22 April 2024
Adriatic
Metals PLC
("Adriatic Metals" or the "Company")
CORPORATE
UPDATE
Adriatic Metals
PLC (ASX:ADT, LSE:ADT1,
OTCQX:ADMLF)
is pleased to announce an update on recent
corporate activity.
Transition to Mining Operator at
Rupice Mine
In June 2022, Adriatic and Nova
Mining and Construction d.o.o, ('Nova') entered into a Mining
Services Contract, which was focused on the development of the
Rupice Mine. As announced in June 2023, Adriatic took the decision
to implement an Accelerated Development Action Plan (ADAP) and
onboarded experienced international operators in order to
significantly improve productivity levels on the basis that the
development rate was not in line with contractual
expectations.
Following the success of the ADAP,
Adriatic and Nova have agreed to terminate the Mining Services
Contract and enter into a settlement and termination agreement
effective on 20 April 2024. Accordingly, Adriatic has commenced the
transition process to take over as the mining operator at Rupice
Mine.
The ADAP has been overseen by the
Adriatic management team and includes several key measures to
improve underground development and productivity, as
follows:
· New mining methodology introduced by the Adriatic Mining team
experienced in this area - implementation of single unit bolt, mesh
bore development cycle reducing the development fleet size by 60%
and cycle times by 65%. Whilst used internationally, the
methodology is a European first and due to its success, a third
drilling jumbo is currently being commissioned.
· Recruitment of several staff with advanced health and safety
skills and rapid mine development experience, providing one-on-one
training to national staff to accelerate the necessary transfer of
skills.
· Transition from 8 hour to 12 hour shifts, which has increased
operational time and subsequent productivity.
·
Improved understanding of underground
rock mass conditions and structural geology through additional
geotechnical drilling and mapping.
· Improved procurement practices including building longer term
regional partnerships which the Company believes will realise
reduced mining costs over time.
· A
greater emphasis on health and safety measures and improved risk
management.
· A
focus on environmental protection via an enhanced water management
approach.
Since implementing the Accelerated
Development Action Plan in June 2023, underground quarterly
development has increased 71% despite poor
ground conditions persisting. Q1 2024 represented a 98% improvement
in underground development and in March 2024 underground
development was 250m - a project development monthly record.
Further improvements are expected in the coming quarter with the
commissioning of the third jumbo.
Development metres by quarter
Adriatic and Nova have agreed
constructive transition arrangements to ensure a seamless handover
of operations. This will be undertaken while Adriatic obtains an
operating licence, which is currently held by Nova as mining
contractor. The transition is envisaged to take approximately
60 days to complete.
The termination will involve
payments to Nova totalling approximately US$11 million, associated
with the transfer of underground and surface equipment, spares and
consumables inventory, leases, various infrastructure components
and key personnel. The first payment to Nova is due shortly after
signing of the termination agreement, with the final payment due
once Adriatic has received the operating licence. Adriatic will
also assume certain financing liabilities amounting to
approximately US$6.5 million for Sandvik underground mining
equipment to be acquired by Adriatic.
Adriatic is confident that the
transition to mining operator will result in enhanced productivity,
operational efficiencies, cost reductions and improvements in
health, safety and environmental standards. Additionally, noticeable improvements in procurement are
anticipated as Adriatic will focus on obtaining better value inputs
from a wider range of local and international suppliers.
US$25 million Additional Loan Facility from Orion Mine
Finance
Adriatic has agreed an additional
short-term loan facility with Orion Mine Finance ('Orion') of US$25
million. This is in addition to the original US$120 million Senior
Secured debt facility provided by Orion in January 2022, which has
been fully drawn down, and subject to the same drawdown conditions
and interest rate.
These funds will be available in a
single tranche during the period 1 September 2024 - 31 December
2024 as required for project-related purposes.
The additional tranche must be
repaid within six months of utilisation in cash or, at Orion's
option, in silver credits. The amount of any silver credits used to
repay the additional tranche shall be calculated by reference to a
market price discounted by 2%.
The first quarterly debt repayment
to Orion is scheduled on 31 December 2024, with 10 quarterly
repayments of principal, accrued interest and fees in even
instalments thereafter.
The final capital cost for the
Project remains at US$188.9 million, including over US$22.7 million
of scope changes resulting from design enhancements, improved water
management facilities and additional mobile fleet.
Paul Cronin, Adriatic's Managing
Director and CEO, commented:
"I am pleased with the progress made
by our leadership team since the initiation of our Accelerated
Development Action Plan in June 2023. It is the opportune time for
us to transition to mining owner-operator and I would like to thank
Nova for their support over the last few years. We have a highly
experienced mining team at Adriatic dedicated to driving
development, as demonstrated by achieving a record-breaking 250
meters of underground progress in March this year.
The Vares Project is expected to be
one of the lowest-cost silver producers globally. Our focus remains
on driving down mining costs further through enhanced operational
efficiencies, rigorous cost management and optimised procurement
processes.
Once again, I would like to extend
my gratitude to Orion for their long term ongoing financial support
as we accelerate the Vares Project to nameplate capacity in Q4
2024."
-ends-
MARKET ABUSE REGULATION
DISCLOSURE
The information contained within
this announcement is deemed by the Company (LEI:
549300OHAH2GL1DP0L61) to constitute inside information for the
purpose of Article 7 of EU Market Abuse Regulation (EU) No.
596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) ACT 2018, as amended. The person
responsible for arranging and authorising the release of this
announcement on behalf of the Company is Paul Cronin, Managing
Director and CEO.
Authorised by Paul Cronin, Managing
Director & CEO
For further information please
visit: www.adriaticmetals.com;
email: info@adriaticmetals.com,
@AdriaticMetals
on Twitter; or contact:
Adriatic Metals PLC
|
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Paul Cronin / Klara
Kaczmarek
|
Via Buchanan
|
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Buchanan
|
Tel: +44 (0) 20 7466 5000
|
Bobby Morse / Oonagh
Reidy
|
adriatic@buchanan.uk.com
|
Morgans Corporate Limited
|
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Rob Douglas / Sam Warriner / Mitch
Duffy
|
Tel: +61 7 3334 4888
|
|
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RBC
Capital Markets
|
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Farid Dadashev / James Agnew / Jamil
Miah
|
Tel: +44 (0) 20 7653 4000
|
|
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Stifel Nicolaus Europe Limited
|
Ashton Clanfield / Callum Stewart /
Varun Talwar
|
Tel: +44 (0) 20 7710 7600
|
|
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Citadel Magnus
|
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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 44km2 concession
package.