Source - LSE Regulatory
RNS Number : 0323U
Adriatic Metals PLC
31 March 2021
 

Adriatic Metals PLC 

('Adriatic Metals' or 'Company')

 

Annual Report and Audited Financial Statements 

for the Six Months Ended 31 December 2020

 

Adriatic Metals PLC (ASX:ADT & LSE:ADT1) is pleased to announce its Annual Report and Audited Financial Statements for the six months ended 31 December 2020.

The Board advises all shareholders and interested stakeholders that the Company's Annual Report including the audited results for the six months ended 31 December 2020 is available on the Company's website: https://www.adriaticmetals.com/investors/financial-reports-2/

An abridged version of the results for the six months ended 31 December 2020 is included below.

 

By order of the Board

Geoff Eyre

Chief Financial Officer and Joint Company Secretary

 

 

Consolidated Statement of Financial Position

AS AT 31 DECEMBER 2020

 

 

(In GBP)

Note

31 December  2020

(Restated) 30 June 2020

Assets

 

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

29,580,538

9,942,729

Other receivables and prepayments

5

654,514

451,546

Financial asset at fair value through profit and loss

6

-

1,241,514

Total current assets

 

30,235,052

11,635,789

Non-current assets

 

 

 

Property, plant and equipment

8

969,464

910,920

Right of use asset

12

236,349

251,898

Exploration and evaluation assets

9, 10

36,479,724

9,045,169

Total non-current assets

 

37,685,537

10,207,987

Total assets

 

67,920,589

21,843,776

 

Equity and liabilities

 

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities

11

1,900,437

682,402

Lease liability

12

35,609

10,530

Option Liability

10

2,515,399

-

Borrowings

7

105,515

-

Total current liabilities

 

4,556,960

692,932

Non-current liabilities

 

 

 

Lease liability

12

219,731

255,091

Borrowings

7

11,590,172

-

Derivative Liability

7

3,045,213

-

Total non-current liabilities

 

14,855,116

255,091

Total liabilities

 

19,412,076

948,023

 

Capital and reserves attributable to shareholders of the parent

Share capital

15

2,772,186

2,401,777

Share premium

15

51,471,748

23,992,967

Share-based payment reserve

15

5,756,069

4,426,185

Warrants Reserve

15

2,797,086

-

Other Equity

10

(2,515,399)

-

Foreign currency translation reserve

 

225,580

219,805

Retained deficit

 

(13,995,045)

(10,144,981)

 

 

46,512,225

20,895,753

Non-controlling interest

10

1,996,288

-

Total equity

 

48,508,513

20,895,753

Total equity and liabilities

 

67,920,589

21,843,776

 

See note 24 for details of the restatement of the prior year comparatives.

The above Consolidated Financial Statements should be read in conjunction with the accompanying notes.

The Consolidated Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 30 March 2021 and were signed on its behalf by:

Paul Cronin

Managing Director & Chief Executive Officer

Geoff Eyre

Chief Financial Officer & Joint Company Secretary

 

Consolidated Statement of Comprehensive Income

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

 

(In GBP)

 

 

Note

Six Months Ended 31 December 2020

Year Ended 30 June 2020

 

 

 

 

Exploration costs

17

(798,028)

-

General and administrative expenses

18

(2,115,707)

(3,315,634)

Share-based payment expense

15e

(2,267,239)

(3,443,359)

Other income

21

4,816

6,131

Operating loss

 

(5,176,158)

(6,752,862)

 

Finance income

19

-

203,131

Finance expense

19

(197,039)

(11,580)

Revaluation of fair value asset

6,7

(322,987)

322,987

Loss before tax

 

(5,696,184)

(6,238,324)

 

Tax charge

16

1,681

-

 

Loss for the period

 

(5,694,503)

(6,238,324)

 

Other comprehensive income that might be reclassified to profit or loss in subsequent periods:

Exchange gain arising on translation of foreign operations

 

5,775

145,563

 

 

5,775

145,563

Total comprehensive loss for the period

 

(5,688,728)

(6,092,761)

 

Total comprehensive loss attributable to:

 

 

 

Owners of the parent

 

(5,169,617)

(6,092,761)

Non-controlling interest

 

(519,111)

-

 

 

(5,688,728)

(6,092,761)

 

Net loss per share

Basic and diluted (pence)

15f

(2.99)

(3.69)

 

The above Consolidated Financial Statements should be read in conjunction with the accompanying notes.

 

 

Consolidated Statement of Changes in Equity

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

(In GBP)

 

Note

 

Number Of
Shares

 

Share Capital

 

(Restated)

Share Premium

Share- Based Payment Reserve

 

 

Warrants

Other Equity

Foreign Currency Translation Reserve

 

(Restated) Retained Earnings

Capital And Reserves Attributable To Owners Of The Parent

Non- Controlling Interest

Total Equity

 

30 June 2019

 

150,782,587

2,013,701

11,084,777

1,714,826

-

 

74,242

(4,638,657)

10,248,889

-

10,248,889

 

 

 

 

 

 

 

 

Comprehensive income for the year:

Loss for the year

 

-

-

-

-

-

 

 

(6,238,324)

(6,238,324)

-

(6,238,324)

 

Other comprehensive income

 

-

-

-

-

-

 

145,563

-

145,563

-

145,563

 

Total comprehensive loss

 

-

-

-

-

-

 

145,563

(6,238,324)

(6,092,761)

-

(6,092,761)

 

 

 

 

 

 

 

 

Contributions by and distributions to owners:

Issue of share capital

15

25,083,400

334,989

13,015,388

-

-

 

-

-

13,350,377

-

13,350,377

 

Share issue costs

15

-

-

(797,655)

-

-

 

-

-

(797,655)

-

(797,655)

 

Exercise of options

15

3,975,000

53,087

690,457

(732,000)

-

 

-

732,000

743,544

-

743,544

 

Issue of options

15

-

-

-

3,443,359

-

 

-

-

3,443,359

-

3,443,359

 

30 June 2020

 

179,840,987

2,401,777

23,992,967

4,426,185

-

 

219,805

(10,144,981)

20,895,753

 

20,895,753

 

 

 

 

 

 

 

 

Comprehensive income for the Period:

Loss for the period

 

-

-

 

 

-

 

 

(5,175,392)

(5,175,392)

(519,111)

(5,694,503)

 

Other comprehensive income

 

-

-

-

-

-

 

5,775

-

5,775

-

5,775

 

Total comprehensive loss

 

-

-

-

 

 

-

-

 

5,775

(5,175,392)

(5,169,617)

(519,111)

(5,688,728)

 

 

 

 

 

 

 

 

Contributions by and distributions to owners:

Issue of share capital

15

5,276,595

70,469

6,129,531

-

-

-

-

-

6,200,000

 

6,200,000

 

Settlement Placement

15

4,830,156

64,507

4,791,547

-

-

-

-

-

4,856,054

 

4,856,054

 

Share issue costs

 

-

 

(1,598,603)

 

-

-

-

151,402

(1,447,201)

 

(1,447,201)

 

Exercise of options

15

4,350,000

58,093

1,203,817

(1,173,926)

-

-

-

1,173,926

1,261,910

 

1,261,910

 

Issue of options

15

-

-

-

2,267,239

-

-

-

-

2,267,239

 

2,267,239

 

Acquisition of subsidiary

15

13,278,937

177,340

16,952,489

236,571

2,797,086

(2,515,399)

-

-

17,648,087

2,515,399

20,163,486

 

31 December 2020

 

207,576,675

2,772,186

51,471,748

5,756,069

2,797,086

(2,515,399)

225,580

(13,995,045)

46,512,225

1,996,288

48,508,513

 

                                             


See note 24 for details of the restatement of the prior year comparatives.

The above Consolidated Financial Statements should be read in conjunction with the accompanying notes.

 

Consolidated Statement of Cash Flows

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

 

(In GBP)

 

 

Note

Six Months Ended 31 December 2020

 

Year Ended 30 June 2020

 

Cash flows from operating activities

 

 

 

Loss for the period

 

(5,694,503)

(6,238,324)

Adjustments for:

Loss on Disposal of Fixed Asset

 

1,106

-

Depreciation of property, plant and equipment

8

36,157

52,645

Amortisation of exploration & evaluation assets

9

11,469

23,317

Amortisation of right-of-use assets

12

15,549

13,714

Share-based payment expense

15

2,267,239

3,443,359

Finance income

19

-

(203,131)

Finance expense

19

197,039

11,580

Revaluation of fair value asset and liability

6,7

322,987

(322,987)

Changes in working capital items:

Increase in other receivables and prepayments

 

(151,833)

(85,438)

Increase in accounts payable and accrued liabilities

 

687,582

498,074

Net cash used in operating activities

 

(2,307,208)

(2,807,191)

Cash flows from investing activities:

Cash acquired on acquisition

10

311,964

-

Purchase of property, plant and equipment

8

(90,864)

(235,117)

Purchase of exploration & evaluation assets

9

(3,052,019)

(4,942,689)

Sale of Property, plant and equipment

 

1,970

-

Loans issued

6

(723,300)

(876,201)

Interest received

 

-

37,742

Net cash used in investing activities

 

(3,552,249)

(6,016,265)

Cash flows from financing activities:

Net proceeds from the issue of ordinary shares

15i

12,317,964

13,296,266

Gross proceeds from loans and borrowings

7

14,956,849

-

Transaction costs arising from financing activities

15i

(1,447,201)

-

Interest paid on lease liabilities

 

(10,523)

(11,580)

Net cash flows from financing activities

 

25,817,089

13,284,686

Net increase in cash and cash equivalents

 

19,957,632

4,461,230

Exchange (losses) / gains on cash and cash equivalents

 

(319,823)

111,740

Cash and cash equivalents at beginning of the period

 

9,942,729

5,369,759

Cash and cash equivalents at end of the period

 

29,580,538

9,942,729

The above Consolidated Financial Statements should be read in conjunction with the accompanying notes.

 

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 Section 3 (collectively, the Group) for the period ended 31 December 2020. Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England & Wales. The Registered office has changed during the year. 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 world-class advanced Vares Silver Project in Bosnia & Herzegovina. The Vares Silver Project consists of two high-grade polymetallic deposits, located at Rupice and Veovaca. The Group expanded its exploration activities to Serbia during the period with the acquisition of the Tethyan Resource Corp to order to advance the former Kizevak and Sastavci polymetallic mines in the Raska District of southern Serbia.

Bosnia & 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.

The Vares Silver Project's captivating economics and impressive resource inventory have attracted Adriatic's highly experienced team, which is expediting exploration efforts to expand the current JORC resource. Results of a recent Pre-Feasibility study indicate an NPV8 of US$1,040 million and IRR of 113%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the project into the development phase and through to production.

2.     Basis of preparation

a Statement of compliance

These consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee, and there is an ongoing process of review and endorsement by the European Commission.

The Consolidated Financial Statements were authorised for issue by the Board of Directors on 30 March 2021.

b Basis of measurement

These Consolidated Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value.

These Consolidated Financial Statements are presented in Great Britain Pounds ("GBP"). The functional currency of the Company is the Great Britain Pound.

c Going Concern

The Group incurred a loss in the period of £5,694,503 (30 June 2020 - £6,238,324). However, the Group also had a net asset position at the balance sheet date of £46,512,225 (30 June 2020 - £20,895,753 ).

The Company and Group continue to meet their working capital requirements with the support of investors completed a £6.2 million equity private placement with the European Bank for Reconstruction and issue of US$20 million in convertible debentures to Queens Road Capital during Q4 2020. The results from the October 2020 Vares Silver Project Pre-Feasibility study indicated a project NPV8 of US$1,040 million and IRR of 113% further underline the Group's future potential as producing mine generating health cash flows.

The Group's operations have been largely unaffected by COVID-19 with exploration and development work continuing with only minor disruption. The Vares Silver Project's economics, the resource based of which includes a substantial element attributable to precious metals, remain attractive notwithstanding the impact that COVID-19 has had on commodity prices and demand.

Cash flow forecasts prepared inclusive of discretionary expenditure, based on planned levels of future activity including commencement of construction of the Vares Silver Project, indicate that the Group will need to raise additional finance within the next 12 months. However, the Directors' believe that the Group can secure the additional funding necessary to continue in operational existence for the next 12 months at planned activity level from the date of this report and would defer the acceleration in cash burn rate that would arise on the commencement of construction until adequate funding is in place to do so.

Cash flow forecasts prepared based on current committed expenditure and non-discretionary spend only, indicate that the Company has 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. The Directors therefore believe there is not a material uncertainty regarding going concern that it is appropriate to prepare the financial statements on a going concern basis.

3.     Significant 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 significant accounting policies applied by management. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in note 4.

a       Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

• The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights

• Substantive potential voting rights held by the company and by other parties

• Other contractual arrangements

• Historic patterns in voting attendance.

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

The Consolidated Financial Statements comprise the Financial Statements of the Company and following subsidiaries at 31 December 2020:

 

Name of subsidiary

Country of incorporation

Shareholding on 31 December 2020

Shareholding on 30 June 2020

Nature of business

Eastern Mining d.o.o.

Bosnia and Herzegovina

100%

100%

Mineral exploration & development

Tethyan Resource Corp

Canada

100%

0%

Holding company - financing mining exploration of subsidiary

Tethyan Resources Limited

England & Wales

100%

0%

Holding company - financing mining exploration of subsidiary

Tethyan Resources Jersey Ltd

Jersey

100%

0%

Holding company - financing mining exploration of subsidiary

Taor d.o.o.

Serbia

100%

0%

Mineral exploration and development

Tethyan Resources d.o.o.

Serbia

100%

0%

Mineral exploration and development

Global Mineral Resources d.o.o.

Serbia

100%

0%

Mineral exploration and development

Tethyan Resources Bulgaria EOOD

Bulgaria

100%

0%

Mineral exploration and development

Kosovo Resource Company

Kosovo

100%

0%

Mineral exploration and development

Ras Metals d.o.o.

Serbia

10%*

0%

Mineral exploration and development

 

* The Group holds 10% of the equity in Ras Metals d.o.o. and has an option to acquire remaining 90% it does not hold. The Group has substantive control of Ras Metals d.o.o. and has consolidated the net assets into the Group financial statements.

The Group also owns 10% of the equity in EFPP d.o.o. with an option to acquire the remaining 90%. However, the Group does not have substantive control over this entity and has not consolidated the net assets into the Group financial statements.  See Section 4 for more details on critical accounting judgements.

Entities in which the Group has a shareholding that are not included in consolidation are as follows:

 

Name of subsidiary

Country of incorporation

Shareholding on 31 December 2020

Shareholding on 30 June 2020

Nature of business

EFPP d.o.o.

Serbia

10%*

0%

Mineral exploration and development

b      Standards, amendments and interpretations adopted

During the period, the following new standards and amendments have been implemented.

Standard

Detail

Effective date

IAS 1

IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Disclosure Initiative - Definition of Material)

1 January 2020

IFRS 3

Business Combinations (Amendment - Definition of Business)

1 January 2020

N/A

Conceptual Framework for Financial Reporting (Revised)

1 January 2020

IFRS 9, IFRS 7, IFRS 4 and IFRS 16

IBOR Reform and its Effects on Financial Reporting - Phase 1

1 January 2020

IFRS 16

Covid-19-Related Rent Concessions - Amendment to IFRS 16

1 June 2020

 

c       Standards, amendments and interpretations effective in future periods

At the date of authorisation of these Consolidated Financial Statements, the following new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group.

Standard

Detail

Effective date

IFRS 17

Insurance contracts

1 January 2021

 

 

 

IAS 1

Amendment - regarding the classification of liabilities

1 January 2022

IAS 37

Onerous Contracts - Cost of Fulfilling a Contract

1 January 2022

IAS 16

Property, Plant and Equipment: Proceeds before Intended Use

1 January 2022

IFRS 1, IFRS 9, IFRS 16 and IAS 41)

Annual Improvements to IFRS Standards 2018-2020

1 January 2022

IFRS 3

References to Conceptual Framework

1 January 2022

 

Management anticipates that all the pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. The group does not expect these Standard or Interpretation to have a material impact on the entity's financial statements in the period of initial application.

d      Foreign currency transactions and translations

The Group's consolidated financial statements are presented in GBP (£), which is considered to be the Company's functional currency.  For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency which is the currency of the primary economic environment in which the entity operates ('the local functional currency').

i)      Transactions and balances

Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

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 GBP (£) at the rate of exchange prevailing at the reporting date and their income statements are translated at average exchange rates prevailing during the period. 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       Other 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-license costs

Pre-license 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 period 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:

·    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

·    Conducting market studies

License costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over the term of the permit.

Where the purchase of a business or group of assets provides the group exploration rights, these costs are capitalised in exploration and evaluation expenditure.

Once the legal right to explore has been acquired, exploration and evaluation expenditure is charged to profit or loss as incurred, unless the Group concludes that a future economic benefit is more likely than not to be realised. These 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 on licenses where a JORC-compliant resource has not yet been established is expensed as incurred until sufficient evaluation has occurred in order to establish a JORC-compliant resource.

Costs expensed during this phase are included in '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 particular license 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 JORC-compliant reserves are established and development is sanctioned, exploration and evaluation assets are tested for impairment and transferred to 'Mines under construction' which is a sub-category of 'Mine properties' and will be subsequently amortised in line with the useful economic life of the mine and rate of depletion of resources. Exploration and evaluation assets are not amortised during the exploration and evaluation phase and are considered to have an indefinite life until determine as part of a mine plan.

h      Property, plant and equipment

i)      Land

Land is held at cost less accumulated impairment losses. Once JORC-compliant reserves are established and development is sanctioned, land is tested for impairment and transferred to 'Mines under construction' which is a sub-category of 'Mine properties' and will be subsequently depreciated in line with the useful economic life of the mine and rate of depletion of resources. Land is not depreciated during the exploration and evaluation phase and is considered to have an indefinite life until determine as 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 and an estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

iii)    Depreciation and amortisation

Land is not depreciated. All other short-lived property, plant and equipment depreciation is provided at rates calculated to expense the cost of property, plant and equipment, less their estimated residual value, using the straight-line method over their estimated useful life of the asset giving the following rates:

 

Land

Not depreciated

Buildings & Leasehold improvements

Shorter of 10% or lease term

Plant and equipment

15% - 33%

Assets under construction

Not depreciated


The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively if appropriate.

i        Leases

The Group applied IFRS 16 for the first time in the comparative period using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 July 2019), without restatement of comparative figures. There were no adjustments to prior periods as a result of the application of this standard because the Group did not have any leases in the prior year.

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

i)      Transition Method and Practical Expedients Utilised

The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 July 2019), without restatement of comparative figures. The Group elected to apply the practical expedient to not reassess whether a contract is, or contains, a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. The definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 July 2019.

IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

·    Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;

·    Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if IFRS 16 had been applied since the commencement date; 

·    Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under IAS 36 as at the date of initial application; and

·    Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application. 

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.

ii)     Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets which, are either expensed as incurred though the income statement or capitalised in exploration and evaluation assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

iii)    Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are amortised on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.

The Company has a single right of use asset, relating to the lease of an office premised in the UK. Given the nature of the asset, the amortisation charge is included in general and administrative expenses.

If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

The right-of-use assets are also subject to impairment.

iv)     Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities 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.

v)      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 value 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 value 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, 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 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. Currently the Group has not done any significant mining and thus management have assessed that no rehabilitation provision is necessary.

k       Interest income

Interest income is 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

Financial assets are 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 classification are met the asset is classified as fair value through the profit and loss or unless management elect to do so provided the classification eliminates or significantly reduces a measurement or recognition inconsistency.

a)     Cash and cash equivalents and trade and other receivables

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.

b)     Fair value through profit or loss

Financial assets measured at fair value through profit or loss are subsequently measured at fair value with changes in those fair values recognised in the profit and loss statement.

Assets held at fair value through profit or loss comprise of the convertible loan asset.

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.

The Group's financial liabilities initially measured at fair value and subsequently recognised at amortised cost include accounts payables and accrued liabilities, and the liability associated with the right of use asset (note 11).

Iii) Convertible debt

The proceeds received on issue of the Group's convertible debt are allocated into their liability 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 bond. 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

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.

With the exception of goodwill, 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, and 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 no deferred tax assets or liabilities.

o      Earnings/loss per share

Basic loss per share is calculated by dividing the loss attributable to the common shareholders of the Group by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares, which comprise share options and warrants granted.

p      Share premium

Share premium represents the excess of proceeds received over the nominal value of new shares issued.

q      Share-based payments & 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 grants warrants to institutions issued as part of an equity raise as part of overall in connection with the acquisition of Tethyan. 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 as 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. 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.

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, share-based payments to 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 premium if applicable together with any associated balance in share-based payments reserve are transferred to retained earnings. The dilutive effect of outstanding options is reflected as additional dilution in the computation of diluted earnings per share.

r       Non-controlling Interest

The Group has the choice, on a transaction by transaction basis, to initially recognise any non-controlling interest in the acquiree which is a present ownership interest and entitles its holders to a proportionate share of the entity's net assets in the event of liquidation at either acquisition date fair value or, at the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets. Other components of non-controlling interest such as outstanding share options are generally measured at fair value.

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.

s       Segmental reporting

The reportable segments identified make up 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 has reviewed its operating segments following the acquisition of the Tethyan Resource Corp and subsidiaries in October 2020 and as a result of the expansion in the group's range to operating activities and determined that there are now three distinct reporting segments as follows:

·    Bosnia (principally the Vares Project)

·    Serbia (principally the Raska Project)

·    Corporate (which supports the activities of the other two segments)

The Vares and Raska projects operate in two separate distinct jurisdictions and are at different points in their respective project life cycles.

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.

Non-current segment assets comprise the non-current assets used directly for segment operations, including intangible assets and property, plant and equipment. Current segment assets comprise the current assets used directly for segment operations, including other receivables and deferred costs. 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.

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. Information about the significant judgements, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are discussed below.

Estimates

a       Exploration and evaluation asset impairment testing

The Group reviews and tests the carrying value of exploration and evaluation assets when events or changes in circumstances suggest that the carrying amount may not be recoverable in terms of IFRS 6. Indicators of impairment the group assesses for are as follows:

a)    the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed.

b)    substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned.

c)     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.

d)    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.

When such indicators exist, management determine 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 made includes discount rates, being the Group's weighted average cost of capital, future prices, E&E costs, production levels and foreign currency exchange rates.

b      Convertible loan valuation

The financial instrument was valued at fair value through the profit and loss account in the prior year. The Group has utilised the Black-Scholes Option Pricing Model to estimate the fair value of the conversion option associated with a loan granted to Tethyan Resource Corp. The use of the Black-Scholes option pricing model requires management to make various estimates and assumptions that impact the value assigned to the loan granted to Tethyan Resource Corp. including the forecast future volatility of the share price and the risk-free interest rate. This financial instrument was eliminated on consolidation on the acquisition of Tethyan Resource Corp in the current period for the Group. The conversion option was not enacted, the loan agreement was amended to remove this option and the conversion value was released to the profit and loss in the current period.

c       Convertible bond valuations

The Group issued USD 20 million 8.5% Convertible bonds through a deed of covenant dated 30 November 2020. The bonds are convertible into fully paid equity securities in the share capital of the issuer, subject to and in accordance with the Conditions and the Deed of Covenant. Management engaged experts to assist with the valuation of the bond holders call option imbedded within this agreement. The option is recognised as a derivative liability in the Group and company accounts and required a separate fair valuation.

See note 6 for further details regarding these inputs.

d      Share-based payments

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 the Black-Scholes Option Pricing 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 share which will vest. See note 15 for further details regarding these inputs.

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 each entity operates in. The Group first considers the currency that mainly influences sales prices for goods and services, and the currency that mainly influences labour, material 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 they are primarily transacted in.

 

Name of entity

Country of incorporation

Functional currency

Adriatic Metals PLC

England & Wales

GBP

Eastern Mining d.o.o.

Bosnia and Herzegovina

BAM*

Tethyan Resource Corp

Canada

CAD

Tethyan Resources PLC

England & Wales

GBP

Tethyan Resources Jersey Ltd

Jersey

GBP

Taor d.o.o.

Serbia

RSD*

Tethyan Resources d.o.o.

Serbia

RSD*

Global Mineral Resources d.o.o.

Serbia

RSD*

Tethyan Resources Bulgaria EOOD

Bulgaria

EUR

Kosovo Resource Company

Kosovo

EUR

Ras Metals d.o.o.

Serbia

RSD*


* Bosnian Marks (BAM) and Republic of Serbia Dinars (RSD) currencies are pegged to the Euro.

 

b      Capitalisation of exploration costs

The group uses its judgement to determine whether costs meet the capitalisation requirements in terms of the standard and its accounting policy on exploration and evaluation assets to determine whether exploration and evaluation costs should be capitalised or expensed based on whether the activities performed are directly attributable to increasing the value of the project.

c       Option Agreement Treatment - Control of Ras Metals

As part of the Tethyan Resource Corp acquisition, the Group became the beneficiary of three mutually exclusive option agreements under which it could acquire, at its sole discretion, the entire share capital of Ras Metals d.o.o., EFPP d.o.o. and Deep Research d.o.o.

The Group assessed each option agreement to determine whether it provided the Company with control over each respective entity and if so from what point in time as follows:

i.      Ras Metals d.o.o. (Ras)

The Group determined that Ras was controlled by the Group from 8 October 2020, being the date at which Tethyan Resource Corp (the option holder) was acquired by the Company, because the Group had the ability and intent to acquire the remaining equity interest in Ras. On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras further details of which are provided in note 25.

The consideration paid in order to exercise right to purchase of the remaining equity contains both fixed and variable elements. As a result of the variable element of the consideration payable the Group did not have access to present returns in Ras at 31 December 2020 and has therefore recognised a non-controlling interest in this.

ii.     EFPP d.o.o. (EFPP)

EFPP was determined to be outside the control of the Group because the option agreement holder, Tethyan Resource Corp, was unlikely to exercise its rights under the agreement. This position was further justified when on 22 February 2021, the Group disposed of its 10% equity stake in EFPP for a nominal amount.

iii.    Deep Research d.o.o. (DR)

DR was determined to be outside of the control of the Group because although Tethyan Resource Corp (the option agreement holder) had the ability to control DR via exercise of the option it did 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.     Other receivables and prepayments

(In GBP)

31 December 2020

30 June 2020

Other receivables

8,729

17,853

Prepayments and deposits

138,088

95,202

Taxes receivable

507,698

338,491

Total

654,514

451,546

All receivables are due within one year.

The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia.

Split of other receivables and prepayments as follows as at 31 December 2020:

 

Bosnia

Serbia

Corporate

Total

Other receivables

829

7,900

-

8,729

Prepayments and deposits

29,475

38,196

70,416

138,088

Taxes receivable

300,426

109,200

98,072

507,698

Total

330,730

155,296

168,488

654,514

Split of other receivables and prepayments as follows as at 30 June 2020:

 

Bosnia

Serbia

Corporate

Total

Other receivables

790

N/A

17,063

17,853

Prepayments and deposits

47,999

N/A

47,203

95,202

Taxes receivable

300,997

N/A

74,994

338,491

Total

349,786

N/A

139,260

451,546

 

6.     Financial assets at fair value through profit and loss

Tethyan Resources Corp Loan

As part of the agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. via a plan of arrangement in British Columbia, the Company provided a convertible loan facility to Tethyan during the prior year and had advanced €1.8 million under the facility to the date of acquisition on 8 October 2020. Effective the same date this loan was amended removing the convertible option from the loan and the conversion value was released to the profit and loss in the current period. As at 31 December 2020, this financial instrument was eliminated on consolidation for the Group.

 

(In GBP)

Tethyan Loan Receivable

At 30 June 2019

-

Additions

876,201

Interest

12,624

Foreign exchange gain

29,702

Revaluation of fair value asset through profit and loss

322,987

At 30 June 2020

1,241,514

Additions

723,300

Interest

7,129

Foreign exchange gain

32,091

Revaluation of fair value asset through profit and loss

(322,987)

Acquisition (loan eliminated on consolidation)

(1,681,047)

At 31 December 2020

-

 

The loan is revalued at its fair value each period end using the following inputs to the Black-Scholes valuation model:

31 December 2020

30 June 2020

Term

-

1 year

Share Price (CAD)

-

CAD 0.22

Exercise Price (CAD)

-

CAD 0.15

Volatility

-

140%

Risk Free rate

-

0.17%

 

 

7.     Financial liabilities at fair value through profit and loss

 

QRC Convertible Loan

 

The Group issued USD 20 million 8.5% Convertible bonds through a deed of covenant dated 30 November 2020. The bonds are convertible into fully paid equity securities in the share capital of the issuer, subject to and in accordance with the Conditions and the Deed of Covenant. Key terms and conditions of the Bond agreement between the Company and Queens Road Capital (QRC) is provided below.

 

Voluntary conversion

 

The bonds 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 on exercise of a 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 bonds are not converted, redeemed, purchased, or cancelled by the company prior to the final maturity date, the bonds shall be redeemed by the company at their principal amount

b)     Redemption at the option of the issuer: Option to the issuer to redeem all the bonds outstanding, prior to the final maturity date, at their principal amount together with accrued but unpaid interest to such date if:

a.     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;

b.     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; or

c.     A project refinancing has occurred

c)     Redemption at the option of bondholder in change of control event: the bondholder receives an option to require the issuer to redeem the bonds prior to the final maturity date. In the event of a change of control, the bonds shall be redeemed at:

a.     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

b.     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 bondholder in the event of project financing: In any event where the company secures a project financing before the final maturity date of the bonds, the bondholder can require the issuer to redeem the bonds at its principal amount together with the accrued but unpaid interest to such date

 

Accounting Consideration and Results

 

QRC's option to convert the bonds into equity and the associated potential issue of shares give rise to a variable amount of cash that would be received by the Company and therefore the bonds fail to meet the requirements to be classified as equity. The conversion feature of the bonds has therefore been accounted for as a derivative liability, with the value of the conversion feature dependent on foreign exchange rates and other 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 as 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 be falling outside of the exemptions of IFRS 9 and 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 elected to account for both the imbedded option and loan liability at fair value in the profit and loss.

 

Valuation Model

 

The Black Scholes model was chosen as the most appropriate pricing model to value the company call options. 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. The Group will be seeking to raise finance to progress the Vares project. Expected term of redemption calculated as 1.15 years from the valuation date.

·      Expected volatility - Weekly volatility over the 1.15 years (60 weeks) was calculated as 74.65% 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 2.33 on the valuation date on the ASX

Using the assumptions set out above, Black Scholes value of call option in hands of Bondholder is £3,045,213.

 

Sensitivity Analysis

 

Inputs to the Black Scholes model are based on management judgements regarding probabilities of future events. The results are sensitive to changes in key assumptions, namely the expected term of the bonds and the volatility of the Company's share price.

 

Sensitivity of the loan 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

50%

Unchanged (74.65%)

100%

Change in expected term

26 Weeks

£2.15m Decrease

£1.73m Decrease

£0.45m Decrease

Unchanged (60 weeks)

£1.28m Decrease

-

£1.27m Increase

91 Weeks

£0.67m Decrease

£0.89m Increase

£2.38m Increase

 

 

(In GBP)

QRC Loan Payable

At 30 June 2020

-

Additions

(14,956,849)

Interest

(105,515)

Foreign Exchange gain

321,464

Recognition of fair value embedded option

3,045,213

At 31 December 2020

(11,695,687)

Short term borrowings at 31 December 2020 are £105,515 (30 June 2020: £nil). Long term borrowings at 31 December 2020 are £11,590,172 (30 June 2020: £nil). Derivative liabilities as at 31 December 2020 are £3,045,213 (30 June 2020: £nil).

8.     Property, plant and equipment

 

 

Cost (In GBP)

 

Land & Buildings

 

Plant & Machinery

 

Total

30 June 2019

630,978

105,341

736,319

Additions

97,989

139,554

237,543

Foreign exchange difference

7,987

1,296

9,283

30 June 2020

736,954

246,191

983,145

Acquisition Assets

-

87,648

87,648

Additions

29,037

61,827

90,864

Disposals

-

(9,378)

(9,378)

Foreign exchange difference

(10,500)

(2,649)

(13,465)

31 December 2020

755,491

383,639

1,139,130

 

Depreciation

30 June 2019

-

15,191

15,191

Charge for the year

14,481

38,164

52,645

Foreign exchange difference

68

4,321

4,389

30 June 2020

14,549

57,676

72,225

Acquisition Assets

0

70,004

70,004

Charge for the period

6,769

29,388

36,157

Disposals

-

(6,054)

(6,054)

Foreign exchange difference

(342)

(2,323)

(2,665)

31 December 2020

20,976

148,691

169,667

 

Net Book Value

30 June 2019

630,978

90,150

721,128

30 June 2020

722,405

188,515

910,920

31 December 2020

734,516

234,948

969,464


 

The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia.

Split of Land and buildings net book value as follows:

 

Bosnia

Serbia

Corporate

Total

30 June 2019

630,978

N/A

-

630,978

30 June 2020

705,951

N/A

16,454

722,405

31 December 2020

718,939

 

15,577

734,516

Split of Property Plant and equipment assets net book value as follows:

 

Bosnia

Serbia

Corporate

Total

30 June 2019

67,664

N/A

22,487

90,151

30 June 2020

157,840

N/A

30,675

188,515

31 December 2020

185,129

24,317

25,502

234,948

 

9.     Exploration and evaluation assets

 

Cost (In GBP)

Vares Silver Project in Bosnia

Raska Project in Serbia

Exploration & Evaluation Assets

30 June 2019

4,055,997

-

4,055,997

Additions

5,048,523

-

5,048,523

Foreign exchange difference

49,522

-

49,522

30 June 2020

9,154,042

-

9,154,042

Acquisition (note 10)

-

24,456,506

24,456,506

Additions

3,052,019

-

3,052,019

Foreign exchange difference

(63,870)

 

(63,870)

31 December 2020

12,142,191

24,456,506

36,598,697

 

Amortisation

 

 

30 June 2019

84,787

-

84,787

Charge for the year

23,317

-

23,317

Foreign exchange difference

769

-

769

30 June 2020

108,873

-

108,873

Charge for the period

11,469

-

11,469

Foreign exchange difference

(1,369)

-

(1,369)

31 December 2020

118,973

-

118,973

 

Net Book Value

 

 

30 June 2019

3,971,210

-

3,971,210

30 June 2020

9,045,169

-

9,045,169

31 December 2020

12,023,218

24,456,506

36,479,724

 

Exploration and evaluation assets include amount of £24,456,506 added in the period in respect of Tethyan exploration rights for the TAOR d.o.o. Kremice licence (measured at historical cost £1,587,934) and Ras Metals d.o.o. licences Kizevak & Sastavci measured as the consideration paid for the combined Tethyan group minus the net book value of assets, being 22,868,571. The remaining exploration and evaluation assets are in respect of the Vares Silver Project concession, located in Bosnia & Herzegovina. The concession is 100% owned by Eastern Mining d.o.o. From 25 May 2020, the Vares Silver Project became subject to a minimum annual concession fee of €199,325 per annum. Concession fees are included in additions to exploration and evaluation assets and amortisation charged over the life of the concession granted. All other exploration and evaluation assets are not amortised until beginning of the production phase.

Additions during the period include BAM 481,800 paid to the Zenica-Doboj Canton following the award of the new concession area in October 2020 which adds some 32.12km2 of land in close proximity to the existing Rupice and Veovaca deposits of the Vares Project.

10.   Acquisition note

On 11 May 2020, the Company entered into an agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. (TSX-V:TETH) (Tethyan) via a plan of arrangement in British Columbia. The acquisition was finalised on 8 October 2020.

The Transaction confirms the enlarged Company as the leading Balkan polymetallic explorer and developer expanding the Company operations to the Raska region of Serbia by bringing the Kizevak & Sastavci projects into the group.

As part of the agreement the Company provided a secured convertible loan facility of €1.8 million to Tethyan was advanced. The funding provided to Tethyan is being used for confirmation and expansion drilling, geophysics, baseline environmental studies at the Raska project in Serbia and general working capital purposes.

Tethyan had entered into an option agreement with EFPP d.o.o. (EFPP) the holders of the Kizevak & Sastavci licences, first closing was completed on 14 May 2020 to acquire 10% equity in EFPP d.o.o. Immediately prior to the completion of the acquisition of Tethyan by the Company the Kizevak & Sastavci licences were spun out to a newly formed company Ras Metals d.o.o. (Ras) in which Tethyan also held a 10% equity interest, which had been a condition precedent to closing of Tethyan acquisition.

As at 31 December 2020 Tethyan continued to hold a 10% equity interest in Ras and EFPP with the option to acquire the remaining 90% equity in each.

On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras, further details of which are provided in note 25, and also disposed of its 10% equity stake in EFPP for a nominal amount.

Management performed an assessment and deemed that substantive control of the Tethyan Group, including Ras, was obtained on 8 October 2020. The acquisition of Tethyan was classified as an asset acquisition due to not meeting the definition of a business in line with IFRS 3. See Significant estimates note for further details.

Cost of Acquisition

Total cost of acquisition is measured as follows:

 

Consideration Value

Shares issued

£17,129,828

Share options issued

£236,571

Warrants issued

£2,797,086

Total equity consideration

£20,163,485

Value of consideration payable under Ras Metals d.o.o. option

£2,515,399

Total consideration to be paid

£22,678,884


Adriatic has allotted 13,278,937 new ordinary shares pursuant to the Arrangement. The opening LSE share price on the acquisition date was £1.29 giving value of total shares issued £17,129,828.

Pursuant to the Arrangement, on Admission Adriatic will also issue 4,128,633 warrants and 469,779 options to Tethyan warrant holders and Tethyan option holders. Management used the Black-Scholes formula to determine the fair value of the warrants and options issued under IFRS 2. The following assumptions were used:

·    Strike price & length of contract determined by each individuals option contracts

·    Underlying price (£1.29) determined by the opening share price on date of transaction

·    82.3% volatility determined by 100 day LSE ADT1 volatility

·    Risk free rate 0.01% used (on basis of short term UK gilt rate giving negative rates)


Fair value of options issued £236,571, fair value of warrants issued £2,797,086.

At any time within 12 months of the first closing, the Company may acquire the remaining 90% ownership stake in Ras Metals by:

·    making a payment of €1,375 to the sellers of Ras;

·    grant a 2% NSR over the licenses

·    issue 664,000 shares of the Company to the sellers in four equal tranches every six months commencing on second closing; and

·    make a EUR 500,000 payment on the two-year anniversary of the first closing.


With the exception of the 2% NSR grant over the licenses which can't be reliably estimated at this stage, the fair value of remaining consideration payable under Ras Option agreement was estimated at £2,515,399

Measurement of assets and liabilities

IFRS 10 requirement to record assets acquired at cost; cost is allocated over the group of assets at relative fair value. In the case of an asset acquisition (rather than business combination), the consideration equals the combined fair value of assets acquired. Consideration above the historical book value of assets should be recognised as an exploration and evaluation asset (representing the value of the rights contained within licenses acquired).

The Kremice and Kaznovice licenses were historically accounted for as an asset acquisition by the Tethyan Group when originally acquired.  The fair value of the consideration paid was determined and allocated as to Exploration and evaluation assets of 250,000 EUR cash plus 12,000,000 shares issued in Tethyan, equating to £1,587,934. The net asset position of 100% owned Tethyan companies when acquired was (£189,687) which includes the aforementioned exploration and evaluation assets.  The Kizevask & Sastavci licenses held by Ras Metals d.o.o. have been assigned the balancing value between Tethyan net assets (£189,687) and the total consideration payable £22,678,884, being £22,868,571. The combined exploration and evaluation assets capitalised totals £24,456,505.

Treatment of Ras Metals Option Agreement

The company recognises an investment for the fair value of the equity acquired (being 10% share of Ras Metals and 100% share of equity in all other Tethyan entities) totalling £2,097,170. The excess value of the transaction over the investment is recognised as a call option asset totalling £20,581,714. The fair value of the remaining consideration to be paid of £2,515,399 has been recognised as an option liability. When the option liability is paid the amount will be capitalised in exploration and evaluation assets and any difference arising from future foreign exchange movements will be recognised in the profit & loss.

 

 

 

Apportioned fair value to Ras Metals d.o.o. 10% owned

£2,286,857

Total investment recognised in company accounts

£2,097,170

Remaining fair value apportioned to 90% call option Ras Metals

£20,581,714

Total Fair Value of Consideration to be paid

£22,678,884

Net liability position of Tethyan 100% owned

189,687

Exploration assets included within the net assets of Tethyan 100% owned entities

£1,587,934

Total exploration and evaluation asset value

£24,456,505

 

Asset Acquisition

The net cash used in the acquisition of subsidiaries and the provisional fair value of assets acquired and liabilities assumed on the acquisition date is detailed below:

 

Fair Value

Cash and cash equivalents

£311,964

Other receivables and prepayments

£56,349

Property, plant and equipment

£17,644

Exploration & evaluation asset

£1,587,934

Accounts payable and accrued liabilities

(£506,900)

Related party borrowings

(£1,640,838)

Other Equity

(£15,840)

 

 

Total Assets acquired

(£189,687)

 

Management have determined there is no present access to returns in Ras Metals d.o.o. owing to the variable consideration included in the exercise price. As such the Group recognises a 90% non-controlling interest in Ras Metals d.o.o. totalling £2,515,399 measured as the balancing figure between the fair value of the acquisition, fair value of Tethyan assets acquired, the investment recognised in the company accounts.

 

Total assets acquired net of consolidation adjustments

(£189,687)

Investment eliminated for Group accounts

(£2,097,170)

Mining and intangible assets recognised on acquisition

£24,456,505

Non-controlling Interest recognised

£2,515,399

 

Total loss attributable to non-controlling interest post 8 October 2020 acquisition in the period totals (£519,111), combined with the amount recognised on acquisition of £2,515,399, the balance of non-controlling interest at 31 December 2020 was 1,996,288.

11.   Accounts payable and accrued liabilities

 

(In GBP)

31 December 2020

30 June 2020

Trade payables

1,222,012

466,610

Accrued liabilities

639,743

132,826

Other payables

38,682

82,966

 

1,900,437

682,402

 

12.   Right of use asset

Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:

(In GBP)

Land & buildings

30 June 2019

-

Additions

265,612

Amortisation

(13,714)

30 June 2020

251,898

Amortisation

(15,549)

31 December2020

236,349

 

The right of use asset relates to the new lease for the Group's head office. Under IFRS 16 this has been recognised as a right of use asset.

Set out below are the carrying amounts of lease liabilities and the movements during the year:

(In GBP)

 

30 June 2019

-

Additions

265,612

Interest expense

11,580

Payments

(11,571)

30 June 2020

265,621

Interest expense

10,523

Payments

(20,803)

31 December2020

255,341

 

Of this amount, £35,609 is recognised as a current liability and the remainder £219,731 is shown within non-current liabilities.

The following are the amounts recognised in profit or loss:
 

Cost (In GBP)

31 December 2020

30 June 2020

Depreciation expense of right-of-use assets

 15,549

13,714

Interest expense on lease liabilities

 10,523

11,580

Total amount recognised in profit or loss

 26,072

25,294

 

 

13.   Financial instruments

IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

·    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).

·    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 (excluding short term assets and liabilities).

See note referenced for further detail on inputs to fair value for each financial instrument.

 

 

As at 31 December  2020
 (In GBP)

 

 

 

 

Note

 

At amortised cost

At fair value

through profit or loss

 

Total

 

 

Fair Value
Hierarchy

 

Financial assets

 

 

 

 

 

Cash and cash equivalents

 

29,580,538

-

29,580,538

N/A

Other receivables and prepayments

5

146,816

-

146,816

N/A

Total financial assets

 

 29,727,354

-

29,727,354

-

 

Financial liabilities

 

Accounts payable and accrued liabilities

11

1,900,437

-

1,900,437

N/A

Borrowings

7

11,695,687

 

11,695,687

Level 3

Borrowings - derivative liability

7

-

3,045,213

3,045,213

Level 3

FV Option Liability -acquisition of Ras Metals

10

-

2,515,399

2,515,399

Level 3

Lease liabilities

12

255,341

 

255,341

Level 3

Total financial liabilities

 

13,851,465

5,560,612

 19,412,077

 

Net financial assets

 

15,875,889

(5,560,612)

10,315,277

 

 

 

As at 30 June 2020 (In GBP)

Note

 

At amortised cost

At fair value

through profit or loss

 

Total

Fair Value
Hierarchy

 

Financial assets

 

 

 

 

 

Financial asset at fair value through profit and loss

6

-

1,241,514

1,241,514

Level 3

Cash and cash equivalents

 

9,942,728

-

9,942,728

N/A

Other receivables and prepayments

5

113,055

-

113,055

N/A

Total financial assets

 

10,055,783

1,241,514

11,297,297

 

 

Financial liabilities

 

Accounts payable and accrued liabilities

11

682,402

-

682,402

N/A

Lease liabilities

12

265,621

-

265,621

Level 3

Total financial liabilities

 

948,023

-

948,023

 

 

 

 

 

 

 

Net financial assets

 

9,107,760

1,241,514

10,349,274

 

 

14.   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 other receivables.

Due to the nature of the business, the Company'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 Group's cash is held in major UK, Australian, Serbian and Bosnian financial institutions, and as such the Group is exposed to credit risks of those financial institutions. Under Standard & Poor's short-term credit ratings, the Group's cash balances are all held in institutions with either an A-1 or A-2 rating and as such are considered to have low credit risk.

The total carrying amount of cash and cash equivalents, other receivables and the fair value financial asset in respect of Tethyan Resource Corp. represents the Group's maximum credit exposure.

The Group's other receivables predominantly relate to value added tax receivables due from governments in the UK and Bosnia. These amounts are excluded from the definition of financial instruments in the accounts and in and event are considered to have low credit risk. Of the remaining other 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 if its accounts 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 illustrates the contractual maturity analysis of the Group's gross financial liabilities based on exchange rates on the reporting date. Contractual gross financial liabilities, shown below, are undiscounted estimated cash outflows which were applicable includes estimated future interest payments.

 

As at 31 December 2020  (In GBP)

 

Within 30 days

30 days to

6 months

6 to 12 months

Over 12 months

Accounts payable and accrued liabilities

2,172,496

-

-

-

Borrowings

 

105,515

 

11,590,172

Derivative liability

 

 

 

3,045,213

Lease liabilities

-

17,805

17,805

219,731

 

2,172,496

123,320

 17,805

14,855,116

 

 

As at 30 June 2020 (In GBP)

 

 

Within 30 days

 

30 days to

6 months

 

6 to 12 months

 

Over 12 months

Accounts payable and accrued liabilities

682,402

-

-

-

Lease liabilities

-

-

-

369,745

 

682,402

-

-

369,745

 

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. As a result, a portion of the Group's expenditures, other receivables, cash and cash equivalents, accounts payables and accrued liabilities are denominated in Bosnian Marks, Great Britain Pounds, Australian Dollars, US Dollars, and euros and are therefore subject to fluctuation in exchange rates.

As at 31 December 2020, a 10% change in the exchange rate between the Great Britain Pound and the Bosnian Mark and Serbian Dinar, which is a reasonable estimation of volatility in exchange rates, would have an approximate £0.1 million change to the Group's total comprehensive loss.

d      Fair values

The fair value of cash, other receivables, accounts payable and accrued liabilities approximate their carrying values due to the short-term nature of the instruments.

Fair value measurements recognised in the statement of financial position subsequent to initial fair value recognition can be classified into Levels 1 to 3 based on the degree to which fair value is observable.

Level 1 - Fair value measurements are those derived from quoted prices in active markets for identical assets and liabilities.

Level 2 - Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly, or indirectly.

Level 3 - Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

The level 3 fair value for the loan receivable is disclosed in note 6.

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 Company defines capital as the equity attributable to equity shareholders of the Company which at 31 December 2020 was £29,526,658 (30 June 2020: £20,895,753).

The Group sets the amount of capital in proportion to 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.

 

15.   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

 

 

Shares

Share Capital

(In GBP)

(Restated)
Share Premium
(In GBP)

30 June 2019

150,782,587

2,013,701

11,084,777

Issue of share capital

25,083,400

334,989

13,015,388

Share issue costs

-

-

(797,655)

Shares issued on exercise of options and performance rights

3,975,000

53,087

690,457

30 June 2020

179,840,987

2,401,777

23,992,967

Issue of share capital

5,276,595

70,469

6,129,531

Shares issued on acquisition of subsidiary

13,278,937

177,340

16,952,489

Settlement placement

4,830,156

64,507

4,791,547

Share issue costs

 

0

(1,598,603)

Shares issued on exercise of options and performance rights

4,350,000

58,093

203,817

31 December 2020

207,576,675

2,772,186

51,471,748


The average price paid for shares issued in the period was £1.06 per share (30 June 2020: £0.49 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 tables summarise the activities and status of the Company's share option plan as at and during the six months ended 31 December 2020

 

Weighted average exercise price of options (A$)

 

Number of options

 

Number of performance rights

 

Total options and performance rights

30 June 2019

0.33

19,200,000

-

19,200,000

Issued

1.19

4,000,000

6,560,000

10,560,000

Exercised

0.42

(3,225,000)

(750,000)

(3,975,000)

Expired

0.60

(375,000)

(2,000,000)

(2,375,000)

30 June 2020

0.46

19,600,000

3,810,000

23,410,000

Issued

 2.20

1,000,000

2,575,000

3,575,000

Acquired Tethyan Acquisition

0.66

469,779

-

469,779

Exercised

0.61

(3,700,000)

(650,000)

(4,350,000)

Expired

-

-

(2,000,000)

(2,000,000)

31 December 2020

 0.53

17,369,779

3,735,000

21,104,779

 

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.

Options and performance rights granted in the Period were valued using the Black-Scholes method (section f).

 

As at 31 December 2020

 

 

 

 

 

 

Grant date

 

Options outstanding

 

Exercise

price

Weighted average remaining contractual

life (Years)

 

 

Expiry date

 

Number exercisable

27 April 2018

 9,000,000

A$0.20

 2.5

1 July 2023

 9,000,000

27 April 2018

 1,900,000

A$0.30

 0.5

1 July 2021

 1,900,000

27 April 2018

 1,000,000

A$0.40

 0.5

1 July 2021

 1,000,000

29 May 2018

 1,000,000

A$0.40

 0.4

5 June 2021

 1,000,000

29 November 2019

 1,000,000

A$1.00

 1.9

28 November 2022

 1,000,000

29 November 2019

 2,000,000

A$1.25

 1.9

28 November 2022

 2,000,000

8 October 2020

 182,600

GBP £0.88

 0.6

16 August 2021

 182,600

8 October 2020

 27,666

GBP £0.85

 1.0

21 December 2021

 27,666

8 October 2020

 88,533

GBP £1.06

 1.9

5 December 2022

 88,533

8 October 2020

 29,880

GBP £1.06

 2.0

3 January 2023

 29,880

8 October 2020

 91,300

GBP £1.80

 3.2

28 February 2024

 39,010

8 October 2020

 24,900

GBP £2.22

 3.2

7 March 2024

 2,490

8 October 2020

 24,900

GBP £1.20

 3.6

19 August 2024

 2,490

6 November 2020

 1,000,000

A$2.20

 2.9

7 November 2023

 1,000,000

 

17,369,779

 

 

 

17,272,669

 

 

As at 30 June 2020

 

 

 

 

 

 

 

Grant date

 

Options outstanding

 

Exercise

price

Weighted average remaining contractual

life (Years)

 

 

Expiry date

 

Number exercisable

27 April 2018

9,000,000

A$0.20

3.0

1 July 2023

9,000,000

27 April 2018

2,500,000

A$0.30

1.0

1 July 2021

2,500,000

27 April 2018

3,100,000

A$0.40

1.0

1 July 2021

3,100,000

29 May 2018

1,000,000

A$0.40

0.9

5 June 2021

-

29 November 2019

1,000,000

A$1.00

2.4

28 November 2022

1,000,000

29 November 2019

2,000,000

A$1.25

2.4

28 November 2022

2,000,000

29 November 2019

500,000

A$1.25

2.4

28 November 2022

500,000

29 November 2019

500,000

A$1.25

2.4

28 November 2022

-

 

19,600,000

 

 

 

18,100,000

 

 

 

 

 

 

 

 

As at 31 December 2020

 

 

 

 

 

 

Grant date

 

Performance rights

outstanding

Weighted average remaining contractual

life (Years)

 

 

Expiry date

 

Number exercisable

29 November 2019

1,160,000

1.9

28 November 2022

410,000

12 June 2020

250,000

4.0

6 January 2025

-

6 August 2020

1,000,000

3.0

31 December 2023

-

6 August 2020

500,000

4.0

31 December 2024

 

18 November 2020

825,000

2.0

31 December 2022

-

 

3,735,000

 

 

410,000

 

As at 30 June 2020

 

 

 

 

 

 

Grant date

 

Performance rights

outstanding

Weighted average remaining contractual

life (Years)

 

 

Expiry date

 

Number exercisable

29 November 2019

1,310,000

2.4

28 November 2022

-

28 February 2020

2,000,000

0.1

31 July 2020

-

12 June 2020

250,000

3.5

6 January 2024

-

12 June 2020

250,000

4.5

6 January 2025

-

 

3,810,000

 

 

-


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.

There were no performance rights outstanding at 30 June 2019.

d      Warrants reserve

Warrants were issued as part of Tethyan Resource Corp acquisition.

The following table presents changes in the Group's warrants reserve during the six months ended 31 December 2020:

(In GBP)

Share-based payment reserve

30 June 2020

-

Issue of Warrants on acquisition of Tethyan

4,128,633

31 December 2020

4,128,633

 

 

As at 31 December 2020

 

 

Grant date

 

Warrants outstanding

 

Exercise

price

Weighted average remaining contractual

life (Years)

 

 

Expiry date

 

Number exercisable

8 October 2020

 413,642

A$1.23

 0.3

20 April 2021

 413,642

8 October 2020

 328,671

A$1.23

 0.5

29 June 2021

 328,671

8 October 2020

 527,800

A$1.23

 0.6

16 August 2021

 527,800

8 October 2020

 2,858,520

A$0.88

 3.1

30 January 2024

 2,858,520

 

4,128,633

 

 

 

4,128,633

 

e      Share-based payment reserve

The following table presents changes in the Group's share-based payment reserve during the six months ended 31 December 2020:

(In GBP)

Share-based payment reserve

30 June 2019

1,714,826

Exercise of share options

(732,000)

Expired options (1)

-

Share-based payment expense

3,443,359

30 June 2020

4,426,185

Exercise of share options

(1,173,926)

Acquisition of subsidiary

236,571

Share-based payment expense

2,267,239

31 December 2020

5,756,069

(1) Expired in the same accounting period as they were granted.

f       Share-based payment expense

During the year ended 31 December 2020; the Group recognised £2,267,239 (30 June 2020: £3,443,359) of share-based payment expense. 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:

For the year ended

31 December  2020

30 June 2020

Risk-free interest rate

0.01%

2.01%

Expected volatility (1)

63.65% - 97.76%

78.14% - 115.82%

Expected life (years)

0.85 - 4.41

0.42 - 5.18

Fair value per option

£0.55 - £1.29

£0.39 - £0.68

 

(1) Expected volatility is derived from the Company's historical share price volatility.


With the exception of 1,000,000 options granted to non-executive directors during the year (30 June 2020: 3,000,000) that vested immediately, all options and performance rights have both market and non-market vesting conditions. 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 Committee Report.

g       Per share amounts

 

 6 months ended
31 December 2020

Year ended 30 June 2020

Loss for the period attributable to owners of equity (In GBP)

5,694,503

6,238,324

Weighted average number of common shares for the purposes of basic loss per share

190,619,399

 

168,915,249

Weighted average number of common shares for the purposes of diluted loss per share

213,827,441

 

185,645,660

Basic loss per share (pence)

(2.99)

(3.69)

       


3,375,000 (30 June 2020: 5,160,000) options and performance rights have not been included in the calculation of diluted EPS because their exercise is contingent on the satisfaction of certain criteria that had not been met at 31 December 2020.

h      Foreign Currency Translation Reserve

(In GBP)

Foreign Currency Translation Reserve

30 June 2019

74,242

Other comprehensive income

145,563

30 June 2020

219,805

Other comprehensive income

5,775

31 December 2020

225,580

i        Cash flow from financing activities

Net cash flow proceeds from the issue of ordinary shares in the period was £12,317,964 (30 June 2020: £13,296,266). Transaction costs arising from financing activities totals £1,447,201 (30 June 2020: £1,447,201).

16.   Taxation

a       Current taxation

The tax charge for the period comprises:

(In GBP)

6 months ended
31 December 2020

Year ended 30 June 2020

Current tax expense

-

-

Prior year tax expense

1,681

-

Overseas tax

-

-

Deferred tax expense

-

-

Adjustments to deferred tax liability

-

-

Total tax expense

1,681

-


The reasons for the difference between the actual tax charge for the period and the standard rate of corporation in the United Kingdom applied to loss for the year is as follows:

(In GBP)

6 months ended
31 December 2020

Year ended 30 June 2020

Loss before tax

5,696,184

6,238,324

Expected income tax recovery at 19% (2019 - 19%)

1,082,275

1,185,282

Expenses not deductible for tax purposes

19,384

(654,238)

Different Tax rates applied in overseas jurisdictions

(46,601)

-

Unrecognised taxable losses and timing differences

(1,055,058)

(531,043)

Adjustment for under/(over) provision in previous periods

(1,681)

-

Total income taxes

(1,681)

-

 

b      Deferred tax

The Group has no recognised deferred tax balance or gain/loss for the year ended 30 June 2020 or 2019 because of uncertainty regarding future taxable profits. As at 31 December 2020, the Group has, for tax purposes, non-capital losses available to carry forward to future years as follows:

 

(In GBP)

31 December  2020

30 June 2020

Expiry Date

UK

12,323,011

4,752,719

Not applicable

Bosnia

1,417,043

1,258,100

5 years

Serbia

3,073,548

-

5 years

Canada

960,972

-

20 years

 

17,774,574

6,010,819

 

 

The expiry of non-capital losses available to carry forward in Bosnia and Serbia is as follows:

(In GBP)

 

31 December 2020

 

Serbia

Bosnia

Within one year

 514,525

 108,477

1-2 years

49,436

 205,596

2-3 years

653,104

 220,180

3-4 years

722,580

 392,646

Within 5 years

1,133,903

 490,144

 

 3,073,548

 1,417,043

 

As a result of the Tethyan acquisition, Tethyan Resource Corp was acquired, this company is incorporated in Canada, non-capital losses available to carry forward to future years is £960,972 with year of expiry 2040.

 

17.   Exploration activities expensed

Exploration and evaluation expenditure incurred on licences where a JORC-compliant resource has not yet been established is expensed as incurred until sufficient evaluation has occurred in order to establish a JORC-compliant resource.

(In GBP)

6 months ended
31 December  2020

Year ended 30 June 2020

Exploration activities expensed

798,028

-

 

18.   General and administrative expenses

 

(In GBP)

6 months ended
31 December  2020

Year ended 30 June 2020

Wages and salaries

616,278

350,526

Consultancy fees

468,047

676,149

Cash remuneration in respect of qualifying services

1,084,325

1,026,675

Professional fees

313,760

1,051,354

Amortisation

27,017

37,031

Depreciation

36,157

52,645

Audit fee

100,175

47,289

Marketing

75,250

161,003

Stock exchange fees

136,166

358,663

Other costs

342,857

580,974

 

2,115,707

3,315,634

19.   Finance income and expense

 

(In GBP)

 

6 months ended
31 December  2020

 

Year ended 30 June 2020

Interest income

-

50,366

Foreign exchange gain

-

152,765

Finance income

-

203,131

 

(In GBP)

6 months ended
31 December  2020

Year ended 30 June 2020

Interest Expense

82,744

-

Interest expense on lease liabilities

10,523

11,580

Foreign exchange loss

103,772

-

Finance expense

197,039

11,580

 

20.   Segmental information

It is the opinion of the Directors that there are three reporting segments within the operations of the Group which are assessed when evaluation performance

Split of performance is below:

 

Segmental Split

 

 

 

 

(In GBP)

Six months ended 31 December 2020

Year ended 30 June 2020

 

Bosnia

Serbia

Corporate

Total

Bosnia

Corporate

Total

Exploration activities expenses

(5,015)

(793,013)

0

(798,028)

0

 

0

General and administrative expenses

(249,932)

(425,935)

(1,440,840)

(2,115,707)

(465,903)

(2,849,731)

(3,315,634)

Share-based payment expense

0

 

(2,267,239)

(2,267,239)

 

(3,443,360)

(3,443,360)

Other income

 

 

4,816

4,816

 

6,131

6,131

 

 

 

 

 

 

 

 

Operating Loss

(254,947)

(1,217,948)

(3,703,263)

(5,176,158)

(465,903)

(6,286,960)

(6,752,863)

 

 

 

 

 

 

 

 

Finance income

 

 

-

-

 

203,131

203,131

Finance expense

 

 

(197,039)

(197,039)

 

(11,580)

(11,580)

Revaluation of fair value asset

 

 

(322,987)

(322,987)

 

322,987

322,987

 

 

 

 

 

 

 

 

Loss before tax

(254,947)

(1,217,948)

(4,223,289)

(5,696,184)

(465,903)

(5,772,422)

(6,238,325)

Tax charge

0

0

1,681

1,681

 

0

0

Loss after tax

(254,947)

(1,217,948)

(4,221,608)

(5,694,503)

(465,903)

(5,772,422)

(6,238,325)

                 

 

(In GBP)

Period Ended 31 December 2020

Year Ended 30 June 2020

 

 

Bosnia

Serbia

Corporate

Total

Bosnia

Corporate

Total

Exploration and evaluation assets additions capitalised

3,052,019

24,456,506

-

27,456,506

5,048,523

-

5,048,523

                 

 

21.   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.

The Company engaged Swellcap Limited, a related party controlled by Paul Cronin to provide the Company with corporate office facilities and services, payments totalled £18,972 for the six months ended 31 December 2020 (30 June 2020: £34,622). Following the Company entering in to a lease for office premises in December 2019 the Company invoiced Swellcap Limited £4,816 for office facilities and services for the six months ended 31 December 2020 (30 June 2020: £6,131).

Balances outstanding with related parties was £13,899 at 31 December 2020 (30 June 2020: £nil)

Transactions with key management personnel are disclosed below.

b      Key management personnel compensation

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, the Chief Executive Officer and the Chief Financial Officer, their remuneration is presented below:

 

(In GBP)

6 months ended
31 December  2020

Year ended 30 June 2020

Board fees

104,767

243,594

Consultancy fees

172,991

539,629

Cash remuneration in respect of qualifying services

 277,758

783,223

Share based payments expense

736,715

2,880,487

Social security costs

15,030

16,835

 

 1,029,503

3,680,545


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 15f of the accounts.

Consultancy fees above include the following amounts paid to related party companies controlled by key management personnel:

(In GBP)

Related party

 

Controlling party

6 months ended
31 December  2020

Year ended 30 June 2020

Swellcap Limited

Paul Cronin

84,999

198,998

GPE Consulting Limited

Geoff Eyre

87,992

80,830

Gumtree Limited

Sean Duffy

-

72,718


There were no balances outstanding with related parties as at 31 December 2020 (30 June 2020: £nil).

22.   Directors and employees

Employees of the Group are all employees including Directors, key management personnel and personnel in management positions engaged via management services contracts. The below information relates to all employees and all costs, including those capitalised.

(In GBP)

6 months ended
31 December  2020

Year ended 30 June 2020

Gross salaries

724,217

416,930

Consultancy fees

305,914

882,432

Cash remuneration in respect of qualifying services

1,030,131

1,299,362

Social security costs

80,813

62,407

Defined contribution pension cost

2,306

2,975

Share based payments expense

2,267,239

3,443,359

Total

3,380,489

4,808,103

Average number of employees

73

39

Average number of employees has increased to 73 in the period (30 June 2020 - 39 employees) due to increasing staff numbers as the Vares Project progresses as well as the acquisition of Tethyan group.

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 15f of the accounts.

Directors' remuneration totalled the following:

(In GBP)

6 months ended
31 December 2020

Year ended 30 June 2020

Board fees

104,767

243,594

Consultancy fees

84,999

386,081

Cash remuneration in respect of qualifying services

189,766

629,675

Average number of Directors

6

6

Additionally, the monetary value of directors' share awards that vested in the period, calculated as the number of awards vested multiplied by the share price on the vesting date less options exercise price or performance rights nominal value payable, was £66,244 (30 June 2020: £853,978) of which £66,244 relates to Non-Executive Directors (30 June 2020: £233,247).

The highest paid Director in the six months ended 31 December 2020 received cash remuneration, excluding notional gains on share options or performance rights, of £106,859 (30 June 2019: £238,897). The highest paid Director in the year ended 30 June 2020 received remuneration, inclusive of the monetary value of share awards that vested in the year, of £106,859 (30 June 2020: £858,889).

Of the total amount incurred as Directors remuneration, £nil (30 June 2020: £nil) remains in accounts payable and accrued liabilities on 31 December 2020.

23.   Commitments and contingencies

The Group had no significant commitments as at 31 December 2020 (30 June 2020: £nil), other than the lease of the Group's head office disclosed in note 12 and annual concession fees disclosed in note 9.

24.   Prior year adjustment

During the year ended 30 June 2020 (the comparative reporting period) the exercise of share options which had previously generated a cumulative share based payment expense of £732,000 within the share based payment reserve.  On exercise the £732,000 cumulative charge was incorrectly transferred against the share premium account. 

Under the provisions of the accounting standards and Companies act, when new shares are issued in connection with an employee share scheme, the share premium account will normally need to reflect only the cash subscribed for the shares. The amount recognised as a cumulative share based payment expense should be credited to a reserve other than share premium. The basis for this is that the services undertaken by the employee do not, as a matter of law, form part of the consideration received for the shares issued on exercise of the options.

The adjustment to the comparative figures for the year ended 30 June 2020 represents a change in classification within equity only. With a £732,000 decrease in the share premium account and an equal increase in retained earnings. There is no impact on the Group and Parent Company Net assets, profit or loss or cash flow statement for the year ended 30 June 2020.

25.   Subsequent events

On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras Metals d.o.o. (Ras) under an agreement held by Tethyan Resource Corp, a wholly owned subsidiary of the Company. The consideration paid for the remaining 90% of the shares in Ras that the Company did not already hold was EUR 1,365,000 in cash plus the allotment of 166,000 Ordinary shares of £0.013355 each in the Company. Additionally, deferred consideration of EUR 500,000 in cash, is payable on 14 May 2022, and 498,000 Ordinary shares in the Company that will be allotted in three equal tranches on or around 22 August 2021, 22 February 2022 & 22 August 2022.

 

Parent Company Statement of Financial Position

AS AT 31 DECEMBER 2020

 

(In GBP)

Note

31 December 2020

(Restated) 30 June 2020

ASSETS

 

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

27,983,443

9,577,188

Other receivables and prepayments

f

5,118,660

139,261

Financial asset at fair value through profit and loss

j

-

1,241,514

Total current assets

 

33,102,103

10,957,963

 

Non-current assets

Investment in subsidiaries

i

17,324,405

11,021,333

Fair value option asset on acquisition

j

20,581,714

-

Property, plant and equipment

g

41,079

47,129

Right of use asset

o

236,349

251,898

Total non-current assets

 

38,183,547

11,320,360

Total assets

 

71,285,650

22,278,323

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities

h

3,740,393

314,047

Lease liabilities

p

35,609

10,530

Option liability

j

2,515,399

 

Borrowings

j

105,515

 

Total current liabilities

 

6,396,916

324,577

 

Non-current liabilities

Lease liabilities

p

219,731

255,091

Borrowings

j

11,590,172

 

Derivative Liability

j

3,045,213

 

Total non-current liabilities

 

14,855,116

255,091

Total liabilities

 

21,252,032

579,668

 

Shareholders' equity

Share capital

l

2,772,186

2,401,777

Share premium

l

51,471,748

23,992,967

Share-based payment reserve

l

5,756,069

4,426,185

Warrants reserve expense

l

2,797,086

-

Retained earnings

l

(12,763,471)

(9,122,274)

Total shareholders' equity

 

50,033,618

21,698,655

Total liabilities and shareholders' equity

 

71,285,650

22,278,323


See note 24 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.
 

The Company's loss after tax for the six months ended 31 December 2020 was £4,957,675 (year ended 30 June 2019: £5,782,084).

The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 30 March 2021 and were signed on its behalf by:

 

Paul Cronin

Managing Director & Chief Executive Officer

Geoff Eyre

Chief Financial Officer & Joint Company Secretary

 

Parent Company Statement of Changes in Equity

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

 

 

(In GBP)

 

 

Note

 

Number of

shares

 

 

Value

 

(Restated)

Share premium

Share-based

payment reserve

Warrants Reserve

 

Total equity

30 June 2019

 

150,782,587

2,013,701

11,084,777

1,714,826

-

(4,072,190)

10,741,114

 

 

 

Loss for the year

 

-

-

-

-

-

(5,782,084)

(5,782,084)

Total comprehensive loss

 

-

-

-

-

-

(5,782,084)

(5,782,084)

Issue of share capital

15

25,083,400

334,989

13,015,388

-

-

-

13,350,377

Share issue costs

 

15

 

-

 

-

 

(797,655)

 

-

-

 

-

 

(797,655)

Exercise of options

15

3,975,000

53,087

690,457

(732,000)

-

732,000

743,544

Issue of options

15

-

-

-

3,443,359

-

-

3,443,359

30 June 2020

 

179,840,987

2,401,777

23,992,967

4,426,185

-

(9,122,274)

21,698,655

 

 

 

Loss for the period

 

-

-

-

-

-

(4,957,675)

(4,957,675)

Total comprehensive loss

 

-

-

-

-

-

(4,957,675)

(4,957,675)

Issue of share capital

15

5,276,595

70,469

6,129,531

-

-

-

6,200,000

Settlement Placement

15

4,830,156

64,507

4,791,547

-

-

-

4,856,054

Share issue costs

15

-

-

(1,598,603)

-

-

142,551

(1,456,052)

Exercise of options

15

4,350,000

58,093

1,203,817

(1,173,926)

-

1,173,927

1,261,911

Issue of options

15

-

-

-

2,267,239

-

-

2,267,239

Acquisition of subsidiary

 

13,278,937

177,340

16,952,489

236,571

2,797,086

-

20,163,486

31 December 2020

 

207,576,675

2,772,186

51,471,748

5,756,069

2,797,086

(12,763,471)

50,033,618

                     

 

See note 24 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.

See note t for details of the restatement of the prior year comparatives.

 

Parent Company Statement of Cash Flows

FOR THE SIX MONTHS ENDED 31 DECEMBER 2020

 

 

 

(In GBP)

 

 

Note

 

Six months ended 31 December 2020

Year ended 30 June 2020

 

Cash flows from operating activities

 

 

 

Loss for the period

e

(4,957,675)

(5,782,084)

Adjustments for:

Depreciation of property, plant and equipment

g

6,969

16,946

Amortisation of right-of-use assets

o

15,549

13,714

Share-based payment expense

l

2,267,239

3,443,359

Finance income

 

-

(193,468)

Finance expense

 

134,504

11,580

Revaluation of fair value asset

 

322,987

(322,987)

Changes in working capital items:

Increase in other receivables and prepayments

 

(3,110,904)

(42,015)

Increase in accounts payable and accrued liabilities

 

3,407,207

211,350

Net cash used in operating activities

 

(1,914,124)

(2,643,605)

 

Cash flows from investing activities:

Investment in subsidiaries

 

(3,309,554)

(5,390,808)

Purchase of property, plant and equipment

 

(919)

(48,789)

Loan issued

 

(1,881,641)

(876,201)

Interest received

 

-

28,079

Net cash used in investing activities

 

(5,192,113)

(6,287,719)

 

Cash flows from financing activities

Issues of ordinary shares

l

12,317,964

13,296,266

Transaction costs arising from financing activities

l

(1,447,201)

 

Proceeds from loans and borrowings

q

14,956,849

-

Interest paid on lease liabilities

 

(10,523)

(11,580)

Net cash flows from financing activities

 

25,817,089

13,284,686

Net increase in cash and cash equivalents

 

18,710,852

4,353,362

Exchange (losses) / gains on cash and cash equivalents

 

(304,597)

123,062

Cash and cash equivalents at beginning of the period

 

9,577,188

5,100,764

Cash and cash equivalents at end of the period

 

27,983,443

9,577,188

 

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 six months ended 31 December 2020.

Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England & 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

These Parent Company Financial Statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively "IFRS") adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006.

IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee, and there is an ongoing process of review and endorsement by the European Commission.

The Parent Company Financial Statements were authorised for issue by the Board of Directors on 30 March 2021.

ii)     Basis of measurement

These Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value.

The presentation currency of these Financial Statements is Great Britain pounds ("GBP"). The functional currency of the Company is deemed to be the GBP under IAS 21.

iii)    Going concern

Refer to accounting policies in note 3 of the notes to the Consolidated Financial Statements.

c.     Accounting policies

In addition to the accounting policies in note 3 of the notes to the 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, which is the primary mechanism used for funding the subsidiary, are made via capital contributions and recorded as additions to investments in subsidiaries.

d.    Critical accounting estimates and judgements

The preparation of the Parent Company's 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. In addition to the critical accounting estimates and judgements in note 4 of the Consolidated Financial Statements, the following information about the significant 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, investments in subsidiary, which are made via capital contributions, 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. No impairment indicators were identified in the six months ended 31 December 2020.

e.    Loss for the period

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 period is £4,957,675 (Year ended 30 June 2020 - £5,782,084).

f.     Other receivables and prepayments

Other receivables contain amounts receivable for VAT, prepaid expenses and deposits paid. All receivables are held at cost less any provision for impairment. A provision for impairment is made where there is objective evidence that the receivable is irrecoverable. All receivables are due within one year.

 

(In GBP)

31 December 2020

30 June 2020

Other receivables

-

17,063

Prepayments and deposits

70,415

47,203

Taxes recoverable

98,072

74,995

Amounts receivable from subsidiaries (note m)

4,950,173

-

 

5,118,660

139,261

 

g.    Property, plant and equipment

 

Cost (In GBP)

Land & Buildings

Plant and machinery

Total

30 June 2019

-

26,454

26,454

Additions

17,425

27,405

44,830

30 June 2020

17,425

53,859

71,284

Additions

-

-

-

31 December 2020

17,425

53,859

71,284

 

Depreciation

30 June 2019

-

3,968

3,968

Charge for the period

970

19,217

20,187

Disposals

-

-

-

30 June 2020

970

23,185

24,155

Charge for the period

878

6,091

6,969

31 December 2020

1,848

29,276

31,124

 

Net Book Value

30 June 2019

-

22,486

22,486

30 June 2020

16,455

30,674

47,129

31 December 2020

15,577

25,502

41,079

 

h.    Accounts payable and accrued liabilities

 

(In GBP)

31 December  2020

30 June 2020

Trade payables

238,940

233,058

Accrued liabilities

405,205

74,474

Other payables

14,570

6,515

Amounts payable to subsidiaries (note m)

3,081,678

-

 

3,740,393

314,047

 

i.     Investments in subsidiaries

The breakdown of the investments in subsidiaries is as follows:

Cost (In GBP)

Eastern Mining d.o.o.

Tethyan Resource Corp.

Total

30 June 2019

5,623,315

-

5,623,315

Additions

5,398,018

-

5,398,018

30 June 2020

11,021,333

-

11,021,333

Additions

4,205,902

2,097,170

6,303,072

31 December 2020

15,227,235

2,097,170

17,324,405

 

The list of subsidiaries of the Company is presented in note 3a of the notes to the consolidated financial statements.

 

j.     Financial Instruments

The Company's financial assets and liabilities are classified as follows:

As at 31 December 2020
(In GBP)

Note

 

At amortised cost

At fair value through

profit or loss

 

Total

Financial assets

 

-

-

-

Related Party Receivables

m

1,868,495

 

1,868,495

FV Option Asset on acquisition

r

 

20,581,714

20,581,714

Cash and cash equivalents

 

27,983,443

 

27,983,443

Other Receivables and prepayments

f

70,416

 

70,416

Total financial assets

 

29,922,354

20,581,714

50,504,068

 

Financial liabilities

Accounts payable and accrued liabilities

h

658,715

 

 

658,715

Borrowings

q

11,695,687

 

11,695,687

Derivative Liability

q

 

3,045,213

3,045,213

FV Option Liability on acquisition

r

 

2,515,399

2,515,399

Lease liabilities

p

255,340

 

255,340

 

Total financial liabilities

 

12,609,742

5,560,612

18,170,354

Net financial assets

 

17,312,612

15,021,102

32,333,714

 

 

As at 30 June 2020
(In GBP)

 

 

 

 

At amortised cost

 

 

At fair value through

profit or loss

 

 

 

Total

Financial assets

 

 

 

 

Cash and cash equivalents

 

9,577,188

-

9,577,188

Other receivables

f

139,261

-

139,261

Financial asset at fair value through profit and loss

n

-

1,241,514

1,241,514

Total financial assets

 

9,716,449

1,241,514

10,957,963

 

Financial liabilities

Accounts payable and accrued liabilities

h

314,047

-

314,047

Lease liabilities

p

265,621

-

265,621

Total financial liabilities

 

579,668

-

579,668

Net financial assets

 

9,136,781

1,241,514

10,378,295

 

 

k.    Financial Risk Management

The Company is exposed to risks that arise from its use of financial instruments. The principle financial instruments used by the Company, from which financial risk arises, are set out in note k. The types of risk exposure the Company is subjected during the year are as follows:

i)      Credit risk

The credit risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 13 of the notes to the Consolidated Financial Statements.

ii)     Liquidity Risk

The liquidity risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 13 of the notes to the Consolidated Financial Statements.

The following table illustrates the contractual maturity analysis of the Company's gross financial liabilities based on exchange rates on the reporting date.

As at 31 December  2020
(In GBP)

 

Within 30 days

30 days to

6 months

6 to 12 months

Over 12 months

Accounts payables and accrued liabilities

658,716

-

-

-

Borrowings

-

105,515

-

11,590,172

Derivative Liability

 

-

 

3,045,213

Lease liabilities

-

17,805

17,805

219,731

 

658,716

123,320

17,805

14,855,116

 

 

 

 

 

 

As at 30 June 2020
(In GBP)

 

Within 30 days

30 days to

6 months

6 to 12 months

Over 12 months

Accounts payable and accrued liabilities

314,047

-

-

-

Lease liability

-

-

-

369,745

 

314,047

 

 

369,745

 

iii)    Market risk

The market risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 14 of the notes to the Consolidated Financial Statements.

As at 31 December 2020, a 10% change in the exchange rate between the Great Britain Pound and the Australian Dollar, which is a reasonable estimation of volatility in exchange rates, would have an approximate £0.6 million change to the Parent Company's total comprehensive loss.

iv)     Fair values

The fair value of cash, other receivables, and accounts payable and accrued liabilities and joint venture obligation approximate their carrying values due to the short-term nature of the instruments.

Fair value measurements recognised in the Statement of Financial Position subsequent to initial fair value recognition can be classified into Levels 1 to 3 based on the degree to which fair value is observable.

Level 1 - Fair value measurements are those derived from quoted prices in active markets for identical assets and liabilities.

Level 2 - Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly, or indirectly.

Level 3 - Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

The level 3 fair value for the convertible loan asset is disclosed in note 6 of the Consolidated Financial Statements. There were no transfers between any levels of the fair value hierarchy in the current period or prior years.

l.     Equity

The movements in share capital, share premium, share based payment reserve, warrants reserve are as detailed in note 15 of the notes to the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.

m.   Related party disclosures

The Company's related parties include key management personnel, companies which have directors in common and its subsidiaries. Transactions with its Directors and key management personnel and transactions with companies which have directors in common during the period have been disclosed in note 21 of the notes to the Consolidated Financial Statements.

The Company had the following related-party balances and transactions during the six months ended 31 December 2020 and the year ended 30 June 2020.

(In GBP)

 

Six months ended 31 December 2020

Year ended
30 June 2020

At 31 December 2020

At 30 June 2020

 

 

Subsidiary

 

Nature of transaction

 

Transaction amount

 

Transaction amount

Balance owed by

/ (owed to)

Balance owed by

/ (owed to)

Eastern Mining d.o.o.

Trading

3,081,678

-

3,081,678

-

Eastern Mining d.o.o.

Capital contribution

4,205,902

5,398,018

(3,081,678)

-

Tethyan Resources Corp.

Loan

1,518,929

-

1,632,007

-

Tethyan Resources Limited

Loan

236,488

-

236,488

-

Tethyan Resources Jersey

Loan

55,700

-

-

-

 

Intercompany loan receivables are assessed for impairment at period end. Intercompany loans were made to fund both corporate costs and exploration projects undertaken by subsidiaries. In company subsidiaries other than Eastern Mining (who hold a JORC resource), exploration expenditure is expensed as incurred and not capitalised, as a result these companies net asset position is lower than their loans payable to the company and not recoverable in the short term. Company policy is to impair intercompany loans provided to fund corporate costs but not to impair intercompany loans provided to fund exploration projects on the basis that these exploration projects will add additional long term value. Management will assess for any impairment indicators on an ongoing basis.

n.    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 6 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.

o.    Right of use asset

The movements in right of use asset are as detailed in note 12 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.

p.    Lease liabilities

The movements in lease liabilities are as detailed in note 12 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.

q.    Borrowings and Derivative Liability

The movements in external loans and imbedded derivative liability are as detailed in note 7 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.

r.     Fair Value of Option Asset and Liability

The movements in fair value of option asset and fair value of option liability are as detailed in note 10 of the Consolidated Financial Statements. The Company may acquire the remaining 90% ownership stake in Ras Metals d.o.o. The excess value of the Tethyan transaction over the investment recorded is recognised as a call option asset totalling £20,581,714. Value of remaining consideration payable under Ras Option agreement being £2,515,399 held as a call liability.

These balances are eliminated in the Consolidation Group accounts which includes Ras Metals d.o.o.

s.     Commitments

Commitments relating to the Parent Company have been disclosed in note 23 of the Consolidated Financial Statements.

t.     Subsequent events

Subsequent events relating to the Parent Company have been disclosed in note 25 of the Consolidated Financial Statement

 

**ends**

 

Market Abuse Regulation Disclosure

The information contained within this announcement is deemed by Adriatic (LEI: 549300OHAH2GL1DP0L61) to constitute inside ‎information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. The person ‎responsible for arranging and authorising the release of this announcement on behalf of Adriatic is Paul Cronin, Managing Director and CEO.

For further information please visit  www.adriaticmetals.com,  @AdriaticMetals on Twitter, or contact:

Adriatic Metals PLC

 

Paul Cronin / Thomas Horton

Tel: +44 (0) 7866 913207

 

 

Tavistock Communications Limited

 

Charles Vivian

Tel: +44 (0) 7977 297903

Edward Lee

Tel:  +44 (0) 7736 220565

Gareth Tredway

Tel: +44 (0) 7785 974264

 

 

The Capital Network

 

Julia Maguire/Lelde Smits

Tel: +61 2 8999 3699

 

ABOUT ADRIATIC METALS

Adriatic Metals Plc (ASX:ADT, LSE:ADT1) is a precious and base metals explorer and developer that owns the world-class Vares Silver Project in Bosnia & Herzegovina and the Raska Project in Serbia.

The Vares project's captivating economics and impressive resource inventory have attracted Adriatic's highly experienced team, which is expediting exploration efforts to expand the current JORC resource. Results of a recent pre-feasibility study announced on 15 October 2020 indicate a post-tax NPV8% of US$1,040 million and IRR of 113%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the project into the development phase and through to production with significant cornerstone investment of US$28 million from Queen's Road Capital Investment and EBRD.

There have been no material changes to the assumptions underpinning the forecast financial information derived from the production target in the 15 October 2020 announcement and these assumptions continue to apply. There have been no material changes to the assumptions and technical parameters on the updated Mineral Resource Estimate announced on 1 September 2020 and these assumptions continue to apply.

Adriatic Metals acquired TSX-V listed Tethyan Resource Corp in 2020, to advance the former Kizevak and Sastavci polymetallic mines in the Raska District, southern Serbia.

DISCLAIMER

Forward-looking statements are statements that are not historical facts. Words such as "expect(s)", "feel(s)", "believe(s)", "will", "may", "anticipate(s)", "potential(s)"and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to statements regarding future production, resources or reserves and exploration results. All of such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of the Company, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include, but are not limited to: (i) those relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits and conclusions of economic evaluations, (ii) risks relating to possible variations in reserves, grade, planned mining dilution and ore loss, or recovery rates and changes in project parameters as plans continue to be refined, (iii) the potential for delays in exploration or development activities or the completion of feasibility studies, (iv) risks related to commodity price and foreign exchange rate fluctuations, (v) risks related to failure to obtain adequate financing on a timely basis and on acceptable terms or delays in obtaining governmental approvals or in the completion of development or construction activities, and (vi) other risks and uncertainties related to the Company's prospects, properties and business strategy. Our audience is cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof, and we do not undertake any obligation to revise and disseminate forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of or non-occurrence of any events.

 

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