - (42,185)
Expiry/Cancellation of options and performance rights 13E - - - - - - (83,758)
(83,758)
31 December 2023 5,712,782 174,145,606 23,497,730 3,591,220 2,743,303 1,310,705 (100,343,380) 110,657,966
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2023
Year Ended
31 December 2023
Year Ended
31 December 2022
(In USD) Note
Cash flows from operating activities:
Loss for the year (28,932,859) (47,142,818)
Adjustments for:
Depreciation of property, plant and equipment 7 475,950 232,206
Depreciation of right-of-use assets 10 390,192 1,059,717
Share-based payment expense 13F 1,561,020 1,295,293
Finance Income 17 (948,775) (334,497)
Finance expense 17 5,461,991 7,072,693
Fair value movements in derivative liabilities 6 3,540,640 4,081,401
Revaluation of deferred consideration - (151,339)
Exploration and evaluation asset impairment 8 - 23,186,959
Changes in working capital items:
Increase in receivables and prepayments (4,815,690) (171,789)
Increase in inventory (1,552,781) -
Increase/(decrease) in accounts payable and accrued liabilities 1,933,899 (360,894)
Net cash used in operating activities (22,886,414) (11,233,068)
Cash flows from investing activities:
Purchase of property, plant and equipment 7 (94,408,470) (42,231,895)
Prepaid property, plant and equipment (6,585,108) (16,432,347)
Interest received on cash holdings 1,508,143 -
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 6 81,060,421 26,176,885
Settlement of deferred consideration - (525,785)
Interest paid on loans and borrowings 6 (1,895,000) (1,700,000)
Interest received on cash holdings 5 - 277,383
Capital payments on leases 10 (1,719,291) (1,890,191)
Interest paid on leases 10 (1,103,318) (589,377)
Net cash generated from financing activities 106,998,895 22,410,095
Net decrease in cash and cash equivalents (15,372,954) (47,487,215)
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 `
The accompanying notes are an integral part of these consolidated financial
statements.
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 Raska 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 28 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.
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 scheduled 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.
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 (#_bookmark19) .
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.
The consolidated financial statements comprise the financial statements of the
Company and its following subsidiaries at 31 December 2023:
Country of incorporation Shareholding at 31 December 2023 Shareholding at 31 December 2022 Nature of business
Name of subsidiary
Registered Address
Adriatic Metals BH d.o.o. (Formerly Eastern Mining d.o.o.) 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% Mineral exploration and development
Adriatic Metals Jersey Ltd (formerly Tethyan Resource Corp) Jersey (formerly Canada) 35-37 New Street, St. Helier, Jersey, Channel Islands, JE2 3RA 100% 100% Holding company - financing mining exploration of subsidiary
Adriatic Metals Services (UK) Limited (formerly Tethyan Resources Limited) England and Wales Regent House, 65 Rodney Road, Cheltenham, GL50 1HX, UK 100% 100% Holding company and management services company - financing mining exploration
of subsidiary and providing services to other group companies.
Adriatic Metals Trading and Finance Ltd Jersey 35-37 New Street, St. Helier, Jersey, Channel Islands, JE2 3RA 100% 100% Trading and finance company
Adriatic Metals Trading & Finance B.V. The Netherlands liquidated n/a 100% Trading and finance company (liquidated during year ended 31 December 2023)
Adriatic Metals Holdings BIH Limited England and Wales Regent House, 65 Rodney Road, Cheltenham, GL50 1HX, UK 100% 100% Holding company - financing mining exploration of subsidiary
Tethyan Resources Jersey Ltd Jersey 35-37 New Street, St. Helier, Jersey, Channel Islands, JE2 3RA 100% 100% Holding company - financing mining exploration of subsidiary
Taor d.o.o. Serbia Kneza Milosa 93(street) /4 floor, Belgrade, Serbia 100% 100% Mineral exploration and development
Tethyan Resources d.o.o. Serbia Kneza Milosa 93(street) /4 floor, Belgrade, Serbia 100% 100% Mineral exploration and development
Global Mineral Resources d.o.o. Serbia Kneza Milosa 93(street) /4 floor, Belgrade, Serbia 100% 100% Mineral exploration and development
Adriatic Metals d.o.o. (formerly RAS Metals d.o.o.) Serbia Kneza Milosa 93(street) /4 floor, Belgrade, Serbia 100% 100% Mineral exploration and development
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
· 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
· 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.
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.
Monetary assets and liabilities denominated in foreign currencies are
translated at the spot rates at the reporting date.
Foreign exchange differences arising on settlement or translation of monetary
items are recognised in profit or loss.
II) Group companies
On consolidation, the assets and liabilities of foreign operations are
translated into USD at the rate of exchange prevailing at the reporting date
and their income statements are translated at average exchange rates
prevailing during the year. The exchange differences arising on translation
for consolidation are recognised in other comprehensive income.
E Cash and cash equivalents
Cash and cash equivalents are comprised of cash held on deposit and other
short term, highly liquid investments with original maturities of three months
or less. These deposits and investments are readily convertible to known
amounts of cash and subject to an insignificant risk of change in value.
F Receivables
All receivables are held at amortised cost less any provision for impairment.
A loss allowance for expected credit losses is made to reflect changes in
credit risk since the initial recognition.
G Exploration and evaluation assets
Pre-licence costs
Pre-licence costs relate to costs incurred before the Group has obtained legal
rights to explore in a specific area. Such costs may include the acquisition
of exploration data and the associated costs of analysing that data. These
costs are expensed in the year in which they are incurred.
Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for mineral resources,
the determination of technical feasibility and the assessment of commercial
viability of an identified resource.
Exploration and evaluation activity includes:
· 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.
In evaluating whether the expenditures meet the criteria to be capitalised,
several different sources of information are used. The information that is
used to determine the probability of future benefits depends on the extent of
exploration and evaluation that has been performed.
Exploration and evaluation expenditure in the year for activity on licences
where a JORC-compliant resource has not yet been established is expensed as
incurred until sufficient evaluation has occurred to establish a
JORC-compliant resource. Costs expensed during this phase are included in
exploration expenses and other operating expenses in the statement of profit
or loss and other comprehensive income.
Upon the establishment of a JORC-compliant resource (at which point, the Group
considers it probable that economic benefits will be realised), the Group
capitalises any further evaluation expenditure incurred for the licence as
exploration and evaluation assets up to the point when a JORC-compliant
reserve is established. Capitalised exploration and evaluation expenditure is
considered to be an intangible asset and measured at cost less accumulated
impairment.
Exploration and evaluation assets acquired in a business combination are
initially recognised at fair value, including resources and exploration
potential that is considered to represent value beyond proven and probable
reserves. Similarly, the costs associated with acquiring an exploration and
evaluation asset (that does not represent a business) are also capitalised and
subsequently measured at cost less accumulated impairment.
Once a JORC-compliant reserve is established and development is sanctioned,
exploration and evaluation assets are tested for impairment and transferred to
mine under construction and amortised in line with the useful economic life of
the mine or on a unit of depletion basis. Exploration and evaluation assets
are not amortised during the exploration and evaluation phase and are
considered to have an indefinite life until determined to be part of a mine
plan.
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.
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:
Buildings and Leasehold improvements Shorter of 10% or lease term
Plant and equipment 15% - 33%
III) Mine under construction
Mine under construction includes construction costs as well as exploration and
evaluation and land balances transferred as noted above once a JORC-compliant
reserve is established and development is sanctioned. Expenditure which is
necessarily incurred whilst commissioning the mine is also capitalised as a
mine under construction cost. Development costs incurred after the
commencement of production are capitalised to the extent they are expected to
give rise to a future economic benefit.
Mine under construction costs are amortised in line with the useful economic
life of the mine or rate of depletion of resources once the mine enters into
production. The method of amortisation is determined taking into account all
relevant factors at the point at which the mine enters into production.
Expenditure which is necessarily incurred whilst commissioning the mine under
construction, in the period prior to being capable of operating in the manner
intended by management, are capitalised. Development costs incurred after the
commencement of production are capitalised to the extent they are expected to
give rise to a future economic benefit.
IV) Depreciation and amortisation
The assets' residual values, useful lives and methods of depreciation and
amortisation are reviewed at each financial year-end and adjusted
prospectively if appropriate.
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.
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.
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.
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.
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.
II) 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.
J Rehabilitation provision
The Group recognises provisions for contractual, constructive or legal
obligations, including those associated with the reclamation of mineral
interests and property, plant and equipment, when those obligations result
from the acquisition, construction, development or normal operation of the
assets. Initially, a provision for the rehabilitation is recognised at its
present value in the period in which it is incurred. Upon initial recognition
of the liability, an amount equal to the corresponding provision is added to
the carrying amount of the related asset and the cost is amortised as an
expense over the economic life of the asset. Following the initial recognition
of the rehabilitation provision, the carrying amount of the liability is
increased for the passage of time as the discount is unwound, and adjusted for
changes to the current market-based discount rate and amount or timing of the
underlying cash flows needed to settle the obligation. The increase in the
provision due to the passage of time is recognised as interest expense.
K Finance income and finance expense
Finance income and Finance expense are recorded on an accrual basis using the
effective interest method.
L Financial instruments
Financial assets and liabilities are recognised when the Group becomes a party
to the contractual provisions of the financial instrument. Financial assets
are derecognised when the contractual rights to the cash flows from the
financial asset expire, or when the financial asset and all substantial risks
and rewards are transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expired.
Except for trade and other receivables which do not contain a significant
financing component, financial assets and financial liabilities are measured
initially at fair value plus or minus, in the case of a financial asset or
financial liability not at fair value through profit or loss, transactions
costs that are directly attributable to the acquisition or issue of the
financial instrument. Trade receivables which do not contain a significant
financing component are recognised at their transaction price. Financial
assets and financial liabilities are subsequently measured as described below.
i) Financial assets
A financial asset is subsequently recognised at amortised cost under IFRS 9 if
it meets both the hold to collect and contractual cash flow characteristics
tests. A financial asset is measured at fair value through other comprehensive
income if the financial asset is held within a business model whose objective
is achieved by both collecting contractual cash flows and selling financial
assets and the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
If neither of the above classifications are met the asset is classified as
fair value through the profit and loss, with changes in fair value recognised
in the profit and loss statement. Even if an asset meets the above two
requirements to be measured at fair value through other comprehensive income,
IFRS 9 contains an option to designate, at initial recognition, a financial
asset as measured at fair value through the profit and loss provided the
classification eliminates or significantly reduces a measurement or
recognition inconsistency.
Cash and cash equivalents and trade and other receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an
active market. After initial recognition these are measured at amortised cost
using the effective interest method, less provision for impairment, if any.
ii) Financial liabilities
Financial liabilities are subsequently measured at amortised cost using the
effective interest method, except for financial liabilities designated at fair
value through profit or loss, that are carried subsequently at fair value with
gains and losses recognised in the profit and loss statement.
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial
liability, or, where appropriate, a shorter period. Where the movement in fair
value is due to a change in the entity's credit risk, such gain or loss is
recognised in other comprehensive income.
iii) Convertible debt
The proceeds received on issue of the Group's convertible debt are allocated
to their debt and derivative liability components. The amount initially
attributed to the debt component equals the discounted cash flows using a
market rate of interest that would be payable on a similar debt instrument
that does not include an option to convert. Subsequently, the debt component
is accounted for as a financial liability measured at amortised cost until
extinguished on conversion or maturity of the debt. The remainder of the
proceeds is allocated to the conversion option and is recognised as a
derivative liability.
M Impairment of assets
I) Financial assets
A financial asset that is not carried at fair value through profit or loss is
assessed at each reporting date to determine a loss allowance for expected
credit losses. If the credit risk on a financial instrument has increased
significantly since initial recognition, the loss allowance is equal to the
lifetime expected credit losses. If the credit risk has not increased
significantly, the loss allowance is equal to the twelve month expected credit
losses.
The expected credit losses are measured in a way that reflects the unbiased
and probability weighted amount that is determined by evaluating a range of
possible outcomes, the time value of money and reasonable and supportable
information that is available about past events, current conditions and
forecasts of future economic conditions.
II) Non-financial assets
The carrying amounts of capitalised exploration and evaluation expenditure for
undeveloped mining projects (projects for which the decision to mine has been
not yet been deemed commercially viable and development has not yet been
authorised) are reviewed at each reporting date for indicators of impairment
in accordance with IFRS 6, and when indicators are identified are tested in
accordance with IAS 36 Impairment of Assets.
Property, plant and equipment and intangible assets with finite lives are
reviewed for impairment if there is an indication that the carrying amount may
not be recoverable.
At the end of each reporting period, the Group reviews the carrying amounts of
its tangible and intangible assets to determine whether there is an indication
that the assets are impaired. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the
impairment, if any. Where the asset does not generate largely independent cash
inflows, the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs. A cash-generating unit is the smallest
identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets.
The recoverable amount is the higher of fair value less costs to sell, and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessment of the time value of money and the risks specific to
the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than the carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised in the profit and loss statement. All assets are subsequently
reassessed for indications that an impairment loss previously recognised may
no longer exist. Where an impairment loss is subsequently reversed, the
carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but to an amount that does not
exceed the carrying amount that would have been determined had no impairment
loss been recognised for the asset (or cash-generating unit) in prior periods.
A reversal of an impairment loss is recognised in the profit and loss
statement.
N Income taxes
Current income tax is the expected tax payable or receivable on the taxable
income or loss for the year, using tax rates enacted or substantively enacted
at the reporting date, and any adjustment to tax payable or receivable in
respect of previous years.
Deferred income taxes are calculated based on temporary differences between
the carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not recognised on the initial recognition of goodwill, on the
initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or
loss at the time of the transaction, or on temporary differences relating to
investments in subsidiaries and jointly controlled entities where the reversal
of these temporary differences can be controlled by the Group and it is
probable that reversal will not occur in the foreseeable future.
Deferred income tax assets and liabilities are measured, without discounting,
at the tax rates that are expected to apply when the assets are recovered, and
the liabilities settled, based on tax rates that have been enacted or
substantively enacted by the reporting date.
A deferred tax asset is recognised for unused tax losses, tax credits and
deductible temporary differences, to the extent that it is probable that
future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that sufficient taxable profit will be
available to allow the related tax benefit to be utilised.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to set off current tax assets against current tax
liabilities, and they relate to income taxes levied by the same tax authority
on the same taxable entity, or on different taxable entities which intend
either to settle current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities and assets are
expected to be settled or recovered.
The Group has not recognised any deferred tax assets or liabilities.
O Earnings or Loss per share ("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.
Diluted EPS is calculated by dividing the earnings attributable to the owners
of the parent and 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 potentially dilutive common shares, which
comprise share options and warrants granted, except where these are
anti-dilutive.
P Share capital, share premium and merger reserve
Ordinary shares are classified as share capital. Share premium represents the
excess of proceeds received over the nominal value of new shares issued.
Incremental costs directly attributable to the issuance of new shares are
shown in share premium as a deduction, net of tax, from the proceeds.
Merger reserve represents the difference between the value of shares issued by
the Company in exchange for the value of shares acquired in respect of the
acquisition of subsidiaries. Merger reserve only arises where the issuing
company takes its interest in another body corporate from below a 90% equity
holding to a 90% or above equity holding.
Q Share-based payments and warrants payments
I) Share-based payment transactions
The Company grants share options and performance rights to Directors,
officers, consultants and employees ("equity-settled transactions"). The
Company may grant warrants to institutions in relation to an equity raise or
other transaction. The Board of Directors determines the specific grant terms
within the limits set by the Company's share option plans.
II) Equity-settled transactions
The costs of equity-settled transactions are measured by reference to the fair
value at the grant date and are recognised, together with a corresponding
increase in equity, over the period in which the performance and/or service
conditions are fulfilled, ending on the date on which the relevant persons
become fully entitled to the award (the "vesting date"). The cumulative
expense recognised for equity-settled transactions at each reporting date
until the vesting date reflects the Company's best estimate of the number of
equity instruments that will ultimately vest. The profit or loss charge or
credit for a period represents the movement in cumulative expense recognised
at the beginning and end of that period and the corresponding amount is
represented in share option reserve. No expense is recognised for awards that
do not ultimately vest.
Where the terms of an equity-settled award are modified, the minimum expense
recognised is the expense as if the terms had not been modified. An additional
expense is recognised for any modification which increases the total fair
value of the share-based payment arrangement or is otherwise beneficial to the
employee as measured at the date of modification.
Where equity-settled transactions are awarded to employees, the fair value of
the options at the date of grant is charged to the profit and loss statement
over the vesting period. Non-market performance vesting conditions are taken
into account by adjusting the number of equity instruments expected to vest at
each reporting date so that, ultimately, the cumulative amount recognised over
the vesting period is based on the number of the options that will eventually
vest. Market performance vesting conditions are incorporated into the fair
value of the equity instrument at the grant date.
Where equity-settled transactions are entered into with non-employees and some
or all of the goods or services received by the entity as consideration cannot
be specifically identified, they are measured at the fair value of the equity
instruments issued. Otherwise equity-settled transactions with non-employees
are measured at the fair value of the goods or services received.
Upon exercise of share options or warrants, the proceeds received are
allocated to share capital, and share premium if applicable, and any
associated balance in share-based payments reserve is transferred to retained
earnings. The dilutive effect of outstanding options is reflected as
additional dilution in the computation of diluted earnings per share.
The Group utilises the Black-Scholes option pricing model to estimate the fair
value of share options and performance rights granted to Directors, officers
and employees. The use of this model requires management to make various
estimates and assumptions that impact the value assigned to the share options
and performance rights including the forecast future volatility of the share
price, the risk-free interest rate, dividend yield, the expected life of the
share options and performance rights and the expected number of options and
performance rights which will vest. See note 13F (#_bookmark22) for further
details regarding these inputs.
III) STIP equity scheme
The Group operates an STIP scheme which runs on a calendar year basis, with
employees receiving either cash or shares subsequent to year end based on to
their performance during the year. An option pricing model is used to measure
the Group's liability at each reporting date, taking into account the terms
and conditions on which the bonus is awarded and the extent to which employees
have rendered their service. Movements in the liability (other than cash
payments) are recognised in the consolidated statement of comprehensive
income.
R 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 Raska Project); and
· Corporate (which supports the activities of the other two
segments, principally the UK).
The Vareš and Raska Projects operate in two separate distinct jurisdictions
and are at different points in their respective project life cycles.
Segment assets are those used directly for segment operations. Inter-company
balances comprise transactions between operating segments making up the
reportable segments. These balances are eliminated to arrive at the figures in
the Consolidated Financial Statements.
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.
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.
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 England and Wales USD USD
Adriatic Metals BH d.o.o. Bosnia and Herzegovina USD USD
Adriatik Metali d.o.o Bosnia and Herzegovina BAM BAM
Adriatic Metals Jersey Ltd Jersey (originally Canada) USD USD
Adriatic Metals Services (UK) Limited England and Wales USD USD
Adriatic Metals Trading and Finance Ltd Jersey USD USD
Adriatic Metals Holdings BIH Limited England and Wales USD USD
Tethyan Resources Jersey Ltd Jersey GBP GBP
Adriatic Metals d.o.o. Serbia RSD RSD
Taor d.o.o. Serbia RSD RSD
Tethyan Resources d.o.o. Serbia RSD RSD
Global Mineral Resources d.o.o. Serbia 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.
c Indicators of impairment
The Group uses its judgement in assessing whether indicators of impairment
have occurred.
The Group reviews and tests the carrying amount of exploration and evaluation
assets when events or changes in circumstances suggest that the carrying
amount may not be recoverable in accordance with IFRS 6. Indicators of
impairment are as follows:
i) the period for which the entity has the right to explore in the specific
area has expired or will expire in the near future, and is not expected to be
renewed;
ii) substantive expenditure on further exploration for, and evaluation of,
mineral resources in the specific area is neither budgeted nor planned;
iii) exploration for and evaluation of mineral resources in the specific area
have not led to the discovery of commercially viable quantities of mineral
resources and the entity has decided to discontinue such activities in the
specific area; and
iv) sufficient data exist to indicate that, although a development in the
specific area is likely to proceed, the carrying amount of the exploration and
evaluation asset is unlikely to be recovered in full from successful
development or by sale.
The Group also reviews property, plant and equipment and intangible assets
with finite lives for impairment if there is an indication that the carrying
amount may not be recoverable.
In assessing whether an indicator of impairment has occurred, the Group
considers external sources of information including observable indications of
decline in market value, actual or expected negative changes in the
technological, market, economic or legal environment, changes in market
interest rates or other market rates of return on investments, and whether the
carrying amount of its net assets is greater than its market capitalisation.
As external sources of information will typically be broader and less clearly
linked to a specific asset or cash generating unit, for example, a decline in
market capitalisation below the carrying value of the entity's net assets.
This may then require the use of judgement to determine which assets or cash
generating unit should be tested in response to an external source of
information.
The Group also considers internal sources of information including changes in
planned development of the assets, evidence of obsolescence or damage, changes
in the expected use or life of an asset, and evidence from internal reporting
that an asset's economic performance is, or will be, worse than expected.
No changes in circumstances or other indicators of impairment occurred during
the year in respect of the Raska Project exploration and evaluation asset.
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.
5. Receivables and prepayments
(In USD) 31 December 2023 31 December 2022
Current
Accrued interest income 59,321 57,114
Vareš Project prepayments and deposits 6,585,108 17,119,197
Unamortised deferral of day one fair value adjustment for Copper Stream 98,843 -
Taxes receivable 6,363,960 1,618,066
Other receivables 104,524 35,938
Non-Current
Unamortised deferral of day one fair value adjustment for Copper Stream 1,680,315 -
Total 14,892,071 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.
The segmental analysis of receivables and prepayments is as follows:
31 December 2023
Bosnia Serbia Corporate Total
Accrued interest income - - 59,321 59,321
Prepayments and deposits 6,299,029 70,900 215,179 6,585,108
Unamortised deferral of day one fair value adjustment for Copper Stream 1,779,158 - - 1,779,158
Taxes receivable 6,215,399 53,988 94,573 6,363,960
Other receivables 100,381 4,144 - 104,524
Total 14,393,967 129,031 369,073 14,892,071
31 December 2022
Bosnia Serbia Corporate Total
Accrued interest income - - 57,114 57,114
Prepayments and deposits 16,802,323 114,756 202,118 17,119,197
Taxes receivable 1,468,539 75,343 74,184 1,618,066
Other receivables 608 3,105 32,225 35,938
Total 18,271,470 193,204 365,641 18,830,315
6. Borrowings and Derivative Liability
a) Total borrowings and derivative liability
(In USD) Orion Senior Secured Debt QRC Total Derivative Liability on QRC Convertible Debt
Convertible Debt Borrowings
Copper Stream
At 31 December 2020 - - (15,980,753) (15,980,753) (4,160,918)
Interest expense - - (1,699,740) (1,699,740) -
Foreign Exchange gain - - (232,240) (232,240) (104,823)
Payment of Interest - - 1,841,667 1,841,667 -
Revaluation of fair value embedded option - - - - 1,763,318
At 31 December 2021 - - (16,071,066) (16,071,066) (2,502,423)
Additions (26,176,885) - - (26,176,885) -
Interest expense (35,484) - (1,700,012) (1,735,496) -
Foreign Exchange gain - - - - 214,605
Payment of Interest - - 1,700,000 1,700,000 -
Revaluation on modification - - (214,605) (214,605) -
Revaluation of fair value embedded option - - - - (4,081,401)
At 31 December 2022 (26,212,369) - (16,285,683) (42,498,052) (6,369,219)
Additions (58,560,421) (22,500,000) - (81,060,421) -
Interest expense (12,999,260) - (1,718,284) (14,717,544) -
Foreign Exchange gain - - - - -
Payment of Interest - - 1,895,000 1,895,000 -
Day one fair value adjustment - (1,871,124) - (1,871,124) -
Fair value adjustment (2,548,423) (2,548,423)
Revaluation of fair value embedded option - - - - (3,540,640)
At 31 December 2023 (97,772,050) (26,919,547) (16,108,967) (140,800,564) (9,909,859)
Year end balances are analysed below:
Orion Senior Secured Debt QRC Total Derivative Liability on QRC Convertible Debt
Convertible Borrowings
At 31 December 2022 Debt
Copper Stream
Current liability - - - - -
Non-current liability (26,212,369) - (16,285,683) (42,498,052) (6,369,219)
(26,212,369) - (16,285,683) (42,498,052) (6,369,219)
At 31 December 2023 Orion Senior Secured Debt QRC Total Derivative Liability on QRC Convertible Debt
Convertible Debt Borrowings
Copper Stream
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.
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.
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.
During 2023 the applicable CME Term SOFR has fluctuated between 4.560740% and
5.39482%, meaning that the total interest rate applicable has fluctuated
between 12.32235% and 12.89482% 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 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:
(In USD) 31 December 2023
Deposit funds received during the Year 22,500,000
Day one fair value adjustment in respect of future delivery of copper warrants 1,871,124
Fair value at initial recognition 24,371,124
Fair value adjustment at 31 December 2023 2,548,423
Balance at 31 December 2023 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 13(th) 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 15.00% 20.00% 25.00%
Day one fair value adjustment 29,738,197 24,768,916 21,015,051
At 31 December 2023 32,311,242 25,715,201 21,068,867
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.
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;
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%
Change in expected term 26 Weeks $0.8m Decrease $0.6m Decrease $0.4m Decrease
Unchanged (48 weeks) $0.3m Decrease - $0.6m Increase
65 Weeks $0.1m Increase $0.5m Increase $1.0m Increase
7. Property, plant and equipment
Note
Cost (In USD) Land & Buildings Plant & Machinery Mine under Construction Total
31 December 2021 1,110,227 852,631 28,446,606 30,409,464
Additions 3,670,590 1,170,962 38,926,044 43,767,596
Recognition of rehabilitation provision - - 4,431,212 4,431,212
Foreign exchange difference - 2,546 - 2,546
31 December 2022 4,780,817 2,026,139 71,803,862 78,610,818
Additions 828,149 2,061,572 119,035,126 121,924,847
Capitalised net interest 6,17 - - 12,171,745 12,171,745
Capitalised depreciation 10 - - 2,006,890 2,006,890
Reassessment of rehabilitation provision 22 - - (757,425) (757,425)
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 these 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.
Depreciation (in USD)
31 December 2021 47,946 291,670 192,074 531,690
Charge for the year 13,173 219,033 - 232,206
Foreign exchange difference - (13,641) - (13,641)
31 December 2022 61,119 497,062 192,074 750,255
Charge for the year 23,892 452,058 - 475,950
31 December 2023 85,011 949,120 192,074 1,226,205
Net Book Value (in USD)
31 December 2022 4,719,698 1,529,077 71,611,788 77,860,563
31 December 2023 5,523,955 3,138,591 204,068,124 212,730,670
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:
Net Book Value (In USD) Land & Buildings Plant & Machinery Mine under Construction Total
31 December 2022
Bosnia and Herzegovina 4,703,342 1,420,191 71,611,788 77,735,321
Serbia - 89,837 - 89,837
Corporate 16,356 19,049 - 35,405
Total 4,719,698 1,529,077 71,611,788 77,860,563
31 December 2023
Bosnia and Herzegovina 5,509,956 2,990,655 204,068,124 212,568,735
Serbia - 102,119 - 102,119
Corporate 13,999 45,817 - 59,816
Total 5,523,955 3,138,591 204,068,124 212,730,670
8. Exploration and evaluation assets
Cost (In USD) Raska Project in Serbia Total
31 December 2021 31,901,709 31,901,709
Foreign exchange difference (214,750) (214,750)
Impairment (23,186,959) (23,186,959)
31 December 2022 8,500,000 8,500,000
31 December 2023 8,500,000 8,500,000
Net Book Value
31 December 2022 8,500,000 8,500,000
31 December 2023 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.
9. Accounts payable and accrued liabilities
(In USD) 31 December 2023 31 December 2022
Trade payables 13,719,583 2,585,755
Accrued liabilities 3,415,895 2,617,585
Other payables 537,342 138,400
17,672,820 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) Land & buildings Plant & Machinery Total
31 December 2021 733,246 - 733,246
Additions 297,468 9,064,201 9,361,669
Modification 26,404 - 26,404
Depreciation (155,602) (904,115) (1,059,717)
Foreign exchange difference (107,937) 170 (107,767)
31 December 2022 793,579 8,160,256 8,953,835
Additions 1,097,289 599,552 1,696,841
Depreciation (346,201) (2,050,881) (2,397,082)
Foreign exchange difference 64,327 1,905 66,232
31 December 2023 1,608,994 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).
Set out below are the carrying amounts of lease liabilities and the movements
during the year:
(In USD) Land & buildings Plant & Machinery Total
31 December 2021 767,098 - 767,098
Additions 297,468 9,062,598 9,360,066
Modification 16,850 - 16,850
Interest expense 130,771 458,606 589,377
Payments (270,236) (2,209,332) (2,479,568)
Foreign exchange difference (57,590) (9,492) (67,082)
31 December 2022 884,361 7,302,380 8,186,741
Additions 981,918 599,552 1,581,470
Interest expense 104,598 998,720 1,103,318
Payments (465,643) (2,356,966) (2,822,609)
Foreign exchange difference 85,262 2,385 87,647
31 December 2023 1,590,496 6,546,071 8,136,567
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:
Cost (In USD) 12 months to December 2023 12 months to December 2022
Depreciation expense of right-of-use assets 2,397,082 1,059,717
Less: right-of-use asset depreciation capitalised to mine under construction (2,006,890) -
Interest expense on lease liabilities 1,103,318 589,377
Total amount recognised in profit or loss 1,493,510 1,649,094
The following are the amounts recognised in statement of cashflow:
Cost (In USD) 12 months to December 2023 12 months to December 2022
Capital payments on leases (1,719,291) (1,890,191)
Interest paid on leases (1,103,318) (589,377)
Total amount paid in respect of lease liabilities (2,822,609) (2,479,568)
11. Financial instruments
IFRS 13 requires disclosure of fair value measurements by level of the
following fair value measurement hierarchy, depending on whether the fair
value measurements are derived from:
· quoted prices (unadjusted) in active markets for identical assets
or liabilities (level 1);
· inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2); or
· inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (level 3).
Fair value is the amount at which a financial instrument could be exchanged in
an arm's length transaction. Set out below are the financial instruments held
at amortised cost and fair value through profit or loss and their fair value
measurement hierarchy.
See note referenced for further detail on inputs to fair value for each
financial instrument.
Note At fair value Fair Value
Hierarchy
At 31 December 2023 At amortised cost through profit or loss Total
(In USD)
Financial assets
Cash and cash equivalents 44,856,215 - 44,856,215 N/A
Accrued interest receivable 5 59,321 - 59,321 N/A
Total financial assets 44,915,536 - 44,915,536
Financial liabilities
Accounts payable and accrued liabilities 9 17,672,820 - 17,672,820 N/A
Borrowings 6 113,881,017 26,919,547 140,800,564 Level 3
Derivative liability 6 - 9,909,859 9,909,859 Level 3
Lease liabilities 10 8,136,567 - 8,136,567 Level 3
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)
At 31 December 2022 Note At amortised cost At fair value Total Fair Value
(In USD)
Hierarchy
through profit or loss
Financial assets
Cash and cash equivalents 60,585,277 - 60,585,277 N/A
Accrued interest receivable 5 35,938 - 35,938 N/A
Total financial assets 60,621,215 - 60,621,215
Financial liabilities
Accounts payable and accrued liabilities 9 5,341,740 - 5,341,740 N/A
Borrowings 6 42,498,052 - 42,498,052 Level 3
Derivative liability 6 - 6,369,219 6,369,219 Level 3
Lease liabilities 10 8,186,741 - 8,186,741 Level 3
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)
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.
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.
30 days to 6 months 6 to 12 months Over 12 months
Within 30 days
At 31 December 2023 (In USD)
Accounts payable and accrued liabilities 17,672,820 - - -
Borrowings - - 47,373,197 93,427,367
Derivative liability - - 9,909,859 -
Lease liabilities 124,608 623,040 747,648 7,946,031
17,797,428 623,040 58,030,704 101,373,398
30 days to 6 to 12 months Over 12 months
At 31 December 2022 (In USD) Within 30 days 6 months
Accounts payable and accrued liabilities 5,341,740 - - -
Borrowings - - - 46,316,489
Derivative liability - - - 6,369,219
Lease liabilities 198,250 991,250 1,189,500 7,995,030
5,539,990 991,250 1,189,500 60,680,738
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.
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
Share Capital Share Premium Merger Reserve
(In USD)
(In USD)
Ordinary Shares (Number) (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 272,746,292 5,376,349 143,829,631 23,497,730
Issue of share capital 14,807,632 251,055 31,427,918 -
Share Issue costs - - (2,111,505) -
Shares issued on exercise of options and performance rights 5,180,495 85,378 999,562 -
31 December 2023 292,734,419 5,712,782 23,497,730
174,145,606
The average price paid for shares issued in the year was $1.64 per share (31
December 2022: $0.19 per share).
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 12,212,480 990,000 13,202,480
Granted N/A - 548,012 548,012
Exercised 0.12 (7,016,600) (290,000) (7,306,600)
Expired 1.28 (21,580) (306,418) (327,998)
31 December 2022 0.46 5,174,300 941,594 6,115,894
Granted N/A - 1,811,174 1,811,174
Exercised 0.13 (5,018,260) (588,194) (5,606,454)
Expired 1.47 (14,940) (102,503) (117,443)
31 December 2023 2.25 141,100 2,062,071 2,203,171
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
Weighted average remaining contractual life (Years)
Options outstanding Exercise Number exercisable
Grant date price Expiry date
8 October 2020 91,300 £1.80 0.2 28 February 2024 91,300
8 October 2020 24,900 £2.22 0.2 7 March 2024 24,900
8 October 2020 24,900 £1.20 0.6 19 August 2024 24,900
141,100 141,100
At 31 December 2022
Weighted average remaining contractual life (Years)
Options outstanding Exercise Number
Grant date price Expiry date exercisable
27 April 2018 4,000,000 A$0.20 0.5 1 July 2023 4,000,000
8 October 2020 ((1)) 3,320 £1.06 - 5 December 2022 3,320
8 October 2020 29,880 £1.06 0.1 3 January 2023 29,880
8 October 2020 91,300 £1.80 1.2 28 February 2024 68,060
8 October 2020 24,900 £2.22 1.2 7 March 2024 14,940
8 October 2020 24,900 £1.20 1.6 19 August 2024 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:
Weighted average remaining contractual life (Years)
At 31 December 2023 Performance rights Number exercisable
outstanding Expiry date
Grant date
17 February 2022 100,000 0.0 31 December 2023 100,000
17 February 2022 100,000 0.5 30 June 2024 100,000
17 February 2022 23,765 2.0 31 December 2025 14,537
5 April 2022 100,000 0.0 31 December 2023 100,000
5 April 2022 25,000 1.0 31 December 2024 -
23 February 2023 225,189 3.0 31 December 2026 78,193
24 May 2023 142,778 4.0 1 January 2028 -
24 May 2023 434,272 4.4 24 May 2028 -
18 September 2023 911,067 4.4 24 May 2028 -
2,062,071 392,730
Weighted average remaining contractual life (Years)
At 31 December 2022 Performance rights Number exercisable
outstanding Expiry date
Grant date
6 August 2020 500,000 2.0 31 December 2024 -
17 February 2022 100,000 1.0 31 December 2023 -
17 February 2022 100,000 1.5 30 June 2024 -
17 February 2022 41,594 3.0 31 December 2025 -
5 April 2022 100,000 1.0 31 December 2023 -
5 April 2022 50,000 2.0 31 December 2024 -
5 April 2022 50,000 3.0 31 December 2025 -
941,594 -
D Warrants reserve
Warrants were issued as part of Tethyan Resource Corp acquisition.
The following table presents movements in the Group's warrants reserve:
(In USD) Warrants reserve
31 December 2021 2,743,303
Exercise of warrants -
Expired warrants -
31 December 2022 2,743,303
Exercise of warrants -
Expired warrants -
31 December 2023 2,743,303
Exercise Price Weighted average remaining contractual life (Years)
At 31 December 2023 Warrants outstanding Number exercisable
Expiry date
Grant date
29 November 2019 2,651,020 £0.88 0.1 30 January 2024 2,651,020
2,651,020 2,651,020
Exercise Price Weighted average remaining contractual life (Years)
At 31 December 2022 Warrants outstanding Number exercisable
Expiry date
Grant date
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) Share-based payment reserve
31 December 2021 5,778,882
Exercise of share options and performance rights (2,130,739)
Issue of performance rights 873,155
Short term incentive plan awards 576,000
Expiry/cancellation of share options and performance rights (153,862)
31 December 2022 4,943,436
Exercise of share options and performance rights (2,337,235)
Short term incentive plan awards (576,000)
Issue of performance rights 1,644,777
Expiry/cancellation of share options and performance rights (83,758)
31 December 2023 3,591,220
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).
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) Year ended Year ended
31 December 2023 31 December 2022
Awards and expiry/cancellations during the year
Issue of options and performance rights 934,674 367,525
Short term incentive plan awards - 576,000
Expiry/cancellation of options (79,776), (3,971)
854,898 939,554
Awards and expiry/cancellations relating to prior years awards
Issue of options and performance rights 710,104 505,630
Expiry/cancellation of options (3,982) (149,891)
706,122 355,739
1,561,020 1,295,293
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:
Year ended Year ended
31 December 2023 31 December 2022
Risk-free interest rate 3.01% - 3.93% 0.33% -1.31%
Expected volatility (1) 39% - 56% 33% - 36%
Expected life (years) 3.85-5.01 1.7 - 3.9
Fair value per performance right $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
Year ended Year ended
31 December 2023
31 December 2022
Loss for the year attributable to owners of the parent equity (In USD) 28,932,859 47,142,818
Weighted average number of common shares for the purposes of basic loss per 282,504,794 267,970,085
share
Weighted average number of common shares for the purposes of diluted loss per 282,504,794 267,970,085
share
Basic loss per share (cents) (10.24) (17.59)
Diluted loss per share (cents) (10.24) (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.
H Foreign currency translation reserve
(In USD) Foreign Currency Translation Reserve
31 December 2021 1,073,214
Other comprehensive income 187,119
31 December 2022 1,260,333
Other comprehensive income 50,372
31 December 2023 1,310,705
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.
14. Taxation
A Current taxation
The tax credit/(charge) for the year comprises:
(In USD) Year ended Year ended
31 December 2023
31 December 2022
Current tax expense - -
Prior year tax expense - -
Overseas tax - -
Deferred tax expense - -
Adjustments to deferred tax liability - -
Total tax credit/(charge) - -
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:
(In USD) Year ended Year ended
31 December 2023
31 December 2022
Loss before tax 28,932,859 47,142,818
Tax credit on loss at standard UK rate of 23.52% (2022 - 19%) 6,805,008 8,957,135
Effects of:
Expenses not deductible for tax purposes (1,463,970) (4,405,522)
Income not taxable 58,545
Effects of overseas tax rates (1,889,159) (525,663)
Unrecognised taxable losses and timing differences (3,510,424) (4,025,950)
Total income taxes - -
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.
(In USD) 31 December 2023 31 December 2022
UK 44,923,652 37,864,738
Bosnia and Herzegovina 17,094,404 6,808,636
Serbia 13,582,218 11,377,330
75,600,274 56,050,704
15. Exploration activities expensed
(In USD) Year ended Year ended
31 December 2023
31 December 2022
Exploration activities expensed 2,090,498 1,361,548
Exploration activities expensed during the year represent costs incurred at
the Raska Project, for which a JORC-compliant resource has not yet been
established.
16. General and administrative expenses
(In USD) Year ended Year ended
31 December 2023
31 December 2022
Note
Wages and salaries 6,459,385 4,446,812
Consultancy fees 1,128,926 1,009,655
Cash remuneration in respect of qualifying services 7,588,311 5,456,467
Professional fees 2,810,932 892,886
Amortisation 10 390,192 1,059,717
Depreciation 7 475,950 232,206
Audit fee 330,069 194,600
Non audit services 38,900 45,980
Marketing 557,497 777,612
Stock exchange fees 172,652 188,862
Property Costs 1,714,045 412,292
IT expense 609,299 218,407
Insurance 339,967 225,556
Transportation costs 1,312,956 324,626
Other costs 889,157 610,573
17,229,927 10,639,784
17. Finance income and expense
(In USD) Note
Year ended Year ended
31 December 2023
31 December 2022
Interest income 1,567,464 334,497
Foreign exchange gain 208,826 -
Interest capitalised within property, plant and equipment 7 (827,515) -
Finance income 948,775 334,497
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) Note Year ended Year ended
31 December 2023
31 December 2022
Interest expense 6 1,718,284 1,890,937
Interest expense on lease liabilities 10 1,103,318 589,377
Amortisation of day one fair value gain on Copper Stream 5 91,966
-
Fair value Copper Stream liability revaluation 6 2,548,423
-
Foreign exchange loss - 4,592,379
Finance expense 5,461,991 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.
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) Bosnia Serbia Corporate Total Bosnia Serbia Corporate Total
Exploration costs - (2,090,498) - (2,090,498) (775) (1,360,773) - (1,361,548)
General and administrative expenses (9,311,012) (2,058,972) (5,859,942) (17,229,927) (3,444,901) (1,203,301) (5,991,582) (10,639,784)
Share-based payment expense - - (1,561,020) (1,561,020) - - (1,295,293) (1,295,293)
Exploration and evaluation impairment - - - - (23,186,959) (23,186,959)
Other income - - 2,442 2,442 - 9,024 9,024
Operating Loss (9,311,012) (4,149,470) (7,418,520) (20,879,003) (3,445,676) (2,564,074) (30,464,810) (36,474,560)
Finance income - - 948,775 948,775 - - 334,497 334,497
Finance expense (1,055,737) (28,394) (4,377,860) (5,461,991) (735,100) (64,253) (6,273,340) (7,072,693)
Revaluation of derivative liability - - (3,540,640) (3,540,640) - - (4,081,401) (4,081,401)
Revaluation of deferred consideration - - - - - - 151,339 151,339
Loss before taxation (10,366,749) (4,177,864) (14,388,245) (28,932,859) (4,180,776) (2,628,327) (40,333,715) (47,142,818)
Tax charge - - - - - - - -
Loss for the year (10,366,749) (4,177,864) (14,388,245) (28,932,859) (4,180,776) (2,628,327) (40,333,715) (47,142,818)
Year Ended 31 December 2023 Year Ended 31 December 2022
(In USD) Bosnia Serbia Corporate Total Bosnia Serbia Corporate Total
Purchase of mining under construction assets 108,637,946 - - 108,637,946 37,390,342 - - 37,390,342
19. Other income
Year ended Year ended
31 December 2023
31 December 2022
(In USD)
Recharge of corporate office facilities and services 2,442 9,024
2,442 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.
Transactions and balances with these related parties were as follows:
(In USD) Year ended Year ended
31 December 2023
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 Nature of transactions
Related Party
Black Dragon Gold Corp 2,442 - 8,973 1,543 Corporate office facilities and services
Black Dragon Gold Corp - - (6,276) - Travel Expenses
Legal Solutions d.o.o (193,468) (25,610) (14,381) (2,875) Legal Services
OMF Fund III (F) Ltd 60,000,000 (100,591,470) 30,000,000 (30,030,806) Senior Secured Debt
OMF Fund III (F) Ltd 22,500,000 - - Copper Stream
Ventura Trustees Limited (16,930) - (10,242) (15,813) Administration and accountancy services
Baccata Secretaries Limited (34,104) (3,400) 396 (1,513) Company secretarial services
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.
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.
Year ended Year ended
31 December 2023
31 December 2022
(In USD)
Board fees 441,662 385,455
Consultancy fees 444,737 465,257
Short term incentive plan bonus 329,904 272,597
Other - 117,561
Cash remuneration in respect of qualifying services 1,216,303 1,240,870
Share-based payments expense 290,244 -
Social security costs 28,687 29,512
1,535,234 1,270,382
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)
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) Year ended Year ended
31 December 2023
31 December 2022
Wages and salaries 8,219,438 4,775,218
Consultancy fees 4,483,680 2,373,539
Cash remuneration in respect of qualifying services 12,703,118 7,148,757
Social security costs 4,758,788 2,365,912
Defined contribution pension cost 13,598 12,172
Share-based payments expense 1,561,020 1,295,293
Total 19,036,524 10,822,134
Average number of employees 296 158
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.
UK
Serbia Bosnia
23 39 -
Exploration
Mining - 156 -
Administration 8 60 10
Total 31 255 10
Directors' remuneration is set out below:
(In USD) Year ended Year ended
31 December 2023
31 December 2022
Board fees 441,662 385,455
Consultancy fees 444,737 380,542
Accrued cash bonus 329,904 272,597
Benefits 60,503 -
Cash remuneration in respect of qualifying services 1,276,806 1,038,594
Average number of Directors 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) Note 31 December 2023 31 December 2022
At 1 January 4,431,212 -
Recognition of rehabilitation provision - 4,431,212
Impact of life of mine extension 7 (757,425) -
At 31 December 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.
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.
24. Net cash and borrowings
An analysis of net cash and borrowings, including lease liabilities, and
movements in each year is shown below.
(In USD) Note 31 December 2023 31 December 2022
Cash and cash equivalents 44,856,215 60,585,277
Borrowings 6 (140,800,564) (42,498,052)
Lease liabilities 10 (8,136,567) (8,186,741)
(104,080,916) 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 - - (11,233,068) (11,233,068)
Net cash used in investing activities - - (58,664,242) (58,664,242)
Net proceeds from loans and borrowings (26,176,885) - 26,176,885 -
Lease additions - (9,360,066) - (9,360,066)
Foreign exchange movements - 67,082 (4,433,976) (4,366,894)
Changes in fair value due to modifications (214,605) (16,850) - (231,455)
Interest expense (1,735,496) (589,377) - (2,324,873)
Net interest payments 1,700,000 589,377 (2,011,994) 277,383
Capital payments on leases - 1,890,191 (1,890,191) -
Settlement of deferred consideration - - (525,785) (525,785)
Net cash arising from issue of equity - - 661,180 661,180
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 - - (22,886,414) (22,886,414)
Net cash used in investing activities - - (99,485,435) (99,485,435)
Net proceeds from loans and borrowings (81,060,421) - 81,060,421 -
Lease additions - (1,581,470) - (1,581,470)
Foreign exchange movements - (87,647) (356,108) (443,755)
Changes in fair value (4,419,547) - - (4,419,547)
Interest expense (14,717,544) (1,103,318) - (15,820,862)
Net interest payments 1,895,000 844,592 (2,739,592) -
Capital payments on leases - 1,978,017 (1,978,017) -
Net cash arising from issue of equity - - 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)
25. Subsequent events
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 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.
Parent Company Statement of Financial Position
AT 31 DECEMBER 2023
(In USD) Note
31 December 2023 31 December 2022
ASSETS
Current assets
Cash and cash equivalents 29,676,016 27,143,743
Receivables and prepayments f 33,158,466 22,674,681
Total current assets 62,834,482 49,818,424
Non-current assets
Investment in subsidiaries i 34,929,119 34,929,119
Receivables and prepayments f 67,652,967 57,733,284
Property, plant and equipment g 28,576 35,406
Right-of-use asset m 215,963 249,697
Total non-current assets 102,826,625 92,947,506
Total assets 165,661,107 142,765,930
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities h 1,676,757 1,171,031
Lease liabilities n 49,239 48,889
Borrowings o 16,108,967 -
Derivative liability o 9,909,859
Total current liabilities 27,744,822 1,219,920
Non-current liabilities
Accounts payable and accrued liabilities h - 5,240
Lease liabilities n 206,667 238,535
Borrowings o - 16,285,683
Derivative liability o - 6,369,219
Total non-current liabilities 206,667 22,898,677
Total liabilities 27,951,489 24,118,597
Equity
Share capital 5,712,782 5,376,349
Share premium 174,145,606 143,829,631
Merger reserve 23,497,730 23,497,730
Warrants reserve 2,743,303 2,743,303
Foreign currency translation reserve 2,513,538 2,513,538
Share-based payment reserve 3,591,220 4,943,436
Retained deficit (74,494,561) (64,256,654)
Total equity 137,709,618 118,647,333
Total liabilities and equity 165,661,107 142,765,930
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 28 March 2024 and were signed on its behalf by:
Paul Cronin Mike Norris
Managing Director and Chief Executive Officer Chief Financial Officer
Parent Company Statement of Changes in Equity
FOR THE YEAR ENDED 31 DECEMBER 2023
Merger reserve Share-based Warrants Reserve Foreign Currency Translation Reserve
Share premium payment reserve Total equity
(In USD) Note Share capital (Restated*) Retained earnings
31 December 2021 5,279,546 143,259,675 23,019,164 5,778,882 2,743,303 2,513,416 (17,756,831) 164,837,155
Comprehensive expense for the year
Loss for the year e - - - - - 122 (48,630,562) (48,630,440)
Total comprehensive expense - - - - - 122 (48,630,562) (48,630,440)
Share issue costs j - (86,199) - - - - - (86,199)
Exercise of options j 91,224 656,155 - (2,130,739) - - 2,130,739 747,379
Issue of options j - - - 873,155 - - - 873,155
2022 STIP awards j - - - 576,000 - - - 576,000
Expiry/cancellation of options/warrants j - - - (153,862) - - - (153,862)
Acquisition of subsidiary 5,579 - 478,566 - - - - 484,145
31 December 2022 5,376,349 143,829,631 23,497,730 4,943,436 2,743,303 2,513,538 (64,256,654) 118,647,333
Comprehensive expense for the year
Loss for the year e - - - - - - (12,575,142) (12,575,142)
Total comprehensive expense - - - - - - (12,575,142) (12,575,142)
Issue of share capital j 251,055 31,427,918 - - - 31,678,973
Share issue costs j - (2,111,505) - - - - - (2,111,505)
Exercise of options j 81,196 469,929 - (2,337,235) - - 2,337,235 551,125
Issue of options j - - - 1,644,777 - - - 1,644,777
2022 STIP awards j 4,182 529,633 - (576,000) - - - (42,185)
Expiry/cancellation of options/warrants j - - - (83,758) - - - (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.
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.
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 28 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.
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.
I) Investments in subsidiaries
Unlisted investments are carried at cost, being the purchase price, less
provisions for impairment. Additional consideration paid when subscribing for
new shares, is made via capital contributions and recorded as additions to
investments in subsidiaries.
II) Intercompany loans
All intercompany borrowings and loans are initially recognised at the fair
value of consideration received or paid after deduction of issue costs and are
subsequently measured at amortised cost.
III) Impairment
The Company recognises an allowance for expected credit losses ("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.
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.
II) Intercompany loans
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) 31 December 2023 31 December 2022
Accrued interest income 59,321 57,114
Prepayments and deposits 215,179 202,118
Taxes recoverable 94,574 74,184
Amounts receivable from subsidiaries 32,789,392 22,309,041
Other receivables - 32,224
33,158,466 22,674,681
All non-current receivables due more than one year as follows:
(In GBP) 31 December 2023 31 December 2022
Amounts receivable from subsidiaries 67,652,967 57,733,284
67,652,967 57,733,284
g. Property, plant and equipment
(In USD) Land and Buildings Plant and Machinery Total
Cost
31 December 2021 23,570 79,800 103,370
Additions - 10,110 10,110
Foreign exchange difference - 2,546 2,546
31 December 2022 23,570 92,456 116,026
Additions - 1,612 1,612
31 December 2023 23,570 94,068 117,638
Depreciation
31 December 2021 4,857 52,011 56,868
Charge for the year 2,356 21,396 23,752
31 December 2022 7,213 73,407 80,620
Charge for the year 2,358 6,084 8,442
31 December 2023 9,571 79,491 89,062
Net Book Value
31 December 2022 16,357 19,049 35,406
31 December 2023 13,999 14,577 28,576
h. Accounts payable and accrued liabilities
The breakdown of current accounts payable and accrued liabilities is as
follows:
(In USD) 31 December 2023 31 December 2022
Trade payables 337,525 89,199
Accrued liabilities 1,284,135 918,861
Other payables 55,097 70,472
Amounts payable to subsidiaries - 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
i. Investments in subsidiaries
The breakdown of the investments in subsidiaries is as follows:
(In USD) Eastern Mining d.o.o. Adriatic Metals Holdings BIH Limited Adriatik Metali d.o.o. RAS Metals d.o.o. Adriatic Metals Jersey Ltd Total
31 December 2021 - 26,426,143 2,956 30,677,477 3,973,286 61,079,862
Impairment - - - (22,177,477) (3,973,286) (26,150,763)
Foreign currency revaluation - 20 - - - 20
31 December 2022 and 31 December 2023 - 26,426,163 2,956 8,500,000 - 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.
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) Land & buildings
31 December 2021 283,169
Depreciation (33,472)
31 December 2022 249,697
Depreciation (33,734)
31 December 2023 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 316,224
Interest expense 21,369
Payments (50,169)
31 December 2022 287,424
Interest expense 19,187
Payments (50,705)
31 December 2023 255,906
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).
o. 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.
p. 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.
q. Subsequent events
Subsequent events relating to the Parent Company have been disclosed in note
25 to the Group consolidated financial statements.
ADDITIONAL ASX INFORMATION (UNAUDITED)
The Company's corporate governance statement for the year ended 31 December
2023 is available on the Company's website at
https://www.adriaticmetals.com/downloads/corp-governance-files-/adt-2020-06-05-cgp-v03.pdf
(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 28 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.
Principles and recommendations Comment
1. Lay solid foundations for management and oversight
1.1 A listed entity should disclose: (a) the respective roles and responsibilities The Board is ultimately accountable for the performance of the Company and
of its board and management; and (b) those matters expressly reserved to the provides leadership and sets the strategic objectives of the Company. It is
board and those delegated to management. 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.
1.2 A listed entity should: (a) undertake appropriate checks before appointing a The Company undertakes comprehensive reference checks prior to appointing a
person, or putting forward to security holders a candidate for election, as a director, or putting that person forward as a candidate to ensure that person
director; and (b) provide securityholders with all material information in its is competent, experienced, and would not be impaired in any way from
possession relevant to a decision on whether or not to elect or re-elect a undertaking the duties of a director. The Company provides relevant
director. information to shareholders for their consideration about the attributes of
candidates together with whether the Board supports the appointment or
re-election.
1.3 A listed entity should have a written agreement with each director and senior The terms of the appointment of a Non-Executive director, or executive
executive setting out the terms of their appointment. directors and senior executives are agreed upon and set out in writing at the
time of appointment.
1.4 The company secretary of a listed entity should be accountable directly to the The Joint Company Secretaries report directly to the Board through the
board, through the Chair, on all matters to do with the proper functioning of Chairman and are accessible to all directors.
the board.
1.5 A listed entity should (a) have a diversity policy which includes requirements The Company's Corporate Governance Plan includes a 'Diversity Policy', which
for the board or a relevant committee of the board lo set measurable provides a framework for establishing measurable objectives for achieving
objectives for achieving gender diversity and to assess annually both the gender diversity and for the Board to assess annually both the objectives and
objectives and the entity's progress in achieving them; (b) disclose that progress in achieving them.
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 The Board set formal diversity objectives for 2021 onwards which are included
board or a relevant committee of the board in accordance with the entity's as a KPI in the Company's Short Term Incentive Plan in both 2023 and 2024.
diversity policy and its progress towards achieving them, and either: (1) the
respective proportions of men and women on the Board, in senior executive Further detail on the Diversity Policy is included in the Strategic Report of
positions and across the whole organisation (including how the entity has the Directors.
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.
1.6 A listed entity should (a) have and disclose a process for periodically The Chairman reviews the performance of the Board, its Committees and
evaluating the performance of the Board, its Committees and individual individual directors to ensure that the Company continues to have a mix of
directors; and (b) disclose, in relation to each reporting period, whether a skills and experience necessary for the conduct of its activities.
performance evaluation was undertaken in the reporting period in accordance
with that process. The Company's Corporate Governance Plan includes a section The most recent performance evaluation of the board was performed during
on performance evaluation practices adopted by the Company. November and December 2022.
The Company's Corporate Governance Manual includes a section on performance
evaluation practices adopted by the Company.
1.7 A listed entity should (a) have and disclose a process for periodically The Company's Corporate Governance Plan includes a section on performance
evaluating the performance of its senior executives: and (b) disclose, in evaluation practices adopted by the Company.
relation to each reporting period, whether a performance evaluation was
undertaken in the reporting period in accordance with that process. 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.
2. Structure of the board to add value
2.1 The board of a listed entity should: 'The Company's Corporate Governance Manual includes a Nomination Committee
Charter, which discloses the specific responsibilities of the committee.
(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 The Company has established a formal Remuneration & Nomination committee.
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 Refer to the Company's Annual Report for further details regarding the
number of times the committee met throughout the period and the individual Remuneration & Nomination committee.
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 The Board's skills matrix is set out below.
mix of skills and diversity that the board currently has or is looking to
achieve in its membership. 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.
2.3 A listed entity should disclose: (a) the names of the directors considered by Those directors who are considered to be independent are specified in the
the board to be independent directors; (b) if a director has an interest. Directors Report.
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 The length of service of each of the Company's directors is included in the
director, the nature of the interest, position. association or relationship in Directors Report.
question and an explanation of why the board is of that opinion; and (c) the
length of service of each director.
2.4 A majority of the board of a listed entity should be independent directors. The majority of the Company's directors are independent.
2.5 The Chair of the board of a listed entity should be an independent director Mr. Rawlinson, who was the Chairman through the reporting year, is
and, in particular, should not be the same person as the CEO of the entity. independent.
2.6 A listed entity should have a program for inducting new directors and provide The Chairman and Company Secretaries brief and inform New Directors on all
appropriate professional development opportunities for directors to develop relevant aspects of the Company's operations and background. A director
and maintain the skills and knowledge needed to perform their role as development program is also available to ensure that directors can enhance
directors effectively. their skills and remain abreast of important developments.
3. Act ethically and responsibly
3.1 A listed entity should: (a) have a code of conduct for its directors, senior The Company's Corporate Governance Manual includes a 'Corporate Code of
executives and employees; and (b) disclose that code or a summary of it. Conduct', which provides a framework for decisions and actions in relation to
ethical conduct in employment.
4. Safeguard Integrity In financial reporting
4.1 The board of a listed entity should: (a) have an Audit Committee which: (1) The Company has established an Audit & Risk Committee.
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 Refer to the Company's Annual Report for further details regarding the Audit
independent director, who is not the Chair of the board, and disclose: (3) the & Risk Committee.
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.
4.2 The board of a listed entity should, before it approve' the entity's financial A declaration in accordance with these requirements has been provided by the
statements for a financial period, receive from its CEO and CFO a declaration CEO and CFO.
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 The Company seeks to ensure that its external auditors attend its AGM and are
attends its AGM and is available to answer questions from security holders available to answer questions from security holders relevant to the audit.
relevant to the audit.
5. Make timely and balanced disclosure
5.1 A listed entity should (a) have a written policy for complying with its The Company has a continuous disclosure program in place designed to ensure
continuous disclosure obligations under the Listing Rules; and (b) disclose the compliance with ASX Listing Rule disclosure and to ensure accountability
that policy or a summary of it. 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.
6. Respect the rights of shareholders
6.1 A listed entity should provide information about itself and its governance to The Company maintains information in relation to governance documents,
investors via its website. directors and senior executives. Board and committee charters, annual reports.
ASX announcements and contact details on the company's website.
6.2 A listed entity should design and implement an investor relations program to The Company encourages shareholders to attend its AGM and to send in questions
facilitate effective two-way communication with investors. 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.
6.3 A listed entity should disclose the policies and processes it has in place to Refer to commentary at Recommendation 6.2
facilitate and encourage participation at meetings of security holders.
6.4 A listed entity should give security holders the option to receive The Company engages its share registry to manage the majority of
communications from, and send communications to, the entity and its security communications with shareholders. Shareholders are encouraged to receive
registry electronically. 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 (http://www.computershare.com/au) .
7. Recognise and manage risk
7.1 The board of a listed entity should: (a) have a committee or Committees to The Company has established an Audit & Risk Committee. The Company's
oversee risk, each of which: (1) has at least three members, a majority of Corporate Governance Plan includes an Audit & Risk Committee Charter,
whom are independent directors; and (2) is chaired by an independent director, which discloses the specific responsibilities of the committee.
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 Refer to the Company's Annual Report for further details regarding the Audit
the committee met throughout the period and the individual attendances of the & Risk Committee.
members at those meetings; or (b) if it does not have a Risk Committee or
Committees that satisfy (a) above, disclose that fact and the processes it
employs for overseeing the entity's risk management framework.
7.2 The board or a committee of the board should: (a) review the entity's risk The Company's Corporate Governance Manual includes a risk management policy.
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 The Company maintains a risk register as part of its risk management strategy
a review has taken place. 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.
7.3 A listed entity should disclose: (a) if it has an internal audit function, how The Company is currently not in compliance with this recommendation as it does
the function is structured and what role it performs; or (b) if it does not not maintain a separate internal audit function as the Board considers the
have an internal audit function, that fact and the processes it employs for Company is not currently of the relevant size or complexity to warrant the
evaluating and continually improving the effectiveness of its risk management formation of a formal internal audit function.
and internal control processes.
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.
7.4 A listed entity should disclose whether it has any material exposure to Refer to the Company's Annual Report for disclosures relating to the company's
economic, environmental and social sustainability risks and, if it does, how material business risks, in particular the Principal Risks and Uncertainties
it manages or intends to manage those risks. section. . Refer to commentary at Recommendations 7.1 and 7.2 for information
on the company's risk management framework.
8. Remunerate fairly and responsibly
8.1 The board of a listed entity should: (a) have a Remuneration & Nomination The Company has established a Remuneration & Nomination Committee.
Committee which: (1) has at least three members, a majority of whom are
independent directors; and (2) is chaired by an independent director, and The Company's Corporate Governance Plan includes a Remuneration &
disclose: (3) the charter of the committee; (4) the members of the committee; Nomination Committee Charter, which discloses the specific responsibilities of
and (5) at the end of each reporting period, the number of times the committee the Remuneration 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 Refer to the Company's Annual Report for further details regarding the
that fact and the processes it employs for setting the level and composition Remuneration & Nomination Committee.
of remuneration for directors and senior executives and ensuring that such
remuneration is appropriate and not excessive.
8.2 A listed entity should separately disclose its policies and practices Refer to the Remuneration & Nomination Committee Report in the Company's
regarding the remuneration of Non-Executive directors and the remuneration of Annual Report.
executive directors and other senior executives.
8.3 A listed entity which has an equity-based remuneration scheme should: (a) have The Company does not have formal policy on whether participants in the
a policy on whether participants are permitted to enter into transactions equity-based remuneration scheme are permitted to enter into transactions
(whether through the use of derivatives or otherwise) which limit the economic which limit the economic risk of participating in the scheme. However, no such
risk of participating in the scheme; and (b) disclose that policy or a summary transactions have been entered into by scheme participants and such
of it. transactions may only be enter into with the prior approval of the Company as
noted in Schedule 4 Remuneration Committee Charter of the Corporate Governance
Manual.
Board skills matrix
Michael Rawlinson Peter Bilbe Sandra Bates
B. Economics. Master of Science B. Engineering Mining B.Com & LLB
Investment banking Mining Engineer Corporate Law
Resources Gold, Base Metals Corporate Finance
Mining Finance Operational experience M&A
NED - LSE, ASX NED - ASX Resources focus
NED - ASX, LSE, AIM
Paul Cronin - CEO Sanela Karic Julian Barnes
B.Com & MBA LLB BSC (Hons), PhD
Resource Finance Bosnian Law Geologist
CEO experience Corporate affairs Exploration & development
M&A M&A Balkan experience
Exec & NED ASX, LSE, TSX Human Resources Project generation & DD
NED - LSE NED - TSX, LSE, ASX
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:
Categories:
• 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
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:
Percentage of issued share
Number of ordinary shares capital
Rank Name
1 CITICORP NOMINEES PTY LIMITED 74,670,089 24.38%
2 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 37,974,347 12.40%
3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 24,183,042 7.90%
4 BNP PARIBAS NOMS PTY LTD 23,633,083 7.72%
5 BNP PARIBAS NOMINEES PTY LTD 19,790,248 6.46%
6 MR MILOS BOSNJAKOVIC 12,000,000 3.92%
7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 10,364,559 3.38%
8 GLAMOUR DIVISION PTY LTD 6,501,613 2.12%
9 MORGAN STANLEY CLIENT SECURITIES NOMINEES LIMITED SEG 6,376,445 2.08%
10 EUROCLEAR NOMINEES LIMITED EOC01 5,580,455 1.82%
11 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 5,501,837 1.80%
12 BNY (OCS) NOMINEES LIMITED 586389 4,389,940 1.43%
13 MR ERIC DE MORI 4,000,000 1.31%
14 BNY (OCS) NOMINEES LIMITED 703632 3,799,393 1.24%
15 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA 3,031,165 0.99%
16 NINCRO PTY LTD 3,000,000 0.98%
17 MR ALBERTO LAVANDEIRA ADAN 2,666,664 0.87%
18 NORTRUST NOMINEES LIMITED 2,452,856 0.80%
19 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 2,154,296 0.70%
20 INTERACTIVE BROKERS LLC IBLLC2 1,987,824 0.65%
Totals: Top 20 holders 254,057,856 82.97%
Total Remaining Holders Balance 52,164,189 17.03%
At 20 March 2024 the Directors are aware of three shareholders who held a
substantial shareholding within the meaning of the Australian Corporations Act
as outlined in the top 20 listing above. A person has a substantial holding if
the total votes that they or their associates have relevant interests in is
five per cent of more of the total number of votes.
Distribution of Ordinary Shares at 20 March 2024
Number of shareholders Number of ordinary shares Percentage of issued
Range share capital
1 - 1,000 1,011 426,049 0.14%
1,001 - 5,000 700 1,852,076 0.60%
5,001 - 10,000 247 1,902,419 0.62%
10,001 - 100,000 334 10,459,310 3.42%
100,001 Over 105 291,582,191 95.22%
Total 2,397 306,222,045 100.00%
Unmarketable Parcel
Minimum Parcel Size Shares Number of shareholders
Total Shares
ASX Minimum trade parcel AUD$500.00 parcel at AUD$3.74 per share 134 104 1,981
Substantial Option and Performance Rights Holders
Total number of options and performance rights as at 22 March 2024 as follows:
Securities in issue Number of security holders
Instrument
Share Options 24,900 1
Performance Rights 1,868,670 21
Total 1,893,570 22
Restricted securities
There were no restricted securities or securities subject to voluntary escrow
at 31 December 2023.
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 Raska (Suva Ruda)
licence held by Deep Research d.o.o.. The Company has an option agreement to
acquire 100% ownership of Deep Research d.o.o. but has no equity interest in
that entity at present.
Concession document Registration number Licence holder Concession name Area (km(2)) Date granted Expiry date
Bosnia and Herzegovina Concession Agreement No.:04-18-21389-1/13 Eastern Mining d.o.o. Veovaca1 1.08 12-Mar-13 12-Mar-38
Veovaca 2 0.91 12-Mar-13 12-Mar-38
Rupice-Jurasevac, Brestic 0.83 12-Mar-13 12-Mar-38
Annex 3 & 6 Area No.: 04-18-21389-3/18 Eastern Mining d.o.o. Rupice - Borovica 4.52 14-Nov-18 12-Mar-33
Extension Veovaca - Orti - Seliste - Mekuse 1.32 14-Nov-18 12-Mar-33
Annex 5 - Area No: 04-18-14461-1/20 Eastern Mining d.o.o. Orti-Selište-Mekuše- Barice- Smajlova Suma-Macak 19.33 3-Dec-20 3-Dec-50
Extension Droskovac - Brezik 2.88 3-Dec-20 3-Dec-50
Extension Borovica - Semizova Ponikva 9.91 3-Dec-20 3-Dec-50
Concession Agreement No: 04-14-5359-3/22 Eastern Mining d.o.o. Saski Do 1.28 19-Jul-22 19-Jul-25
Serbia Exploration Licence 310-02-1721/2018-02 Adriatic Metals d.o.o. Kizevak 1.84 3-Oct-19 29-May-26
Exploration Licence 310-02-1722/2018-02 Adriatic Metals d.o.o. Sastavci 1.44 7-Oct-19 29-May-26
Exploration Licence 310-02-1114/2015-02 Adriatic Metals d.o.o. Kremice 8.54 21-Apr-16 07-Jul-25
Exploration Licence 310-02-00060/2015-02 Deep Research d.o.o. Rudno Polje Raska 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
*Possible to get up to two year's retention right, but only for preparation of
reserves elaborate and preparation of the documents for exploitation field
license which excludes any geological exploration work.
Chapters 6, 6A, 6B and 6C of the Corporations Act
As the company is incorporated in England and Wales, chapters 6, 6A, 6B and 6C
of the Corporations Act dealing with the acquisition of shares (i.e.
substantial holdings and takeovers) do not apply to the Company. In the United
Kingdom, the City Code on Takeovers and Mergers (City Code) regulates
takeovers and substantial shareholders and the Company is subject to the City
Code.
Voting rights
The Company is incorporated under the legal jurisdiction of England and Wales.
To enable the Company to have their securities cleared and settled
electronically through CHESS, Depositary Instruments called CHESS Depositary
Interests (CDIs) are issued. Each CDI represents one underlying ordinary share
in the Company (Share). The main difference between holding CDIs and Shares is
that CDI holders hold the beneficial ownership in the Shares instead of legal
title. CHESS Depositary Nominees Pty Limited (CDN), a subsidiary of ASX, holds
the legal title to the underlying Shares.
Pursuant to the ASX Settlement Operating Rules, CDI holders receive all of the
economic benefits of actual ownership of the underlying Shares. CDIs are
traded in a manner similar to shares of Australian companies listed on ASX.
CDIs will be held in uncertificated form and settled/transferred through
CHESS. No share certificates will be issued to CDI holders. Each CDI is
entitled to one vote when a poll is called, otherwise each member present at a
meeting or by proxy has one vote on a show of hands.
All substantive resolutions at a meeting of security holders are decided by
poll rather than by a show of hands.
If holders of CDIs wish to attend and vote at the Company's general meetings,
they will be able to do so. Under the ASX Listing Rules and the ASX Settlement
Operating Rules, the Company as an issuer of CDIs must allow CDI holders to
attend any meeting of the holders of Shares unless relevant English law at the
time of the meeting prevents CDI holders from attending those meetings.
In order to vote at such meetings, CDI holders have the following options:
a) instructing CDN, as the legal owner, to vote the Shares underlying
their CDIs in a particular manner. A voting instruction form will be sent to
CDI holders with the notice of meeting or proxy statement for the meeting and
this must be completed and returned to the Company's Share Registry prior to
the meeting; or
b) informing the Company that they wish to nominate themselves or
another person to be appointed as CDN's proxy with respect to their Shares
underlying the CDIs for the purposes of attending and voting at the general
meeting; or
c) converting their CDIs into a holding of Shares and voting these at
the meeting (however, if thereafter the former CDI holder wishes to sell their
investment on ASX it would be necessary to convert the Shares back to CDIs).
In order to vote in person, the conversion must be completed prior to the
record date for the meeting. See above for further information regarding the
conversion process.
As holders of CDls will not appear on the Company's share register as the
legal holders of the Shares, they will not be entitled to vote at Shareholder
meetings unless one of the above steps is undertaken.
As each CDI represents one Share, a CDI Holder will be entitled to one vote
for every CDI they hold.
Proxy forms, CDI voting instruction forms, and details of these alternatives
will be included in each notice of meeting sent to CDI holders by the Company.
These voting rights exist only under the ASX Settlement Operating Rules,
rather than under British Columbia Law. Since CDN is the legal holder of the
applicable Shares and the holders of CDIs are not themselves the legal holder
of their applicable Shares, the holders of CDIs do not have any directly
enforceable rights under the Company's articles of association.
As holders of CDIs will not appear on our share register as the legal holders
of shares of ordinary shares, they will not be entitled to vote at our
shareholder meetings unless one of the above steps is undertaken.
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. END FR PPUGCWUPCUQR Recent news on Adriatic Metals
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