Adriatic Metals Achieves Major Milestone with First Concentrate Sales and Announces Equity Raise

Adriatic Metals PLC (ASX:ADT, LSE:ADT1, OTCQX:ADMLF) has announced a significant milestone with the sale of its first on-specification grade concentrates from the Vares Silver Operation in Bosnia & Herzegovina. This achievement marks a pivotal step in the company's journey towards full production capacity, with the first shipment already en route to the Port of Plocê.

Successful Commissioning of Vares Processing Plant

The Vares Processing Plant, now fully commissioned, is producing saleable grade concentrates with impressive metrics. The plant is achieving grades of over 2,500 grams per tonne (g/t) of silver and nearly 50% zinc. These results not only confirm the plant’s operational capabilities but also highlight its potential to generate significant commercial products.

Source: $ADT ASX Announcement

Paul Cronin, Adriatic’s Managing Director and CEO, expressed his satisfaction with the progress: 

"The production of saleable concentrates from the Vares Silver Operation represents a major milestone for the company. The processing team has done an outstanding job, and the plant is meeting our expectations for recoveries."

Source: $ADT ASX Announcement

Exceptional Underground Development

Underground development at the Vares site has also exceeded expectations. After achieving a record high of 250 meters of development in March, the team completed 256 meters in April and is on track to reach nearly 300 meters in May. This increased development rate is crucial as it ensures a steady feed of high-grade ore to the processing plant.

Key Metrics:

 - Silver Concentrate Grade: Over 2,500 g/t

- Zinc Concentrate Grade: Close to 50%

- April Underground Development: 256 meters

- May Underground Development Target: 300 meters

Financial Outlook and Market Dynamics

The timing of this operational success coincides with favorable market conditions. High silver, gold, and zinc prices, coupled with low treatment charges due to a tight concentrate market, are providing strong tailwinds for Adriatic Metals’ free cash flow generation. As the company ramps up to full production capacity expected in Q4 2024, these positive market dynamics are likely to enhance profitability.

Cronin added:

"High silver, gold, and zinc prices and low treatment charges due to a tight concentrate market are providing positive tailwinds for Adriatic’s free cash flow generation, as we progress towards full production capacity in Q4 of this year."

Market Dynamics:

- Silver Price: Increased demand amid tight market

- Gold Price: Consistently high, offering stable revenue

- Zinc Price: Benefiting from supply constraints and high demand

Equity Raise to Bolster Financial Position

In a strategic move to optimize its balance sheet and support ongoing development, Adriatic Metals has announced an equity raise through an institutional placement. The company aims to raise approximately US$50 million (AU$75.81 million) by issuing around 18.3 million CHESS Depositary Interests (CDIs) at AU$4.15 per CDI. This offer price represents a discount of approximately 5.7% to the last close price of AU$4.40 and 11.5% to the five-day volume-weighted average price of AU$4.69.

Use of Proceeds

• US$39 million: To bolster the company’s balance sheet, providing flexibility during the final stages of ramp-up to commercial production and nameplate capacity.
• US$11 million: To finalize the termination payment to the previous mining contractor.

Placement Details

• Offer Price: AU$4.15 per CDI
• Total Funds Raised: Approximately US$50 million (AU$75.81 million)
• CDIs Issued: Approximately 18.3 million
• Undrawn Orion Debt Facility: US$25 million remains available for additional flexibility but is not expected to be drawn upon based on current estimates.

Concurrently, Orion Resource Partners plans to sell 8 million existing CDIs at the offer price, while committing to hold their remaining CDIs for at least 90 days post-closing of the placement.

Source: $ADT ASX Announcement

Future Production and Exploration Plan

With the Vares Processing Plant transitioning to 24-hour operations and the anticipation of first stopes in July, Adriatic Metals is poised for significant production increases. The company remains focused on optimizing the plant’s performance and improving metal recovery rates.

Additionally, ongoing exploration across Adriatic's 44km² concession package continues to uncover new opportunities. The Raska Zinc-Silver Project in Serbia, along with the high-grade Vares Silver Project, positions the company strategically to capitalize on future discoveries and expand its resource base.

Exploration Highlights:

- Vares Silver Operation: Fully funded to nameplate production

- Raska Zinc-Silver Project: Continuing exploration efforts

- Concession Package: 44km² of highly prospective ground

Conclusion

Adriatic Metals PLC's successful sale of its first concentrates from the Vares Silver Operation and the concurrent equity raise mark significant achievements in the company’s development. With robust operational performance, favorable market conditions, and ongoing exploration efforts, Adriatic Metals is well-positioned for a promising future.