Source - LSE Regulatory
RNS Number : 5579G
Adriatic Metals PLC
30 March 2022
 

Adriatic Metals PLC 

("Adriatic Metals" or the "Company")

 

Annual Report and Audited Financial Statements 

for the Year Ended 31 December 2021

 

Adriatic Metals PLC (ASX:ADT, LSE:ADT1, OTCQX:ADMLF) is pleased to announce its Annual Report and Audited Financial Statements for the year ended 31 December 2021.

The Board advises all shareholders and interested stakeholders that the Company's Annual Report including the audited results for the year ended 31 December 2021 is available on the Company's website: https://www.adriaticmetals.com/investors/financial-reports-2/ 

An abridged version of the results for the year ended 31 December 2021 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 2021

 

 

 

(In GBP)

 

Note

 

31 December 2021

(Restated)

31 December 2020

Assets

 

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

83,171,040

29,580,538

Other receivables and prepayments

5

1,640,650

654,514

Total current assets

 

84,811,690

30,235,052

Non-current assets

 

 

 

Property, plant and equipment

8

22,079,729

969,464

Right of use asset

12

542,034

236,349

Exploration and evaluation assets

9, 10

24,456,506

36,479,724

Total non-current assets

 

47,078,269

37,685,537

Total assets

 

131,889,959

67,920,589

 

Equity and liabilities

 

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities

11

3,192,638

1,900,437

Lease liability

12

104,725

35,609

Deferred Consideration

7, 13

858,489

2,515,399

Borrowings

6

-

105,515

Total current liabilities

 

4,155,852

4,556,960

Non-current liabilities

 

 

 

Lease liability

12

462,333

219,731

Borrowings

6

11,880,828

11,590,172

Derivative liability

6

1,849,962

3,045,213

Total non-current liabilities

 

14,193,123

14,855,116

 

Total liabilities

 

18,348,975

19,412,076

 

Capital and reserves attributable to shareholders of the parent

Share capital

15

3,553,408

2,772,186

Share premium

15

107,708,429

34,519,259

Merger Reserve

15

17,709,847

17,256,579

Share-based payment reserve

15

4,467,621

5,756,069

Warrants reserve

15

2,155,882

2,797,086

Other equity

10

-

(2,515,399)

Foreign currency translation reserve

15

(199,263)

225,580

Retained deficit

15

(21,854,940)

(14,299,135)

 

 

113,540,984

46,512,225

Non-controlling interest

10

-

1,996,288

Total equity

 

113,540,984

48,508,513

Total equity and liabilities

 

131,889,959

67,920,589

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

The Consolidated Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 29 March 2022 and were signed on its behalf by:

 

Paul Cronin

Managing Director and Chief Executive Officer

Geoff Eyre

Chief Financial Officer & Joint Company Secretary

 

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

(In GBP)

 

 

Note

Year Ended
31 December 2021

Six months Ended
31 December 2020

 

 

 

 

Exploration costs

17

(2,880,700)

(798,028)

General and administrative expenses

18

(5,274,727)

(2,115,707)

Share-based payment expense

20

(1,434,574)

(2,267,239)

Other income

21

61,869

4,816

Operating loss

 

(9,528,132)

(5,176,158)

 

Finance expense

19

(2,076,846)

(197,039)

Revaluation of fair value asset

10

-

(322,987)

Revaluation of derivative liability

6

1,195,251

-

Revaluation of deferred consideration

7

20,834

-

Loss before taxation

 

(10,388,893)

(5,696,184)

 

Tax charge

16

-

1,681

 

Loss for the period

 

(10,388,893)

(5,694,503)

 

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

Exchange (loss)/gain arising on translation of foreign operations

 

(424,843)

5,775

 

 

(424,843)

5,775

Total comprehensive loss for the period

 

(10,813,736)

(5,688,728)

 

Loss for the period attributable to:

 

 

 

Owners of the parent

 

(10,194,509)

(5,175,392)

Non-controlling interest

 

(194,384)

(519,111)

 

 

(10,388,893)

(5,694,503)

Total comprehensive loss attributable to:

 

 

 

Owners of the parent

 

(10,619,352)

(5,169,617)

Non-controlling interest

 

(194,384)

(519,111)

 

 

(10,813,736)

(5,688,728)

 

Net loss per share

Basic and diluted (pence)

15g

(4.72)

(2.99)

 

See note 25 for details of the restatement of the prior year comparatives.

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

Consolidated Statement of Changes in Equity

FOR THE YEAR ENDED 31 DECEMBER 2021

 

(In GBP)

 

Note

 

Number Of
Shares

 

Share Capital

(Restated) Share Premium

(Restated) Merger Reserve

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 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 (restated)

15

13,278,937

177,340

-

17,256,579

236,571

2,797,086

(2,515,399)

-

(304,090)

17,648,087

2,515,399

20,163,486

31 December 2020

 

207,576,675

2,772,186

34,519,259

17,256,579

5,756,069

2,797,086

(2,515,399)

225,580

(14,299,135)

46,512,225

1,996,288

48,508,513

 

Comprehensive (loss)/income for the year:

Loss for the year

 

 

-

-

-

-

-

-

-

(10,194,509)

(10,194,509)

(194,384)

(10,388,893)

Other comprehensive income

 

-

-

-

-

-

-

-

(424,843)

-

(424,843)

-

(424,843)

Total comprehensive loss

 

-

-

-

-

-

-

-

(424,843)

(10,194,509)

(10,619,352)

(194,384)

(10,813,736)

 

Contributions by and distributions to owners:

Issue of share capital

15

49,350,000

659,069

73,782,979

-

-

-

-

-

-

74,442,048

-

74,442,048

Settlement Placement

15

1,287,236

17,191

846,948

-

-

-

-

-

-

864,139

-

864,139

Share issue costs

 

 

 

(3,277,759)

-

-

-

-

-

-

(3,277,759)

-

 (3,277,759)

Exercise of options

15

6,542,958

87,382

711,997

-

(2,723,021)

-

-

-

2,723,021

799,379

-

799,379

Issue of options

15

-

-

-

-

2,098,430

-

-

-

-

2,098,430

-

2,098,430

Exercise of warrants

15

984,371

13,146

1,125,005

-

-

(473,332)

-

-

473,332

1,138,151

-

1,138,151

Expiry/Cancellation of Options/warrants

15

-

-

-

-

(663,857)

(167,872)

-

-

167,872

(663,857)

-

(663,857)

Acquisition of subsidiary

15

332,000

4,434

-

453,268

-

-

2,515,399

-

(725,521)

2,247,581

(1,801,904)

445,677

31 December 2021

 

266,073,240

3,553,408

107,708,429

17,709,847

4,467,621

2,155,882

-

(199,263)

(21,854,940)

113,540,984

-

113,540,984

                             


See note 25 for details of the restatement of the prior year comparatives.

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

Consolidated Statement of Cash Flows

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

(In GBP)

 

 

Note

Year Ended
31 December 2021

Six Months Ended 31 December 2020

 

Cash flows from operating activities

 

 

 

Loss for the period

 

(10,388,893)

(5,694,503)

Adjustments for:

(Gain)/Loss on Disposal of Fixed Asset

 

(166)

1,106

Depreciation of property, plant and equipment

8

88,544

36,157

Amortisation of exploration & evaluation assets

9

28,889

11,469

Amortisation of right-of-use assets

12

57,786

15,549

Share-based payment expense

20

1,434,574

2,267,239

Finance expense

19

2,076,846

197,039

Revaluation of fair value assets

10

-

322,987

Revaluation of derivative liabilities

6

(1,195,251)

-

Revaluation of deferred consideration

7

(20,834)

-

Changes in working capital items:

Increase in other receivables and prepayments

 

(984,574)

(151,833)

Increase in accounts payable and accrued liabilities

 

1,365,854

687,582

Net cash used in operating activities

 

(7,537,225)

(2,307,208)

Cash flows from investing activities:

Cash acquired on acquisition

10

-

311,964

Purchase of property, plant and equipment

8

(7,264,352)

(90,864)

Purchase of exploration & evaluation assets

9

(2,857,010)

(3,052,019)

Sale of property, plant and equipment

 

1,764

1,970

Loans issued

10

-

(723,300)

Net cash used in investing activities

 

(10,119,598)

(3,552,249)

Cash flows from financing activities:

Gross proceeds from the issue of ordinary shares

15i

77,243,716

12,317,964

Gross proceeds from loans and borrowings

7

-

14,956,849

Transaction costs arising from equity financing

15i

(3,277,759)

(1,447,201)

Settlement of Deferred Consideration

7

(1,188,706)

 

Interest paid on loans and borrowings

6

(1,351,266)

-

Interest paid on leases

12

(70,929)

(10,523)

Net cash flows from financing activities

 

71,355,056

25,817,089

Net increase in cash and cash equivalents

 

53,698,233

19,957,632

Exchange losses on cash and cash equivalents

 

(107,731)

(319,823)

Cash and cash equivalents at beginning of the period

 

29,580,538

9,942,729

Cash and cash equivalents at end of the period

 

83,171,040

29,580,538

The accompanying notes are an integral part of these Consolidated Financial Statements

Notes to the Consolidated Financial Statements

1.   Corporate information

The consolidated financial statements present the financial information of Adriatic Metals PLC and its subsidiaries detailed in Section 3 (collectively, the Group) for the period ended 31 December 2021. 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 Vares Project in Bosnia & Herzegovina and the Raska Project in 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.

2.   Basis of preparation

a       Statement of compliance

These consolidated financial statements have been prepared in accordance with UK adopted international accounting standards. 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 29 March 2022.

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 pounds sterling ("GBP"). This is also the functional currency of the Company.

The Company's year end previously ran to 30 June 2020. The year end was changed to align the financial periods of all subsidiaries to 31 December 2020, hence the comparative period is a 6 month period. The current financial year encompasses the 12 month period to December 2021.

c       Going Concern

The Group incurred a loss in the period of £10,388,893 (31 December 2020 - £5,694,503). However, the Group also had a net asset position at the balance sheet date of £113,540,984 (31 December 2020 - £46,512,225).

The Vares Feasibility Study as completed in August 2021 with Project NPV of US$1.1 billion and build cost of US$168.2 million. Equity raise successfully closed on 29th October 2021 and Orion debt documents were executed with the aim of providing the Group with sufficient funds to complete the Vares mine construction and ongoing owner costs until production commences in Q2 FY23 and the business becomes self-sustaining from cash flows from operations.

Definitive documentation executed for the US$142.5 million Project Finance Debt Package with Orion announced on 10 January 2021 currently undrawn. Debt-Service Coverage Ratio (DSCR) covenant is included in the finance package and will apply commencing 3 months post the first repayment date, required to be above 1.25x level and tested on a quarterly basis.

Refreshed budget show that substantial headroom remains based on assumption debt documents are agreed in line with term sheet on 12-month view as funding in place to cover the approximately 18 month build and bring the Vares project into production. Longer term substantial headroom exists over the 1.25x DSCR covenant, forecasted DSCR as follows:

 

Sep-23

Dec-23

Mar-24

Jun-24

Sep-24

Dec-24

Dec-25

DSCR

3.9

5.0

4.9

4.8

4.7

4.6

5.8

Analysis regarding sensitivities have been considered simultaneously as slippage delay to commencement of production up to 10% increase in build costs.

Cash flow forecasts prepared 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 and 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; and

·              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 parent company and following subsidiaries at 31 December 2021:

 

Name of subsidiary

Country of incorporation

Shareholding on 31 December 2021

Shareholding on
31 December 2020

Nature of business

Eastern Mining d.o.o.

Bosnia & Herzegovina

100%

100%

Mineral exploration & development

Adriatik Metali d.o.o

Bosnia & Herzegovina

100%

0%

Mineral exploration & development (incorporated during year to 31 December 2021)

Adriatic Metals Jersey Ltd (formerly Tethyan Resource Corp)

Jersey (formerly Canada)

100%

100%

Holding company - financing mining exploration of subsidiary

Adriatic Metals Services (UK) Limited (formerly Tethyan Resources Limited)

England & Wales

100%

100%

Holding company - financing mining exploration of subsidiary

Adriatic Metals Trading & Finance B.V.

The Netherlands

100%

0%

Trading & Finance Company (incorporated during year to 31 December 2021)

Adriatic Metals Holdings BIH Limited

England & Wales

100%

0%

Holding company - financing mining exploration of subsidiary (incorporated during year to 31 December 2021)

Tethyan Resources Jersey Ltd

Jersey

100%

100%

Holding company - financing mining exploration of subsidiary

Taor d.o.o.

Serbia

100%

100%

Mineral exploration and development

Tethyan Resources d.o.o.

Serbia

100%

100%

Mineral exploration and development

Global Mineral Resources d.o.o.

Serbia

100%

100%

Mineral exploration and development

Tethyan Resources Bulgaria EOOD (liquidated post year end)

Bulgaria

100%

100%

Mineral exploration and development

Kosovo Resource Company (liquidated during year to 31 December 2021)

Kosovo

0%

100%

Mineral exploration and development

Ras Metals d.o.o.

Serbia

100%

10%*

Mineral exploration and development

 

* The Group held 10% of the equity in Ras Metals d.o.o. at 31 December 2020. The Group had substantive control of Ras Metals d.o.o. at 31 December 2020 and consolidated the net assets into the Group financial statements. The group activated the option to acquire remaining 90% during the period to 31 December 2021. See Section 4 for more details on critical accounting judgements.

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

 

Name of subsidiary

Country of incorporation

Shareholding on 31 December 2021

Shareholding on
31 December 2020

Nature of business

EFPP d.o.o.

Serbia

0%

10%*

Mineral exploration and development

The Group owned 10% of the equity in EFPP d.o.o. at 31 December 2020 with an option to acquire the remaining 90%. However, the Group did not have substantive control over this entity and has not consolidated the net assets into the Group financial statements. The 10% of equity in EFPP d.o.o. was disposed of during the period to 31 December 2021 for nominal consideration of €2.

See Section 4 for more details on critical accounting judgements including conclusion regarding the Group not controlling Deep Research or the Adriatic Foundation and as a result there entities are not included in the consolidated financial statements of the Group.

b      Standards, amendments and interpretations adopted

During the period, there was no material impact on the Group's financial statements resulting from the adoption of new standards and amendments.

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

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

 

 

 

IAS 1

Amendment - regarding the classification of liabilities as Current or Non-current

1 January 2023

IAS 1

Amendment - Disclosure of Accounting Policies

1 January 2023

IAS 8

Amendment - Definition of Accounting Estimates

1 January 2023

IAS 12

Income Taxes Deferred Tax related to Assets and Liabilities arising from a Single Transaction

1 January 2023

 

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 Standards or Interpretations 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 initially amortised over the term of the permit, unless the licence forms part of JORC-compliant reserves where development is sanctioned, at that point, licence costs are transferred to 'Mines under construction', amortisation of licence costs ceases and is instead amortised over the life of the mine when it becomes operational.

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 'Exploration expenses' and 'Other operating expenses' in the statement of profit or loss and other comprehensive income.

Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the 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' within Property Plant and Equipment and will be subsequently amortised in line with the useful economic life of the mine or 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 determined to be part of a mine plan. We assess the balance of Mine under Construction for impairment on transfer from Exploration and Evaluation assets.

h      Property, plant and equipment

iii)    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 or rate of depletion of resources once the mine enters into production. Land is not depreciated during the exploration and evaluation phase and is considered to have an indefinite life until determined as part of a mine plan.

iv)     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.

v)      Mine under Construction

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 or rate of depletion of resources once the mine enters into production. The exact method of amortisation will be determined taking into account all relevant factors at the point at which the mine enters into production.

Expenditure which is necessarily incurred whilst commissioning the mine under construction, in the period prior to being capable of operating in the manner intended by management, are capitalised. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.

vi)     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

Depreciation commences when put into service

Mine properties

Amortised in line with useful economic life of mine or rate of depletion of resources


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 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.

vii)    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.

viii)   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.

ix)     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 Group has a number of right of use asset being administrative premises in Bosnia & Herzegovina, Serbia and the UK. 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 assets, 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.

x)      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.

xi)     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.

Regarding construction to date, whilst access road construction commenced in November 2021 at the Rupice Surface Infrastructure site, construction activities have not progressed to the point to which management believe a rehabilitation provision is currently necessary. Rehabilitation costs were estimated as part of the feasibility study and construction progress will be assessed in future periods with recognition of the estimated outstanding continuous rehabilitation work at each balance sheet date accordingly.

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.

xii)    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 comprised of the convertible option contained within the loan between the Company and Tethyan Resource Corp. Following the acquisition this convertible option was extinguished and previously held value released through the profit and loss, the Group currently has no assets held at fair value through profit and loss.

xiii)   Financial liabilities

Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for financial liabilities designated at fair value through profit or loss, that are carried subsequently at fair value with gains and losses recognised in the profit and loss statement.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Where the movement in fair value is due to a change in the entity's credit risk, such gain/loss is recognised in Other Comprehensive Income statement.

The Group's financial liabilities initially measured at fair value and subsequently recognised at amortised cost include accounts payables and accrued liabilities, deferred consideration and the liability associated with the right of use asset (note 12).

xiv)   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 as appropriate conditions were met.

m     Impairment of assets

xv)    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.

xvi)   Non-financial assets

Exploration and evaluation assets relates to the Raska Project, with value based on consideration paid for the combined Tethyan group.

The carrying values of capitalised evaluation expenditure for undeveloped mining projects (projects for which the decision to mine has been not yet been deemed commercially viable and development not yet been authorised) are reviewed at each reporting date for indicators of impairment in accordance with IFRS 6, and when indicators are identified are tested in accordance with IAS 36 Impairment of Assets.

Property, plant and equipment and intangible assets with finite lives are reviewed for impairment if there is an indication that the carrying amount may not be recoverable.

The Vares Project is considered to be a cash generating unit, previously capitalised exploration and evaluation assets in relation to the Vares Project were transferred to Mines under Construction following the completion of the Feasibility Study in August 2021.

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that the assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate largely independent cash inflows, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

The recoverable amount is the higher of fair value less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the profit and loss statement. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Where an impairment loss is subsequently reversed, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior periods. A reversal of an impairment loss is recognised in the profit and loss statement.

n      Income taxes

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.

Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not recognised on the initial recognition of goodwill, on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction, 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 not recognised any 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 Capital, Share Premium & Merger reserve

Ordinary shares are classified as Share Capital. Share premium represents the excess of proceeds received over the nominal value of new shares issued.

Incremental costs directly attributable to the issuance of new shares are shown in share premium as a deduction, net of tax, from the proceeds.

Merger reserve represents the difference between the value of shares issued by the Company in exchange for the value of shares acquired in respect of the acquisition of subsidiaries.

q      Share-based payments & warrants payments

xvii)  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.

xviii) 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. Non market performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of the options that will eventually vest. Market performance vesting conditions are incorporated into the fair value of the equity instrument at the grant date.

Where equity-settled transactions are entered into with non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the equity instruments issued. Otherwise, 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.

The Group utilises the Black-Scholes Option Pricing Model to estimate the fair value of share options and performance rights granted to Directors, Officers and employees. The use of this model requires management to make various estimates and assumptions that impact the value assigned to the share options and performance rights including the forecast future volatility of the share price, the risk-free interest rate, dividend yield, the expected life of the share options and performance rights and the expected number of share which will vest. See note 15 for further details regarding these inputs.

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.

On the creation of a non-controlling interest, the group recognise an Other Equity account for the deferred consideration payable under any option agreements.

s       Other Reserve Accounts

Foreign currency translation reserve include gains/losses arising on retranslating the net assets of entities from their functional currencies into the Group presentational currency GBP.

Retained Earnings include all other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere

t       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.

In the comparative period 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 & Herzegovina (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.

u      Adriatic Foundation

The Adriatic Foundation (the "Foundation") is a not-for-profit trust which was created in Bosnia & Herzegovina with the objective of supporting the communities around the Vares Project. Adriatic Metals PLC provided the initial funding required for the formation of the Foundation.

The Company has the ability to appoint the Board of Trustees of the Foundation and hence transactions between the Company and the Foundation have been classified as related party on the basis of the company yielding significant influence.

With reference to IFRS 10 an assessment of control has been performed to determine whether the company controls the Adriatic Foundation. The conclusion of this assessment is that whilst the company has power over the Foundation, it does not have the ability to use its power to affect the company returns. The Foundation statute prevents neither the Company as the founder, nor any other person associated with the Foundation to directly or indirectly derive profit or any other material or financial benefit realized through the purposes and activities of the Foundation. The Directors have therefore concluded that the Company does not control the Foundation and as a result the Foundation is not included in the consolidated financial statements of the Group.

4.   Critical accounting estimates and judgements

The preparation of the Consolidated Financial Statements in accordance with IFRS requires management to make certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from these estimates. 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

v       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.

Exploration and evaluation assets at 31 December 2021 comprised the Raska Project £24,456,506, with value based on consideration paid for the combined Tethyan group. No indicators of impairment were identified during managements review of potential indicators, further expansion of drilling program is budgeted for 2022 and the Group aims to produce an internal scoping study.

For further assurance over the value of exploration and evaluation assets capitalised, management obtained a resource estimate from Forge International estimate, an independent third-party organisation. This comprised an additional stage of preliminary Resource modelling, this time using both the historical and modern data sets. The results of which were compared to the market capitalisation of comparative listed single asset projects in which the Raska Project valuation did not appear unreasonable compared similar projects.

w     Mine under Construction impairment testing

Mine under construction is in respect of the Vares Project concession, located in Bosnia & Herzegovina. The balance of Exploration and Evaluation asset were transferred to Mine under Construction at the completion of the Feasibility Study. We assess the balance of Mine under Construction on transfer from Exploration and Evaluation assets and subsequently at each balance sheet date, no impairment was required at the date of the transfer or at the 31 December 2021.

Property, plant and equipment and intangible assets with finite lives are reviewed for impairment if there is an indication that the carrying amount may not be recoverable.

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 Feasibility study indicate an NPV8 of US$1,062 million and IRR of 134%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the Project into the development phase and through to production.

x       Deferred Consideration

The Group accounts for deferred consideration within financial liabilities section at fair value through profit and loss.

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. See Note 10 for details.

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

·              making a payment of €1,365k 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 €0.5m 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 originally estimated at £2,515,399 at 31 December 2020.

On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras making payment of €1,365k to the sellers and issuing the first 166,000 shares reducing the deferred consideration balance. On the 24 August 2021 the second tranche of 166,000 shares were issued in line with the agreement reducing the deferred consideration balance further. The remaining deferred consideration was estimated as at the balance sheet date to be £858,489. See Note 7 for further details.

y       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 embedded within this agreement. The option is recognised as a derivative liability in the Group and company accounts and required a separate fair valuation. This option was revalued as at the balance sheet date.

See note 6 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 & Herzegovina

BAM

Adriatik Metali d.o.o

Bosnia & Herzegovina

BAM

Adriatic Metals Jersey Ltd

(previously Tethyan Resource Corp)

Jersey

CAD

Adriatic Metals Services (UK) Limited

(previously Tethyan Resources Limited)

England & Wales

US$

Adriatic Metals Trading & Finance BV

Netherlands

US$

Adriatic Metals Holdings BIH Limited

England & Wales

GBP

Tethyan Resources Jersey Ltd

Serbia

RSD

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 (liquidated post year end)

Bulgaria

Kosovo Resource Company (liquidated during year to 31 December 2021)

Kosovo

 

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.

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 license as exploration and evaluation assets up to the point when a JORC-compliant reserve is established. There is an element of judgement involved by management as to which costs are directly attributable to increasing the value of the Project, broadly activities in relation to scoping, exploration and development are deemed directly attributable, whilst activities in relation to supporting and administrative duties are deemed not to be directly attributable.

c       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 under an agreement with commercially acceptable terms, to acquire the remaining equity interest in Ras. Hence the Group had control over Ras, rights to variable returns from its involvement with Ras, and the ability to use its power over Ras to affect the amount of the Group's returns. 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 10.

The Group assessed whether the option agreement gave access to the returns associated with an ownership interest. In such circumstances, the proportion allocated to the parent and non-controlling interests in preparing consolidated financial statements is determined by taking into account the eventual exercise of those potential voting rights and other derivatives that currently give the entity access to the returns.The consideration paid to exercise the right to purchase the remaining equity contained both fixed and variable elements. As a result of the additional consideration payable which remained variable at year end, the Group did not have access to present returns in Ras at 31 December 2020 and has therefore recognised a non-controlling interest until the Company completed the acquisition of the entire issued share capital of Ras further details of which are provided in note 10.

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, the terms of closing out the Option were not commercially acceptable and hence did not have an ability to direct activities of this entity which impact the Group's returns. This position was further justified when on 22 February 2021, the Group disposed of its 10% equity stake in EFPP for a nominal amount. The Group no longer have any holding in this entity following this disposal.

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, the terms of closing out the Option were not commercially acceptable 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. At 31 December 2020 and 31 December 2021, the Group did not have an ability to direct activities of this entity to impact the Group's returns.  

5.   Other receivables and prepayments

(In GBP)

31 December 2021

31 December 2020

Other receivables

4,286

8,729

Prepayments and deposits

443,450

138,088

Debt issuance costs

435,069

-

Taxes receivable

757,845

507,698

Total

1,640,650

654,514

All receivables are due within one year.

Debt issuance costs are in relation to Orion Financing package which was agreed post year end and will be netted against the debt liability when draw down occurs, and amortised over the life of the obligation.

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

The split of other receivables and prepayments is as follows as at 31 December 2021:

 

Bosnia & Herzegovina

Serbia

Corporate

Total

Other receivables

865

1,716

1,705

4,286

Prepayments and deposits

332,834

28,004

92,613

443,451

Debt issuance costs

-

-

435,069

435,069

Taxes receivable

538,618

82,350

136,876

757,844

Total

872,317

112,070

666,263

1,640,650

 

The split of other receivables and prepayments is as follows as at 31 December 2020:

 

Bosnia & Herzegovina

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

6.   Borrowings and Derivative Liability

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 A$ 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:

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;

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

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:

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

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 the embedded option at fair value in the profit and loss, and loan liability at amortised cost.

Valuation Model

The Black Scholes model was chosen as the most appropriate pricing model to value the company call options, valuation was updated at 31 December 2021. The main assumptions and inputs used in the options pricing model at each year end 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 A$ 2.7976 per ordinary share

·              Expected term - Judgement applied to assign probability to the various redemption and put options in the contract. The Group has agreed a financing package to progress the Vares Project (see Note 25), redemption is contingent on the successful draw down of the facility. Expected term of redemption calculated as 1.08 years from the valuation date.

·              Expected volatility - Weekly volatility over the 1.08 years (56 weeks) was calculated as 46.72% 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 A$ 2.45 on the valuation date on the ASX

Using the assumptions set out above, Black Scholes value of call option in hands of Bondholder is £1,849,962.

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

 

20%

(Unchanged (46.72%)

50%

Change in expected term

26 Weeks

£1.67m Decrease

£0.8m Decrease

£0.69m Decrease

Unchanged (56 weeks)

£1.39m Decrease

-

£0.18m Increase

91 Weeks

£1.2m Decrease

£0.46m Increase

£0.67m Increase

 

 

(In GBP)

QRC Loan Payable

Fair Value Option

At 30 June 2020

-

-

Additions

(14,956,849)

 

Interest accruing

(105,515)

 

Foreign Exchange gain

321,464

 

Recognition of fair value embedded option

3,045,213

(3,045,213)

At 31 December 2020

(11,695,687)

(3,045,213)

Interest accruing

(1,235,780)

 

Payment of interest

1,351,266

 

Foreign Exchange loss

(300,627)

 

Revaluation of fair value option

-

1,195,251

At 31 December 2021

(11,880,828)

(1,849,962)

 

Short term borrowings at 31 December 2021 are £nil (31 December 2020: £105,515). Long term borrowings at 31 December 2021 are £11,880,828 (31 December 2020: £11,590,172). Derivative liabilities at 31 December 2021 are £1,849,962 (31 December 2020: £3,045,213).

 

7.   Deferred Consideration
 

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. See Note 10 for details.

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

·              making a payment of €1,365k 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 €0.5m 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 originally estimated at £2,515,399 at 31 December 2020.

On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras making payment of €1,365k to the sellers and issuing the first 166,000 shares. On the 24 August 2021 the second tranche of 166,000 shares were issued in line with the agreement. The remaining deferred consideration was estimated as at the balance sheet date.

 

(In GBP)

Deferred Consideration

At 30 June 2020

-

Additions

2,515,399

At 31 December 2020

2,515,399

Payments made to sellers

(1,188,706)

Value of shares issued to sellers

(447,370)

Revaluation of fair value liability through profit and loss

(20,834)

At 31 December 2021

858,489

 

Remaining deferred consideration payable as follows:

 

31 December 2021

Basis for valuation

Remaining 332,000 Shares to be issued in two equal tranches every six months commencing on second closing; and

£438,240

LSE ADT1 Share price 31 December 2021 = £1.32

€500,000 payment on the two-year anniversary of the first closing

£420,249

€:GBP 31 December 2021 = 1: 0.84050

2% NSR over the licenses

£nil

Can't be reliably estimated at this stage prior to feasibility study

At 31 December 2021

       £858,489

 

         

 

On the Raska Project, the Company have not been able to model the 2% NSR over the licenses as we have not yet conducted a definitive feasibility study, nor have we defined a JORC compliant resource.

8.   Property, plant and equipment

 

 

Cost (In GBP)

 

Land & Buildings

 

Plant & Machinery

 

Mine under Construction

 

Total

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

Transfer from Exploration and Evaluation Asset

 

 

14,477,144

14,477,144

Additions

108,209

265,193

6,890,950

7,264,352

Disposals

-

(4,751)

-

(4,751)

Foreign exchange difference

(43,145)

(13,869)

(345,850)

(402,864)

31 December 2021

820,555

630,212

21,022,244

22,473,011

 

 

Depreciation

30 June 2020

14,549

57,676

-

72,225

Acquisition Assets

-

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)

 

 

 

 

 

Transfer from Exploration and Evaluation Asset

 

 

133,872

133,872

Charge for the period

15,614

72,930

-

88,544

Disposals

-

(2,546)

-

(2,546)

Foreign exchange difference

(1,153)

(3,479)

8,377

3,745

 

 

 

 

 

 

 

Net Book Value

30 June 2020

722,405

188,515

-

910,920

31 December 2020

734,516

234,948

-

969,464

 

 

 

 

 

           


Mine under construction is in respect of the Vares Project concession, located in Bosnia & Herzegovina. The balance of Exploration and Evaluation asset were transferred to Mine under Construction at the completion of the Feasibility Study. 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. The concession is 100% owned by Eastern Mining d.o.o.

From 25 May 2020, the Vares 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 amortization were charged over the life of the concession granted, until they were transferred to Mines under Construction, upon which amortisation ceased are not amortised until beginning of the production phase.

 

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

The split of land and buildings net book value is as follows:

 

Bosnia & Herzegovina

Serbia

Corporate

Total

30 June 2020

705,951

N/A

16,454

722,405

31 December 2020

718,939

-

15,577

734,516

31 December 2021

771,284

-

13,834

785,118


The split of property plant and equipment assets net book value is as follows:

 

Bosnia & Herzegovina

Serbia

Corporate

Total

30 June 2020

157,840

N/A

30,675

188,515

31 December 2020

185,129

24,317

25,502

234,948

31 December 2021

339,711

54,362

20,543

414,616

 

The split of mines under construction net book value is as follows:

 

Bosnia & Herzegovina

Serbia

Corporate

Total

30 June 2020

-

N/A

-

-

31 December 2020

-

-

-

-

31 December 2021

20,879,995

-

-

20,879,995

 

The sensitivity of the Vares Project to key project inputs is considered within the Feasibility Study. Summary of sensitivities chart of Post-Tax NPV 8% US$ 1062 million (GBP 785 million) to inputs is as follows: Please click the following link to view chart: 
http://www.rns-pdf.londonstockexchange.com/rns/5579G_1-2022-3-30.pdf

 

Analysis of sensitivities shows that significant headroom exists over carrying value of Vares Tangible assets (£22,059,745), headroom shown in table below.

GBP (millions)

-20%

-10%

0%

+10%

+20%

Metals Price (+/-%)

513

638

763

887

1,012

Operating Cost (+/-%)

807

784

763

741

719

Initial Capital Cost (+/-%)

784

773

763

752

741

Head Grade (+/-%)

515

637

763

888

1,013

 

9.   Exploration and evaluation assets

 

Cost (In GBP)

Vares Project in Bosnia & Herzegovina

Raska Project in Serbia

Exploration & Evaluation Assets

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

Additions

2,857,010

-

2,857,010

Foreign exchange difference

(522,057)

-

(522,057)

Transfer to Mines under Construction

(14,477,144)

-

(14,477,144)

31 December 2021

-

24,456,506

24,456,506

Amortisation

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

Charge for the period

28,889

-

28,889

Foreign exchange difference

(13,990)

-

(13,990)

Transfer to Mines under Construction

(133,872)

-

(133,872)

31 December 2021

-

-

-

Net Book Value

 

 

30 June 2020

9,045,169

-

9,045,169

31 December 2020

12,023,218

24,456,506

36,479,724

31 December 2021

-

24,456,506

24,456,506

 

Exploration and evaluation assets include amount of £24,456,506 added in the comparative 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 were in respect of the Vares Project concession, located in Bosnia & Herzegovina which were then transferred to Mines under Construction following the completion of the Feasibility Study in August 2021.

10. Acquisition note

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 (Ras Option Agreement) held by Adriatic Metals Jersey Ltd (formerly Tethyan Resource Corp), a wholly owned subsidiary of the Company. The consideration paid on 23 February 2021 for the remaining 90% of the shares in Ras that the Company did not already hold was €1,365,000 in cash plus the allotment of 166,000 Ordinary shares of £0.013355 each in the Company.

Second tranche of shares was issues for 166,000 ordinary shares on 22 August 2021. Additionally, deferred consideration still to be paid at 31 December 2021 of €500,000 in cash, is payable on 14 May 2022, and 332,000 Ordinary shares in the Company that will be allotted in two equal tranches on or around, 22 February 2022 and 22 August 2022.

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 the Ras Option Agreement was originally estimated at £2,515,399 as at 31 December 2020, subsequent movements are detailed in Note 7.

The Group had initially recognised a 90% non-controlling interest in Ras Metals d.o.o. as part of the acquisition of the Tethyan Resource Corp. group which finalised on 8 October 2020. Upon the acquisition of the remaining 90% of the shares in Ras that the Company did not already on 23 February 2021 the balance of the non-controlling interest was transferred to Retained Earnings.

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. 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 license was 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 cash plus 12,000,000 shares issued in Tethyan, equating to £1,587,934. The net liability 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 difference between Tethyan net liabilities £189,687 and the total consideration payable £22,678,884, being £22,868,571.

(In GBP)

 

Total Fair Value of Consideration to be paid

22,868,571

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

1,587,934

Total exploration and evaluation asset value

24,456,505

     

 

As part of the agreement to acquire Tethyan Group, the Company provided a convertible loan facility to Tethyan and had advanced €1.8 million under the facility to the date of acquisition on 8th October 2020 including £723,300 in the 6 month period to 31 December 2020. Effective the same date this loan was amended removing the convertible option from the loan and the conversion value £322,987 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.

The fair value of the remaining consideration to be paid of £2,515,399 has been recognised as deferred consideration, which reduces as amounts are settled and any difference arising from changes in the fair value of the deferred consideration is recognised in the profit & loss.

Asset acquisition

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

(In GBP)

Book 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

(522,740)

Related party borrowings

(1,640,838)

Total Assets acquired

(189,687)


Management determined there was no present access to returns in Ras Metals d.o.o. owing to the variable consideration included in the exercise price as at 31 December 2020. As such the Group recognised 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 loss attributable to non-controlling interest post 8 October 2020 acquisition in the period to 31 December 2020 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.

Further losses of (£194,384) were incurred by Ras Metals under the option agreement bringing the non-controlling interest to £1,801,904, which upon the acquisition of the remaining share capital on 23 February 2021 the balance of the non-controlling interest was transferred to Retained Earnings.

 

11. Accounts payable and accrued liabilities

 

(In GBP)

31 December 2021

31 December 2020

Trade payables

389,213

1,222,012

Accrued liabilities

2,047,360

639,743

Other payables

756,065

38,682

 

3,192,638

1,900,437

 

Other payables includes amounts payable in relation to cash settled STIP.

12. Right of use asset and lease liabilities

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 2020

251,898

Amortisation

(15,549)

31 December 2020

236,349

Additions

363,220

Foreign Exchange Difference

251

Amortisation

(57,786)

31 December 2021

542,034

 

The right of use asset relates to the lease on several administrative buildings and coresheds for the Group. 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 2020

265,621

Interest expense

10,523

Payments

(20,803)

31 December 2020

255,341

Additions

362,452

Interest expense

24,317

Foreign Exchange difference

(4,123)

Payments

(70,929)

31 December 2021

567,058

 

Of this amount, £104,725 is recognised as a current liability and the remainder £462,333 is shown within non-current liabilities.

The following are the amounts recognised in profit or loss:
 

Cost (In GBP)

31 December 2021

31 December 2020

Depreciation expense of right-of-use assets

57,786

 15,549

Interest expense on lease liabilities

 24,317

 10,523

Total amount recognised in profit or loss

 82,103

 26,072

 

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  2021
(In GBP)

Note

At amortised cost

At fair value

through profit or loss

Total

Fair Value
Hierarchy

 

Financial assets

 

 

 

 

 

Cash and cash equivalents

 

83,170,672

-

83,170,672

N/A

Total financial assets

 

83,170,672

-

 83,170,672

-

 

Financial liabilities

 

Accounts payable and accrued liabilities

11

3,192,638

-

3,192,638

N/A

Borrowings

6

11,880,828

 

11,880,828

Level 3

Borrowings - derivative liability

6

-

1,849,962

1,849,962

Level 3

Deferred Consideration

7

-

858,489

858,489

Level 3

Lease liabilities

12

567,058

 

567,058

Level 3

Total financial liabilities

 

15,640,524

2,708,451

18,348,975

 

Net financial assets

 

67,530,148

(2,708,451)

64,821,697

 

 

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

6

11,695,687

 

11,695,687

Level 3

Borrowings - derivative liability

6

-

3,045,213

3,045,213

Level 3

Deferred Consideration

7

-

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

 

 

14. Financial risk management

d      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 and other receivables 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 & Herzegovina. 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.

e      Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become du'. 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 2021 (In GBP)

 

Within 30 days

30 days to

6 months

6 to 12 months

Over 12 months

Accounts payable and accrued liabilities

3,034,385

-

-

158,253

Borrowings

-

-

-

11,880,828

Derivative liability

-

-

-

1,849,962

FV Option Liability on acquisition

-

639,369

219,120

-

Lease liabilities

-

52,363

52,362

462,333

 

3,034,385

691,732

271,482

14,351,376

 

 

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

FV Option Liability on acquisition

 

1,412,391

223,685

879,323

Lease liabilities

-

17,805

17,805

219,731

 

2,172,496

1,440,711

241,490

16,613,762

 

f       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 & Herzegovina. 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 2021, 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 £0.4 million change to the Group's total comprehensive loss.

g       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.

There were no transfers between any levels of the fair value hierarchy in the current or prior years.

h      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 2021 was £113,540,984 (31 December 2020: £46,512,225).

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

i        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.

j        Common shares issued

 

 

Shares

Share Capital

(In GBP)

(Restated) Share Premium
(In GBP)

(Restated) Merger Reserve
(In GBP)

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

-

17,256,579

Settlement placement

4,830,156

64,507

4,791,547

-

Share issue costs

-

-

(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

34,519,259

17,256,579

Issue of share capital

49,350,000

659,069

73,782,979

-

Shares issued on acquisition of subsidiary

332,000

4,434

-

453,268

Settlement placement

1,287,236

17,191

846,948

-

Share Issue costs

-

-

(3,277,759)

-

Shares issued on exercise of options and performance rights

6,542,958

87,382

711,997

-

Shares issued on exercise of warrants

984,371

13,146

1,125,005

-

31 December 2021

266,073,240

3,553,408

107,708,429

17,709,847


The average price paid for shares issued in the period was £1.33 per share (31 December 2020: £1.06 per share).

Settlement placement refers to the following: Adriatic announced on 3 November 2020 that it had entered into a Deed of Settlement and Release with Sandfire where both parties had agreed to settle dispute as announced on 31 July 2020. Sandfire has chosen to exercise its ongoing anti-dilution right in respect of subsequent issues of equity by the Company since the settlement, up to the point of the Orion Equity raise, as per the results of placing announced on 13 October 2021, Sandfire sold its entire holding in the Company and at which point no longer held an ongoing anti-dilution right.

k       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 year ended 31 December 2021.

 

Weighted average exercise price of options (A$)

 

Number of options

 

Number of performance rights

 

Total options and performance rights

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

Issued

0.01

-

1,657,259

1,657,259

Exercised

0.38

(3,140,699)

(3,402,259)

(6,542,958)

Expired

0.42

(2,016,600)

(1,000,000)

(3,016,600)

31 December 2021

 0.53

12,212,480

990,000

13,202,480

 

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 2021

 

 

 

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

 1.5

1 July 2023

 9,000,000

29 November 2019

 1,000,000

A$1.00

 0.9

28 November 2022

 1,000,000

29 November 2019

1,000,000

A$1.25

 0.9

28 November 2022

1,000,000

8 October 2020

41,500

£1.06

 0.9

5 December 2022

41,500

8 October 2020

 29,880

£1.06

 1.0

3 January 2023

 29,880

8 October 2020

 91,300

£1.80

 2.2

28 February 2024

 50,630

8 October 2020

 24,900

£2.22

 2.2

7 March 2024

7,470

8 October 2020

 24,900

£1.20

 2.6

19 August 2024

 7,470

6 November 2020

 1,000,000

A$2.20

 1.9

7 November 2023

 1,000,000

 

12,212,480

 

 

 

12,136,950

 

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

 

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.

 

As at 31 December 2021

 

 

Grant date

 

Performance rights

outstanding

Weighted average remaining contractual life (Years)

 

 

Expiry date

 

Number exercisable

29 November 2019

50,000

0.9

28 November 2022

50,000

6 August 2020

500,000

3.0

31 December 2024

-

18 November 2020

40,000

1.0

31 December 2022

40,000

30 June 2021

100,000

1.0

31 December 2022

100,000

30 June 2021

50,000

1.2

31 March 2023

-

30 June 2021

100,000

2.2

31 March 2024

-

01 July 2021

150,000

1.5

30 June 2023

-

 

990,000

 

 

190,000

 

 

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

l        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 year ended 31 December 2021:

(In GBP)

Warrants reserve

30 June 2020

-

Issue of Warrants on acquisition of Tethyan

2,797,086

31 December 2020

2,797,086

Exercise of warrants

(473,332)

Expired warrants

(167,872)

31 December 2021

2,155,882

 

As at 31 December 2021

 

 

Grant date

 

Warrants outstanding

 

Exercise

price

Weighted average remaining contractual

life (Years)

 

 

Expiry date

 

Number exercisable

8 October 2020

2,651,020

A$0.88

 3.1

30 January 2024

2,651,020

 

2,651,020

 

 

 

2,651,020

             

m     Share-based payment reserve

The following table presents changes in the Group's share-based payment reserve during the year ended 31 December 2021:

(In GBP)

Share-based payment reserve

30 June 2020

4,426,185

Exercise of share options

(1,173,926)

Acquisition of subsidiary

236,571

Issue of options

2,267,239

31 December 2020

5,756,069

Exercise of share options

(2,723,021)

Issue of options

2,098,430

Cancellation of share options

(663,857)

31 December 2021

4,467,621

n      Share-based payment expense

During the year ended 31 December 2021; the Group recognised £2,098,430 (31 December 2020: £2,267,239) 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  2021

31 December  2020

Risk-free interest rate

0.01%

0.01%

Expected volatility (1)

44.14% - 44.21%

63.65% - 97.76%

Expected life (years)

1.5 - 2.75

0.85 - 4.41

Fair value per option

£1.33 - £1.35

£0.55 - £1.29

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


With the exception of options granted to Non-Executive directors during the comparative period (31 December 2020: 1,000,000) 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 & Nominations Committee Report.

o      Per share amounts

 

Year ended
31 December 2021

6 months ended
31 December 2020

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

10,813,736

5,694,503

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

220,323,937

190,619,399

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

245,652,425

213,827,441

Basic and diluted loss per share (pence)

(4.72)

(2.99)

       


Total of 990,000 (31 December 2020: 3,375,000) 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 2021.

Basic and diluted loss per share are the same whilst the Group is loss making in the pre-production phase.

p      Foreign Currency Translation Reserve

(In GBP)

Foreign Currency Translation Reserve

30 June 2020

219,805

Other comprehensive income

5,775

31 December 2020

225,580

Other comprehensive income

(424,843)

31 December 2021

(199,263)

q      Cash flow from financing activities

Net cash flow proceeds from the issue of ordinary shares in the period was £77,243,716 (31 December 2020: £12,317,964). Transaction costs arising from financing activities totals £3,265,212 (31 December 2021: £1,447,201).

16. Taxation

r       Current taxation

The tax charge for the period comprises:

(In GBP)

Year ended
31 December 2021

6 months ended
31 December 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)

Year ended
31 December 2021

6 months ended
31 December 2020

Loss before tax

10,388,893

5,696,184

Expected income tax recovery - 19% (2020 - 19%)

1,974,400

1,082,275

Expenses not deductible for tax purposes

(151,783)

19,384

Different Tax rates applied in overseas jurisdictions

(521,219)

(46,601)

Unrecognised taxable losses and timing differences

(1,301,398)

(1,055,058)

Adjustment for under/(over) provision in previous periods

-

(1,681)

Total income taxes

-

(1,681)

s       Deferred tax

The Group has no recognised deferred tax balance or gain/loss for the year ended 31 December 2021 or period ending 31 December 2020 or 30 June 2020 because of uncertainty regarding future taxable profits. As at 31 December 2021, the Group has, for tax purposes, non-capital losses available to carry forward to future years as follows:

 

(In GBP)

31 December 2021

31 December 2020

Expiry Date

UK

14,937,988

12,323,011

Not applicable

Bosnia & Herzegovina

2,146,313

1,417,043

5 years

Serbia

6,546,899

3,073,548

5 years

Canada

-

960,972

20 years

 

23,631,200

17,774,574

 


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

(In GBP)

 

31 December 2021

 

Serbia

Bosnia & Herzegovina

Within one year

49,436

205,596

1-2 years

653,104

220,180

2-3 years

722,580

392,646

3-4 years

1,253,821

490,144

Within 5 years

3,867,958

837,747

 

6,546,899

2,146,313

 

As a result of the Tethyan acquisition, Tethyan Resource Corp (incorporated in Canada), subsequently corporate migration occurred and no longer operating in Canada. As such no longer showing any losses available to carry forward to future years.

 

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)

Year ended
31 December  2021

6 months ended
31 December  2020

Exploration activities expensed

2,880,700

798,028

 

18. General and administrative expenses

(In GBP)

Year months ended
31 December 2021

6 months ended
31 December 2020

Wages and salaries

2,020,765

616,278

Consultancy fees

984,534

468,047

Cash remuneration in respect of qualifying services

3,005,299

1,084,325

Professional fees

921,017

313,760

Amortisation

86,675

27,017

Depreciation

88,544

36,157

Audit fee

83,765

100,175

Non audit services

25,000

-

Marketing

250,379

75,250

Stock exchange fees

174,539

136,166

Other costs

639,509

342,857

 

5,274,727

2,115,707

 

19. Finance income and expense

 

(In GBP)

 

Year ended
31 December 2021

 

6 months ended
31 December  2020

Finance income

-

-

 

(In GBP)

Year ended
31 December 2021

6 months ended
31 December  2020

Interest Expense

1,250,667

82,749

 

 

 

Interest expense on lease liabilities

24,330

10,518

Foreign exchange loss

801,849

103,772

Finance expense

2,076,846

197,039

 

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

Year ended 31 December 2021

Six months ended 31 December 2020

(In GBP)

Bosnia & Herzegovina

Serbia

Corporate

Total

Bosnia & Herzegovina

Serbia

Corporate

Total

Exploration activities expenses

(439)

(2,880,261)

-

(2,880,700)

(5,015)

(793,013)

-

(798,028)

General and administrative expenses

(882,106)

(651,361)

(3,741,260)

(5,274,727)

(249,932)

(425,935)

(1,440,840)

(2,115,707)

Share-based payment expense

-

-

(1,434,574)

(1,434,574)

-

-

(2,267,239)

(2,267,239)

Other income

52,098

 

9,771

61,869

-

-

4,816

4,816

 

 

 

 

 

 

 

 

 

Operating Loss

(830,447)

(3,531,622)

(5,166,063)

(9,528,132)

(254,947)

(1,217,948)

(3,703,263)

(5,176,158)

 

 

 

 

 

 

 

 

 

Finance income

-

-

-

-

-

-

-

-

Finance expense

-

-

(2,076,846)

(2,076,846)

-

-

(197,039)

(197,039)

Revaluation of fair value asset

-

-

-

-

-

-

(322,987)

(322,987)

Revaluation of derivative liability

-

-

1,195,251

1,195,251

-

-

-

-

Revaluation of fair value liability

-

-

20,834

20,834

-

-

-

-

 

 

 

 

 

 

 

 

 

Loss before tax

(830,447)

(3,531,622)

(6,026,824)

(10,388,893)

(254,947)

(1,217,948)

(4,223,289)

(5,696,184)

Tax charge

-

-

-

-

-

-

1,681

1,681

Loss after tax

(830,447)

(3,531,622)

(6,026,824)

(10,388,893)

(254,947)

(1,217,948)

(4,221,608)

(5,694,503)

 

Segmental Split

Year Ended 31 December 2021

Six months ended 31 December 2020

 

(In GBP)

Bosnia & Herzegovina

Serbia

Corporate

Total

Bosnia & Herzegovina

Serbia

Corporate

Total

Exploration and evaluation assets additions capitalised

2,857,010

-

-

2,857,010

3,052,019

24,456,506

-

27,456,506

Mine under construction additions capitalised

6,890,950

-

-

6,890,950

-

-

-

-

                   

 

21. Other Income

 

 

(In GBP)

Year ended
31 December 2021

6 months ended 31 December 2020

Miscellaneous income

47,282

-

Recharge of corporate office facilities and services

14,587

4,816

 

61,869

4,816

Miscellaneous income in year ended 31 December 2021 relates to the sale of scrap metal as part of preparatory works at the Vares processing plant (6 months ended 31 December 2020; nil). Recharge of corporate office facilities and services relates to shared facilities of registered UK office address, see related party disclosures for more details.

22. Related party disclosures

t       Related party transactions

The Group's related parties include key management personnel, companies which have directors in common and their subsidiaries and any entities which the Company may exert significant influence over. The Company has identified the following related parties:

- Swellcap Limited, an entity controlled by Paul Cronin

- Blackdragon Gold Corp, an entity of which Paul Cronin is the CEO and Managing Director

- The Adriatic Foundation

Transactions and balances with these related parties were as follows:

 

12 months ended
31 December 2021

6 months ended
31 December 2020

 

 

Related Party

(In GBP)

(Payments to)/received from

Balance (owed to)/due from

(Payments to)/received from

Balance (owed to)/due from

Nature of transactions

Swellcap Limited

(13,899)

-

(258)

(13,899)

Corporate office facilities and services

Blackdragon Gold Corp

8,097

1,674

-

-

Corporate office facilities and services

Adriatic Foundation

(5,410)

-

-

-

Initial establishment costs

Adriatic Foundation

(9,477)

-

-

-

S Karic's waived board fees

Adriatic Foundation

(85,955)

-

-

-

Donation of €100,000.

 

During the period Paul Cronin gifted 250,000 ordinary shares held in the Company to the Foundation for nil consideration fulfilling the initial funding commitments made to the Foundation at the time of its launch. Additionally, the Company also announced on 9th June 2021 that it intends to donate 0.25% of the future profits from its operations in Bosnia & Herzegovina to the Foundation.

Transactions with key management personnel are disclosed below.

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

 

(In GBP)

Year ended
31 December 2021

6 months ended 31 December 2020

Board fees

158,309

104,766

Consultancy fees

415,072

172,991

Cash bonus paid

70,000

-

Accrued cash bonus

196,133

-

Cash remuneration in respect of qualifying services

839,514

277,757

Share based payments expense

243,971

736,715

Social security costs

28,262

15,030

 

1,111,747

 1,029,503


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 parties or companies controlled by key management personnel:

 

 

12 months ended
31 December 2021

6 months ended
31 December 2020

 

Related Party

(In GBP)

Controlling Party

Payments to/(received from)

Balance owed to/(due from)

Payments to/(received from)

Balance owed to/(due from)

Swellcap Limited

Paul Cronin

-

-

84,999

-

Paul Cronin

Not applicable

313,406

97,437

-

-

GPE Consulting Limited

Geoff Eyre

171,667

98,696

87,992

-

 

The balance due to related parties is in respect of the Company's annual STIP. Of this amount, 50% was paid in January 2022 and the remained will be paid in January 2023 provided that the individuals remain in the service of the Company at that time.

23. 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)

Year ended
31 December 2021

6 months ended
31 December 2020

Gross salaries

1,994,662

724,217

Consultancy fees

819,422

305,914

Cash remuneration in respect of qualifying services

2,814,084

1,030,131

Social security costs

447,001

80,813

Defined contribution pension cost

9,231

2,306

Share based payments expense

1,434,574

2,267,239

Total

4,704,890

3,380,489

Average number of employees

109

73

 

Average number of employees has increased to 109 in the period (30 June 2020 - 73 employees) due to increasing staff numbers as the Vares Project progresses as well as full year of headcount included in year ended 31 December 2021 relating to the Raska Project.

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)

Year ended
31 December 2021

6 months ended
31 December 2020

Board fees

158,309

104,767

Consultancy fees

243,406

84,999

Cash bonus paid

70,000

-

Accrued cash bonus

97,437

-

Cash remuneration in respect of qualifying services

569,152

189,766

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 £1,088,550 (31 December 2020: £66,244) of which £nil relates to Non-Executive Directors (31 December 2020: £66,244).

The highest paid Director in the year ended 31 December 2021 received cash remuneration, excluding notional gains on share options or performance rights, of £313,406 (31 December 2020: £106,859). The highest paid Director in the year ended 31 December 2021 received remuneration, inclusive of the monetary value of share awards that vested in the year, of £1,401,956 (31 December 2020: £106,859).

24. Commitments and contingencies

The Group had no significant commitments as at 31 December 2021 (31 December 2020: £nil), other than the lease held by the Group disclosed in note 12 and annual concession fees disclosed in note 8.

25. Prior year adjustment

During the six months ended 31 December 2020 (the comparative reporting period) equity issued in respect of the acquisition of Tethyan Resource Corp had previously been recorded as an increase to share capital and share premium.

When a company issues shares, the basic rule contained in section 610 of the Companies Act 2006 is that those shares should be accounted for at the value of consideration received in exchange. Any excess over the nominal value of the shares issued is recorded in the share premium account.

Merger relief is a Companies Act relief from the creation of a share premium account on the issue of shares. Broadly, it applies where a company issues equity shares in consideration for the shares of another company (ie, a share for share exchange) where, as part of the arrangement, it secures at least a 90% equity holding in the other company. The specific criteria for merger relief are set out in section 612 of the Companies Act 2006. Where the criteria are met, the relief must be applied and therefore no share premium is recorded on the issue of the shares.

The company acquired 100% of the equity holding in Tethyan Resource Corp and therefore meets the criteria. The adjustment to the comparative figures for the six months ended 31 December 2020 represents a change in classification within equity only, with a £16,952,489 decrease in the share premium account, an increase in merger reserve of £17,256,579. Note that £304,090 costs directly attributable to raising equity were also included within share premium and these have been reallocated to retained deficit in line with the requirements when merger relief has been applied. There is no impact on the Group and Parent Company net assets, profit or loss or cash flow statement for the period ended 31 December 2020.

26. Subsequent events

The Company allotted 166,000 on 7 March 2022 relating to the deferred consideration payable following the Company's completion of the acquisition of the entire issued share capital of Ras Metals d.o.o. (Ras) on 23 February 2021.

The Orion Debt Financing was completed on 10 January 2022 consistent with the Company's announcement on 13 October 2021 that it had agreed a term sheet with Orion Resource Partners (UK) LLP for a US$142.5 million debt financing package comprising:

•              US$120.0 million senior secured debt; and

•              US$22.5 million copper stream

No funds have yet been drawn under the facility and financial close remains subject to satisfaction of customary conditions precedent.

Parent Company Statement of Financial Position

AS AT 31 DECEMBER 2021

 

 

(In GBP)

 

Note

 

31 December 2021

(Restated)

31 December 2020

ASSETS

 

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

73,077,051

27,983,443

Other receivables and prepayments

f

6,161,387

5,118,660

Total current assets

 

79,238,438

33,102,103

 

Non-current assets

Investment in subsidiaries

i

45,154,403

35,390,720

Other receivables and prepayments

f

13,819,993

-

Property, plant and equipment

g

34,378

41,079

Right of use asset

o

209,338

236,349

Total non-current assets

 

59,218,112

35,668,148

Total assets

 

138,456,550

68,770,251

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

Current liabilities

 

 

 

Accounts payable and accrued liabilities

h

1,761,009

3,740,393

Lease liabilities

p

23,291

35,609

Deferred Consideration

j

858,489

-

Borrowings

j

-

105,515

Total current liabilities

 

2,642,789

3,881,517

 

Non-current liabilities

Accounts Payable and accrued liabilities

h

13,616

-

Lease liabilities

p

210,483

219,731

Borrowings

j

11,880,828

11,590,172

Derivative Liability

j

1,849,962

3,045,213

Total non-current liabilities

 

13,954,889

14,855,116

Total liabilities

 

16,597,678

18,736,633

 

Shareholders' equity

Share capital

l

3,553,408

2,772,186

Share premium

l

107,708,429

34,519,259

Merger reserve

l

17,709,847

17,256,579

Share-based payment reserve

l

4,467,621

5,756,069

Warrants reserve expense

l

2,155,882

2,797,086

Retained earnings

l

(13,736,315)

(13,067,561)

Total shareholders' equity

 

121,858,872

50,033,618

Total liabilities and shareholders' equity

 

138,456,550

68,770,251


 

See note 25 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.

The accompanying notes are an integral part of these Parent Company Financial Statements.

The Company's loss after tax for the year ended 31 December 2021 was £4,022,648 (six months ended 31 December 2020: £4,957,675).

The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 29 March 2022 and were signed on its behalf by:

 

Paul Cronin

Managing Director and Chief Executive Officer

Geoff Eyre

Chief Financial Officer & Joint Company Secretary

 

Parent Company Statement of Changes in Equity

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

 

(In GBP)

 

 

Note

 

Number of

shares

 

 

Value

 

(Restated) Share premium

(Restated) Merger reserve

Share-based

payment reserve

Warrants Reserve

 

 

(Restated) Retained earnings

 

Total equity

30 June 2020

 

179,840,987

2,401,777

23,992,967

-

4,426,185

-

(4,072,190)

10,741,114

 

 

 

 

Loss for the period

 

-

-

-

-

-

-

(4,957,675)

(4,957,675)

Total comprehensive loss

 

-

-

-

-

-

-

(4,957,675)

(4,957,675)

Issue of share capital

l

5,276,595

70,469

6,129,531

-

-

-

-

6,200,000

Settlement Placement

l

4,830,156

64,507

4,791,547

-

-

-

-

4,856,054

Share issue costs

l

-

-

(1,598,603)

-

-

-

142,551

(1,456,052)

Exercise of options

l

4,350,000

58,093

1,203,817

-

(1,173,926)

-

1,173,927

1,261,911

Issue of options

l

-

-

-

-

2,267,239

-

-

Acquisition of subsidiary (restated)

 

13,278,937

177,340

-

17,256,579

236,571

2,797,086

(304,090)

20,163,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

 

-

-

-

-

-

-

(4,022,648)

(4,022,648)

Total comprehensive loss

 

-

-

-

-

-

-

(4,022,648)

(4,022,648)

Issue of share capital

l

49,350,000

659,069

73,782,979

-

-

-

-

74,442,048

Settlement Placement

l

1,287,236

17,191

846,948

-

-

-

-

864,139

Share issue costs

l

-

-

(3,277,759)

-

-

-

-

(3,277,759)

Exercise of options

l

6,542,958

87,382

711,997

-

(2,723,022)

-

2,723,022

799,379

Issue of options

l

-

-

-

-

2,098,431

-

-

2,098,431

Exercise of Warrants

 

984,371

13,146

1,125,005

-

-

(473,332)

473,332

1,138,151

Expiry/Cancellation of Options / Warrants

 

-

-

-

-

(663,857)

(167,872)

167,872

(663,857)

Acquisition of subsidiary

 

332,000

4,434

-

453,268

-

-

(10,332)

447,370

 

 

 

 

 

 

 

 

 

 

                       

 

See note 25 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives.

The accompanying notes are an integral part of these Parent Company Financial Statements.

 

Parent Company Statement of Cash Flows

FOR THE YEAR ENDED 31 DECEMBER 2021

 

 

 

(In GBP)

 

 

Note

 

Year ended
31 December 2021

Six months ended
31 December 2020

 

Cash flows from operating activities

 

 

 

Loss for the period

e

(4,022,648)

(4,957,675)

Adjustments for:

Depreciation of property, plant and equipment

g

10,917

6,969

Amortisation of right-of-use assets

o

27,011

15,549

Share-based payment expense

l

1,434,574

2,267,239

Finance expense

 

1,856,543

134,504

Revaluation of fair value asset

 

-

322,987

Revaluation of derivative liability

 

(1,195,251)

-

Revaluation of deferred consideration

 

(20,834)

-

Movement of intercompany loan provision

 

(825,824)

-

Changes in working capital items:

Increase in other receivables and prepayments

 

2,518,037

(3,110,904)

Increase in accounts payable and accrued liabilities

 

(2,000,920)

3,407,207

Net cash used in operating activities

 

(2,218,395)

(1,914,124)

 

Cash flows from investing activities:

Investment in subsidiaries

 

(7,392,637)

(3,309,554)

Purchase of property, plant and equipment

 

(4,216)

(919)

Loan issued

 

(16,454,568)

(1,881,641)

Interest received

 

-

-

Net cash used in investing activities

 

(23,851,421)

(5,192,113)

 

Cash flows from financing activities

Issues of ordinary shares

l

77,243,716

12,317,964

Transaction costs arising from equity financing

l

(3,277,759)

(1,447,201)

Proceeds from loans and borrowings

q

-

14,956,849

Settlement of Deferred Consideration

 

(1,188,706)

 

Interest paid on loans and borrowings

q

(1,351,266)

-

Interest paid on lease liabilities

 

(40,520)

(10,523)

Net cash flows from financing activities

 

71,385,465

25,817,089

Net increase in cash and cash equivalents

 

45,315,649

18,710,852

Exchange losses on cash and cash equivalents

 

(222,041)

(304,597)

Cash and cash equivalents at beginning of the period

 

27,983,443

9,577,188

Cash and cash equivalents at end of the period

 

73,077,051

27,983,443

 

The accompanying notes are an integral part of these Parent Company Financial Statements.

 

Notes to the Parent Company Financial Statements

a.   Corporate information

These Financial Statements represent the individual financial statements of Adriatic Metals PLC (the "Parent Company"), the parent company of the Adriatic Metals Group for the year ended 31 December 2021.

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

iv)     Statement of compliance

These parent company financial statements have been prepared in accordance with UK adopted international accounting standards.

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 29 March 2022.

v)      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.

vi)     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.

vii)    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, are made via capital contributions and recorded as additions to investments in subsidiaries.

viii)   Intercompany loans

All intercompany borrowings and loans are initially recognised at the fair value of consideration received or paid after deduction of issue costs and are subsequently measured at amortised cost.

ix)     Impairment

The Company recognises an allowance for expected credit losses ('ECLs') for all receivables held at amortised cost. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive.

d.   Critical accounting estimates and judgements

The preparation of the Parent Company's Financial Statements 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.

x)      Value of investments in subsidiaries

The Parent Company, investments in subsidiaries, which are made via capital contributions or arise upon acquisition, are reviewed for impairment if events or changes indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the net present value of expected future cash flows of the relevant generating unit or disposal value if higher.

No impairment indicators were identified in the year ended 31 December 2021 and judgement was made that no impairment was charged.

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 12 months to 31 December 2021 is £4,022,648 (six months ended 31 December 2020 - £4,957,675).

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. Allowance is made for expected credit losses ('ECLs') for all receivables held at amortised cost. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive.

All current receivables due within one year as follows:

 

(In GBP)

31 December 2021

31 December 2020

Other receivables

1,706

-

Prepayments and deposits

527,681

70,415

Taxes recoverable

136,877

98,072

Amounts receivable from subsidiaries (note m)

5,495,123

4,950,173

 

6,161,387

5,118,660

 

All non-current receivables due more than one year as follows:

(In GBP)

31 December 2021

31 December 2020

Amounts receivable from subsidiaries (note m)

13,819,993

-

 

13,819,993

-

 

g.   Property, plant and equipment

 

Cost (In GBP)

Land & Buildings

Plant and machinery

Total

30 June 2020

17,425

53,859

71,284

Additions

-

919

919

31 December 2020

17,425

54,778

72,203

Additions

-

4,216

4,216

31 December 2021

17,425

58,994

76,419

 

Depreciation

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

Charge for the period

1,742

9,175

10,917

31 December 2021

3,590

38,451

42,041

 

Net Book Value

30 June 2020

16,455

30,674

47,129

31 December 2020

15,577

25,502

41,079

31 December 2021

13,835

20,543

34,378

 

h.   Accounts payable and accrued liabilities

 

The breakdown of current accounts payable and accrued liabilities is as follows:

 

(In GBP)

31 December 2021

31 December 2020

Trade payables

61,645

238,940

Accrued liabilities

897,046

405,205

Other payables

736,482

14,570

Amounts payable to subsidiaries (note m)

65,836

3,081,678

 

1,761,009

3,740,393

 

The breakdown of non-current accounts payable and accrued liabilities is as follows:

 

(In GBP)

31 December 2021

31 December 2020

Amounts payable to subsidiaries (note m)

13,616

-

 

13,616

-

 

i.    Investments in subsidiaries

The breakdown of the investments in subsidiaries is as follows:

 

Cost (In GBP)

Eastern Mining d.o.o.

Adriatic Metals Holdings BIH Limited

Adriatik Metali d.o.o.

(Restated) RAS Metals d.o.o.

(Restated) Adriatic Metals Jersey (previously Tethyan Resource Corp.)

Total

30 June 2020

11,021,333

-

-

-

-

11,021,333

Additions

4,205,902

-

-

-

20,163,485

24,369,387

31 December 2020

15,227,235

-

-

-

20,163,485

35,390,720

Additions

4,308,673

100

2,186

-

-

4,308,673

Transfer of RAS purchase option to the Company

 

 

 

20,163,485

(20,163,485)

-

Exercise of RAS Metals option

-

-

-

2,515,399

-

2,515,399

Group restructure

(19,535,908)

19,535,908

-

 

 

-

Capitalisation of intercompany loan balance

-

-

-

 

2,937,324

2,937,324

31 December 2021

-

19,536,008

2,186

22,678,884

2,937,324

45,154,402

 

The allocation of investment value held on the Company balance sheet as at 31 December 2020 has been restated please see note t for details.

 

The Company sold Eastern Mining d.o.o. to Adriatic Metals Holdings BIH Limited (which was incorporated during the year to 31 December 2021) in exchange for single share issued by Adriatic Metals Holdings BIH Limited, see note m.

 

Adriatik Metali d.o.o. was incorporated during the year to 31 December 2021.

 

As at 31 December 2020, 10% of RAS Metals share capital was owned by Adriatic Metals Jersey Ltd (formerly Tethyan Resource Corp). As disclosed in Note 10 to the consolidated financial statements Adriatic Metals Jersey Ltd also held an option to acquire the remaining 90% of Ras Metals. On 22 February 2021, the option to acquire the remaining 90% of Ras Metals was purchased by Adriatic Metals Plc from Adriatic Metals Jersey Ltd, the consideration being satisfied by way of a return of capital.

 

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 (Ras Option Agreement) held by Adriatic Metals Jersey Ltd, a wholly owned subsidiary of the Company including the 10% that was previously owned by Adriatic Metals Jersey Ltd.

 

Intercompany loan balances between the Company and Adriatic Metals Jersey Ltd were capitalised resulting in investment balance of £2,937,324.

 

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 2021
(In GBP)

Note

 

At amortised cost

At fair value through profit or loss

 

Total

Financial assets

 

 

 

 

Related Party Receivables

m

19,315,117

-

19,315,117

Cash and cash equivalents

 

73,077,051

-

73,077,051

Other Receivables and prepayments

f

529,387

-

529,387

Total financial assets

 

92,921,555

-

92,921,555

 

Financial liabilities

Accounts payable and accrued liabilities

h

1,774,625

-

1,774,625

q

11,880,828

-

11,880,828

Derivative Liability

q

-

1,849,962

1,849,962

FV Option Liability on acquisition

r

-

858,489

858,489

Lease liabilities

p

233,774

-

233,774

Total financial liabilities

 

13,889,227

2,708,451

16,597,678

Net financial assets

 

79,032,328

(2,708,451)

76,323,877

 

As at 31 December 2020
(In GBP)

Note

 

At amortised cost

(Restated) At fair value through profit or loss

 

Total

Financial assets

 

 

 

 

Related Party Receivables

m

1,868,495

-

1,868,495

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

-

29,922,354

 

Financial liabilities

Accounts payable and accrued liabilities

H

658,715

-

658,715

q

11,695,687

-

11,695,687

Derivative Liability

q

-

3,045,213

3,045,213

Lease liabilities

P

255,340

-

255,340

Total financial liabilities

 

12,609,742

3,045,213

15,654,955

Net financial assets

 

17,312,612

(3,045,213)

14,267,399

 

The financial assets and liabilities held on balance sheet as at 31 December 2020 have been restated.  Please see note t for details.

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 with the addition of intercompany balances. 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  2021 (In GBP)

 

Within 30 days

30 days to

6 months

6 to 12 months

Over 12 months

Accounts payables and accrued liabilities

1,454,414

-

-

108,775

Borrowings

-

-

-

11,880,828

Derivative Liability

-

-

-

1,849,962

Deferred Consideration

-

639,369

219,120

-

Intercompany balances

65,836

 

 

570,663

Lease liabilities

-

11,646

11,646

210,483

 

1,520,250

651,015

230,766

14,607,095

 

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

 

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 2021, 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 £0.1 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 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 23 of the notes to the Consolidated Financial Statements.

The Company had the following related-party balances and transactions during the year ended 31 December 2021 and the six months ended 31 December 2020.

(In GBP)

 

Year ended 31 December 2021

Six months ended 31 December 2020

At 31
December 2021

At 31
December 2020

 

 

Subsidiary

 

Nature of transaction

 

Transaction
amount

 

Transaction amount

Balance owed by

/ (owed to)

Balance owed by / (owed to)

Eastern Mining d.o.o.

Capital Contribution

4,308,674

4,205,902

-

(3,081,678)

Adriatic Metals Holdings BIH Limited

Capital Contribution

100

-

-

-

Adriatic Metals Holdings BIH Limited

Sale of Eastern Mining d.o.o. investment

(1)

-

-

-

Adriatic Metals Holdings BIH Limited

Long Term loan

6,436,998

-

6,436,988

-

 

 

 

 

 

 

Adriatik Metali d.o.o.

Capital Contribution

2,185

-

-

-

 

 

 

 

 

 

Adriatic Metals Jersey Limited

Long term loan

590,890

1,518,929

-

1,632,007

Adriatic Metals Jersey Limited

Long term loan

(13,616)

-

(13,616)

-

 

 

 

 

 

 

Adriatic Metals Services (UK) Limited

Short term loan

3,928,419

236,488

4,148,236

236,488

Tethyan Resources Jersey

Long term loan

4,694,382

55,700

4,745,892

-

Tethyan Resources d.o.o.

Long Term loan

1,483,176

-

1,474,002

-

Ras Metals d.o.o.

Long Term  loan

999,202

-

997,332

-

TAOR d.o.o.

Long Term loan

167,055

-

165,778

-

Tethyan Resources d.o.o.

Loan Interest

17,800

-

17,800

-

TAOR d.o.o.

Loan Interest

2,611

-

2,611

-

 

 

 

 

 

 

Adriatic Metals Services (UK) Limited

Trading balance

(126,815)

-

(65,836)

-

Eastern Mining d.o.o.

Trading balance

1,197,815

3,081,678

1,055,882

3,081,678

Tethyan Resources d.o.o.

Trading balance

270,594

-

270,594

-

 

 

 

 

 

 

Short Term Related Party Receivables

 

 

 

5,495,123

4,950,173

Long Term Related Party Receivables

 

 

 

13,819,993

-

Total Related Parties Receivable

 

 

 

19,315,117

4,950,173

Short Term Related Parties Payable

 

 

 

(65,836)

(3,081,678)

Long Term Related Parties Payable

 

 

 

(13,616)

-

Total Related Parties Payable

 

 

 

(79,452)

(3,081,678)

 

Adriatic Metals Holdings BIH Limited was incorporated during the year ended 31 December 2021, the Company paid £100 for 100% of the share capital on incorporation. Eastern Mining d.o.o. was sold during the year ended 31 December 2021 in exchange for a share issued by Adriatic Metals Holdings BIH Limited with £1 nominal value. Loan of £6,436,998 provided to Adriatic Metals Holding BIH Limited was used to fund investment in Eastern Mining d.o.o.

Adriatik Metali d.o.o was incorporated during the year, the company paid £2,186 for 100% of the share capital on incorporation.

As at 31 December 2020, 10% of Ras Metals share capital was owned by Adriatic Metals Jersey Ltd (formerly Tethyan Resource Corp). 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 (Ras Option Agreement) held by Adriatic Metals Jersey Ltd, a wholly owned subsidiary of the Company including the 10% that was previously owned by Adriatic Metals Jersey Ltd, according the value of the investment £2,097,170 previously allocated under Tethyan Resource Corp was instead allocated to RAS.

 

Intercompany loan balances totaling £2,937,324 owing from Tethyan Resource Corp to the Company were capitalised during the period, leaving nil payable balance at 31 December 2021.

 

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 hence have been classified as long term loans. 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 and considers allowance for expected credit losses ('ECLs') for all receivables held at amortised cost. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive.

Adriatic Metals Services (UK) Limited, incurred costs in relation to group subsidiaries. Costs in relation to Corporate activities were recharged to the Company. 

The Company incurred costs in relation to the activities of its group subsidiaries. Costs were recharged on an arms length basis to Eastern Mining d.o.o. and Tethyan Resources d.o.o.

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

o.   Right of use asset

The right of use asset relates to the registered office address. Under IFRS 16 this has been recognised as a 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 2020

251,898

Amortisation

(15,549)

31 December 2020

236,349

Amortisation

(27,011)

31 December 2021

209,338

p.   Lease liabilities

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

(In GBP)

 

30 June 2020

265,621

Interest expense

10,523

Payments

(20,803)

31 December 2020

255,341

Interest expense

18,953

Payments

(40,520)

31 December 2021

233,774

 

Of this amount, £23,291 is recognised as a current liability and the remainder £210,483 is shown within non-current liabilities.

q.   Borrowings and Derivative Liability

The movements in external loans and embedded derivative liability are as detailed in note 6 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions.

r.   Deferred Consideration

Value of remaining consideration payable under Ras Option agreement was when the option and investment were ceded to Adriatic Metals Plc from Tethyan Resources Corp was £2,515,399. When the company acquired the remaining 90% ownership stake in Ras Metals d.o.o. the liability was reduced by cash paid and shares issued under the agreement. The liability was fair valued at 31 December 2021 as £858,489 as detailed in Note 7 of the Consolidated Financial Statements.

s.   Commitments

Commitments relating to the Parent Company have been disclosed in note 24 of the Consolidated Financial Statements.

t.   Prior year adjustment

During the six months ended 31 December 2020 (the comparative reporting period) equity issued in respect of the acquisition of Tethyan Resource Corp had previously been recorded as an increase to share capital and share premium. When a company issues shares, the basic rule contained in section 610 of the Companies Act 2006 is that those shares should be accounted for at the value of consideration received in exchange. Any excess over the nominal value of the shares issued is recorded in the share premium account.

Merger relief is a Companies Act relief from the creation of a share premium account on the issue of shares. Broadly, it applies where a company issues equity shares in consideration for the shares of another company (ie, a share for share exchange) where, as part of the arrangement, it secures at least a 90% equity holding in the other company. The specific criteria for merger relief are set out in section 612 of the Companies Act 2006. Where the criteria are met, the relief must be applied and therefore no share premium is recorded on the issue of the shares.

The company acquired 100% of the equity holding in Tethyan Resource Corp and therefore meets the criteria. The adjustment to the comparative figures for the six months ended 31 December 2020 represents a change in classification within equity only, with a £16,952,489 decrease in the share premium account, an increase in merger reserve of £17,256,579. Note that £304,090 costs directly attributable to raising equity were also included within share premium and these have been reallocated to retained deficit in line with the requirements when merger relief has been applied. There is no impact on the Group and Parent Company net assets, profit or loss or cash flow statement for the period ended 31 December 2020.

As at 31 December 2020 Adriatic Metals Plc had recognised an option asset (£20,581,714) and deferred consideration (£2,515,399) on its balance sheet in relation to the acquisition of Tethyan Resources Corp and Ras Metals. This was to reflect the accounting disclosed within note 10.  The recognition of the option asset and liability was a reflection of how the transaction was completed on 22 February 2021 when the option and investment were ceded to Adriatic Metals Plc from Tethyan Resources Corp.  As at 31 December 2020 this option asset and liability were legally contracted to Tethyan Resources Corp and therefore the balance sheet has been restated to reflect the appropriate legal form at that time. The adjustments reflected are to increase investment in Subsidiary by £18,066,315, to reflect the consideration paid for the investment in the Tethyan group and to remove the option asset (£20,581,714) and deferred consideration (£2,515,399). There is no impact on the consolidated group financial statements, the Company net assets on the statement of financial position, the company statement of comprehensive income or the company statement of cash flows.

u.   Subsequent events

Subsequent events relating to the Parent Company have been disclosed in note 26 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 for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 as it forms part of UK domestic ‎law by virtue of the European Union (Withdrawal) Act 2018, as amended‎‎. The person ‎responsible for arranging and authorising the release of this announcement on behalf of Adriatic is Paul Cronin, Managing Director and CEO.

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

 

Adriatic Metals PLC

 

Paul Cronin / Thomas Horton

Tel: +44 (0) 7866 913207

 

 

Canaccord Genuity Limited (Joint Corporate Broker)

 

Jeremy Dunlop (Australia)

Tel: +61 2 9263 2700

James Asensio  (UK)

Tel: +44 (0) 207 523 8000

 

 

RBC Capital Markets (Joint Corporate Broker)

 

Marcus Jackson / Jamil Miah

Tel: +44 (0) 20 7653 4000

 

 

Stifel Nicolaus Europe Limited (Joint Corporate Broker)

 

Ashton Clanfield / Callum Stewart

Tel: +44 (0) 20 7710 7600

 

 

Buchanan

 

Bobby Morse / Ariadna Peretz

 

Tel: +44 (0) 2074665151

The Capital Network

 

Julia Maguire / Lelde Smits

Tel: +61 2 8999 3699

 

 

 

ABOUT ADRIATIC METALS

Adriatic Metals PLC (ASX:ADT, LSE:ADT1, OTCQX:ADMLF) is a precious and base metals developer that is advancing the world-class Vares Silver Project in Bosnia & Herzegovina, as well as the Raska Zinc-Silver Project in Serbia.

The Vares Silver Project is fully-funded to production, which is expected in Q2 2023. The 2021 Project Definitive Feasibility Study boasts robust economics of US$1,062 million post-tax NPV8, 134% IRR and a capex of US$168 million. Concurrent with ongoing construction activities, the Company continues to explore across its highly prospective 41km2 concession package.

There have been no material changes to the assumptions underpinning the forecast financial information derived from the production target in the 19 August 2021 DFS announcement and these assumptions continue to apply and have not materially changed. Adriatic Metals is not aware of any new information or data that materially affects the information included in the announcement of the updated Mineral Resource Estimate announced on 1 September 2020 and all material assumptions and technical parameters underpinning the Mineral Resource Estimate continue to apply and have not materially changed.

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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