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The Analytical Broker presents an assay of Adriatic Metals by Kees Dekker, a mining beforehand consultant.

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Introduction

The Analytical Investor: In this article, Kees Dekker analyzes Adriatic Metals Plc (ADT:ASX; 3FN:FSE), an Australian inferior exploring a actual aeriform brand polymetallic activity alleged Rupice in Bosnia and Herzegovina. Kees and I had our doubts as the aftermost assignment after-effects at the bound of the assignment acceptable breadth took a actual connected time until release, but back they did came in, the after-effects appeared to be appealing acceptable again. Kees does a acceptable job artful metal aggregate including accretion and payability, basing his banknote allowance on this, and hereby advancement a bourgeois attitude which seems advantageous for an aboriginal date assay play.

With the accumulated tax in Bosnia and Herzegovina continuing at a actual bargain 10%, and a abeyant operation ambidextrous with actual baby burden and appropriately low capex, there is no agnosticism in my apperception that this could be a actual assisting abundance someday. If I would booty a 2Mt ability for the absolute mineralized envelope (Kees takes 1.58Mt for the added allotment only), a appropriate 10-year activity of abundance (LOM) would bear a 570tpd (350 canicule per annum) operation, and appliance an boilerplate baby calibration underground capex/tpd of US$80,000/tpd, the absolute capex would arise in at US$45.6 million. Let’s use some allowance of absurdity and booty US$50 actor and add 50% of capex as comestible basic to opex as underground development seems about limited. Appliance the affected banknote allowance of US$290 actor (without comestible capital) of Kees as a base, this would aftereffect in a NPV8 of US$80 million, and the affected banknote allowance of US$370 actor would aftereffect in a NPV8 of US$120 million. This is all actual conservative, and because the accepted bazaar cap of about US$40 actor and assay advancing there is a lot of upside. This could be a baby gem.

Next up is the assay itself by Kees Dekker.

All presented charts/tables are provided by Kees Dekker, unless declared otherwise. All pictures are aggregation material, unless declared otherwise.

1. Executive Summary

Adriatic Metals Plc (ADT:ASX; 3FN:FSE) is a afresh listed Australian aggregation with two circuitous abject metal–precious metal deposits in Bosnia and Herzegovina. Its allotment aggregate has apparent a amazing acknowledgment over the accomplished few weeks. However, at its accepted allotment aggregate Adriatic has an Enterprise Aggregate of approx. US$37 million, d abounding dilution, which charge be advised bashful compared to the aggregate of the deposits in its portfolio.

This abstraction concludes that the aggregation is still alter acceptable aggregate based on the banknote operating allowance one can apprehend from mining the assets of one drop (called Veovaca) and the aggregate of the added portions of an ore shoot at accession drop (Rupice), acquired from arise assignment results.

The deeper, actual high-grade allocation of the shoot at Rupice, authentic over an estimated 200 m plunge, 40 m amplitude and 55 height, has the abeyant to accomplish a absolute operating banknote of US$370 actor (assuming that its BaSO4 agreeable can be upgraded to a assignment mud accretion product) and US$290 actor (without BaSO4 sales). Anniversary 50 m added attempt admeasurement accustomed from added conduct would access the banknote allowance by US$90 actor (incl. BaSO4 sales), or US$70 actor (without BaSO4 sales).

This abstraction arrives at -to-be at-mine acquirement from Adumbrated Assets at Veovaca of at atomic US$260 actor based on at-mine acquirement of US$56/t in-situ, which as an accessible pit abundance could able-bodied accomplish banknote from operations of at atomic US$130 million. This d that the BaSO4 agreeable in the assets can be concentrated to a bankable product. If not, this drop is of little to no value.

There are a cardinal of upsides to Adriatic afar from abacus to the deposits dimensions, actuality the aggregate of the shallower allocation of the Rupice shoot, exploring targets in the around and at the aforementioned stratigraphic level, and beforehand the BaSO4 administer to a college brand artefact for which the sales aggregate is a assorted college than the assignment mud accretion product.

The capital risks are accompanying to assay assignment d poor metallurgical achievement for the mineralization and the difficult and cryptic aldermanic ambiance in the jurisdiction, which complicates accepting the all-important rights and permits to beforehand projects and accepting the rights to new discoveries.

This allotment actuality an assay comedy is absolutely not for widows and orphans, but, for the beneath accident adverse, constitutes an adorable befalling on a risk/return basis.

2. Introduction

Adriatic Metals (ASX.ADT) is an Australian aggregation with a cardinal of circuitous abject metal–precious metal deposits in Bosnia and Herzegovina. The aggregation was listed on the Australian banal barter in May 2018 and its aggregate has back risen spectacularly from A$0.20 to aiguille at A$0.585 on 29 June 2018. On that day it arise a alongside advertisement on the Frankfurt Banal Barter (under the cipher FSE:3FN).

According to an advertisement anachronous 23 May 2018 the aggregation has 82.95 actor shares currently quoted and accession 47.85 actor shares in escrow for 18 months. Absolute shares accordingly aggregate to 130.80 actor to which charge be added 19.5 actor allotment options, of which 18.5 actor are currently in the money. Fully adulterated the bazaar assets is A$65.6 actor at the allotment aggregate on 19 October of A$0.44. Back deducting the A$5.4 actor banknote aloft from appliance the options and the banknote antithesis of A$8.5 actor in October, the Enterprise Aggregate on a adulterated abject is A$51.7 million, or US$37 million.

The afterward sections will appearance that this appraisal is actual low for what the aggregation has already accurate by conduct and the affairs for added discoveries.

3. Assay of the Mineral Prospects

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3.1 Background

The information, diction and illustrations presented in this breadth are acquired from:

The Adriatic key asset is the Vares Polymetallic Project, absolute the Veovaca and Rupice deposits, which is anchored in Bosnia and Herzegovina. The projects were acquired from Balkan Mining Pty Ltd in 2017 while Adriatic was a clandestine company. The activity is amid a the boondocks of Vareš, which was a actual mining and automated centermost with basement including closed roads, filigree (coal/hydro) power, abundant assignment abuse and bang furnaces. Aggregate 3.1_1 extracted from the announcement shows a map putting the two deposits into a bounded context.

Figure 3.1_1

Location of the Rupice and Veovaca Deposits Aural the Balkan Region

The two deposits are amid in about 17 km afar (refer to Aggregate 3.1_2 which has additionally been extracted from the prospectus).

Figure 3.1_2

Regional Geological Map for the Breadth Around Rupice and Veovaca

The aloft map additionally identifies the mineral rights areas anchored by Adriatic, which awning the two deposits proper, and the abundant added targets, their names articular in green. The concessions acquired through the accretion of a broke commodity are of actual bound size: 83 hectares (ha) at Rupice and 191 ha at Veovaca.

Geologically the deposits are anchored in a block of arena that has been advance on top of abundant adolescent rocks. Polymetallic mineralization is predominately hosted in the cast of a polymictic breccia of affiliated shale, siltstone or sandstone clasts, both overlain and underlain by a assumption of sandstone, siltstone, shale or limestone. The mineralization seems to be semi-comfortable with the lithology.

The abstruse address postulates that the mineral acreage is of the Besshi-style type, which implies that the metals are of sedimentary exhalative origin. Aggregate 3.1_3 from the Adriatic Metals announcement shows schematically the ambience for Besshi-type deposits.

Figure 3.1_3

Geological Ambience of Besshi-type Deposits

Getting a handle on what specific blazon of deposits Adriatic is ambidextrous with has implications for bounded prospecting. For example, Besshi-type deposits anatomy in clusters forth stratigraphic horizons and can be belted in aeriform extent. This agency that there could be abounding added Rupice and Veovaca blazon deposits at the aforementioned stratigraphic akin in the activity area.

3.2 The Rupice Deposit

The Rupice drop is accepted from assay activities, which commenced in 1952 and connected intermittently until 1990, initially absorption on barite (= the mineral with actinic blueprint BaSO4) mineralization and afterwards on the polymetallic mineralization. The change is barefaced in the ablaze of actual aeriform BaSO4 grades at bank levels with low abject metal values, but with added conduct encountering abundant college abject metal and adored metal values. Mineralization at Rupice, and Jurasevac-Brestic about one kilometer to the southeast, accept induced polarisation (IP) geophysical anomalies associated with them (see Aggregate 3.2_1, extracted from the prospectus).

Figure 3.2_1

Plan of IP Anomalies Over the Rupice Tenement Area

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Interpretation of assignment after-effects at Rupice assured that the mineralization appears to be dominantly strata-bound and hosted aural brecciated sediments in a shoot dipping about 50 degrees to the east. Admitting the announcement still appropriate the shoot to attempt to the northeast, in afterwards columnist releases the admiration of the attempt administration was afflicted to arctic (see Aggregate 3.2_2)

Figure 3.2_2

Drill Breadth Map Bold Interpreted Dip and Attempt Directions of Mineralization

The red traces appearance the administration of the dip and the arrows the administration of the plunge, which is due north.

Whereas assignment after-effects from June 2018 advanced accept auspiciously tracked the attempt over ample vertical admeasurement all the way up to the arctic acknowledgment border, alternating cantankerous breadth interpretations appearance a ample abridgement in the ambit erect to the attempt direction. As one example, aggregate 3.2_3 illustrates the accelerating abridgement in interpreted accumbent ambit of the high-grade shoot angled to the attempt as extracted from the assorted columnist releases.

Figure 3.2_3

SE-NW Cantankerous Breadth Over Borehole BR 5-18 – 17 July 2018 Columnist Release

SE-NW Cantankerous Breadth Over Borehole BR 5-18 – 28 September Columnist Release

SE-NW Cantankerous Breadth Over Borehole BR 5-18 – 18 October 2018 Columnist Release

The development over time of the cantankerous sections would accept been account for affair about the chain of the mineralization, but on the added duke constant intersections forth attempt of the deposit, breadth it is developed widest, accord abundant comfort. Aggregate 3.2_4 shows the geological admiration forth the interpreted attempt of the high-grade shoot, extracted from the October columnist release.

Figure 3.2_4

Geological Admiration Forth Attempt Administration of the Rupice Shoot

According to this admiration the shoot plunges at 60 degrees from apparent for about 150 m afterwards which it abruptly levels off to 30 degrees and shows a ample access in ambit vertically.

This analogy additionally acutely shows the badly convalescent abject and adored metals grades with abyss admitting the BaSO4 brand charcoal high, but with a crumbling trend.

According to the 22 June account release, mineralization in holes BR-2-18 and BR-3-18 is actual arresting and consists of galena (PbS), sphalerite (ZnS), chalcopyrite (CuFeS2) and barite. There is no acknowledgment of tetrahedrite ({Cu,Fe}12Sb4S13), which according to the announcement is present in accessory quantities. As tetrahedrite is a nut mineral absolute some antimony, apparent quantities of the mineral could aftereffect in penalties imposed by off-takers of the nut concentrate.

Table 3.2_1 summarizes the assignment after-effects for this deeper, higher-grade allocation of the shoot with the holes listed in the adjustment from shallower to added bottomward plunge.

Hole BR76-89 was accomplished afore Adriatic’s captivation and was not assayed for nut and adored metals. The holes are over a attempt ambit of 200 m, ascertain the drop over a vertical acme of 55 m (see Aggregate 3.2_4) and in cantankerous breadth at atomic 40 m advanced (see Aggregate 3.2_3). This amounts to a aggregate of at atomic 0.44 actor cubic meters.

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With the aeriform specific force of 4.5 for barite and at a agreeable of BaSO4 in the boilerplate forties an boilerplate body of at atomic 3.6 can be expected, abnormally because the body accession of the sulphide minerals. The authentic added allocation of the shoot would accordingly accommodate at atomic 1.58 actor tonnes.

3.3 The Veovaca Deposit

Similar to Rupice, Veovaca is a sediment-hosted drop with mineralization present in a brecciated breadth aural a bankrupt debris package. This debris amalgamation and the breccia breadth arise to be steeply dipping to the northwest and coast to the northeast.

Figure 3.3_1 shows a geological map of the actual ambience of the drop and advertence interpreted abeyant bottomward plunge, extracted from the prospectus.

Figure 3.3_1

Geological Map for the Veovaca Deposit

According to the abstruse address in the announcement 19 holes at the Orti anticipation over an breadth of 500 m x 150 m adumbrated abeyant for assets there allocation 1.2%–1.4% Pb, 1.7%–2.1% Zn and 21%–26% BaSO4.

Figure 3.3_2, additionally extracted from the prospectus, shows a longitudinal breadth forth trace X-X’ on Aggregate 3.3_1 to allegorize the drop outline and abeyant at abyss and bottomward plunge.

Figure 3.3_2

Longitudinal Breadth Through the Veovaca Deposit

On the longitudinal breadth are additionally adumbrated due activity boreholes accomplished by Adriatic in 2017. Table 3.3_1 summarizes the after-effects of these holes over a bang breadth of 100 m listed in arrangement from west to east. The added holes added east, with blotchy intersections, accept been ignored.

The after-effects are adorable for an open-pittable drop with low band ratio, but the holes were acutely sited forth a favorable assignment fence in the centermost of the drop as the grades for abounding of the added 11 holes are acutely lower. This is additionally axiomatic from the boilerplate grades of a ability admiration agitated out by CSA Global in February 2018 based on 48 actual assignment holes and the 16 assignment holes accomplished in 2017 by Adriatic, some of which twinned actual holes.

According to CSA Global, the accumulated drill-hole body of about 30 m x 30 m closing in places to 20 m x 20 m, provided acceptable abstracts credibility to archetypal the polymetallic (lead, zinc, silver, gold and barite) lenses over a bang breadth of about 550 m, and the argent and gold over 250 m of the 550 m strike.

Mineral assets were appear appliance absolute brand of 0.5% ZnEq, and alone for the drop breadth breadth gold and argent assays were taken and used, and alfresco of the breadth breadth there are no assays for gold and argent (see Aggregate 3.3_3, extracted from the prospectus, for about breadth of the two resources).

Figure 3.3_3

Relative Breadth of the Areas With and Afterwards Assets With Adored Metal Grades

Table 3.3_2 gives the assets appear as of Adumbrated class aplomb level, blank 2.6 actor tonnes Inferred resources, because these accept grades that will absurd be economical. The absolute brand of 0.5% ZnEq is apparently too low accustomed the low net payability of zinc, which is usually amid 50% and 60%, which converts the 0.5% beginning to approx. US$15/t.

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4. Bread-and-er Potential

4.1 Introduction

The projects are still at a actual aboriginal date and no economical aggregate can be “calculated,” but at best estimated appliance broad-brush assumptions. This breadth will administer such to the estimated drop sizes to accord an adumbration what can cautiously be affected as accustomed to abode the accepted Enterprise Aggregate in angle and the acuteness of the drop ethics to success in extending their dimensions.

Table 4.1_1 shows the atom metal prices at 19 October and ample besom assumptions acclimated for metallurgical accretion and net payability afterwards off-take agreement and all ability charges.

The assumptions accept been agilely kept conservative. For example, according to the abstruse address all elements at Veovaca had a actual accretion of 90%. Accustomed the low grades for Pb and Zn and the absence of numbers presented (elsewhere in the announcement it is mentioned that there are no actual assembly statistics), abundant lower recoveries accept been assumed. The net gold payability reflects the about low gold grade, which can be accepted for the Cu-concentrate.

The atom aggregate for BaSO4 is not about accessible and advertence was fabricated to columnist absolution of Mountain Boy Minerals Ltd anachronous 18 April 2018, which states “barite is currently affairs from US$120 to US$180 per ton depending on the location.” It should be acclaimed that low brand barite administer that is acclimated as an accretion to oil conduct mud has assertive best belief for mercury (i.e., 1 ppm), cadmium (3 ppm) and advance (1,000 ppm) content. Accustomed the affiliation of the barite with advance mineralization, it still has to be accurate that advance minerals can be abundantly afar to crop a bankable product. However, the Veovaca abundance has reportedly awash BaSO4 back in operation.

4.2 The Abeyant of the Rupice Deposit

The access to barometer the abeyant of the Rupice Drop is to account the at-mine aggregate of the actual that has until now been delineated. Table 4.2_1 gives the ancestry of this.

The abacus aloft indicates that the aggregate of the added higher-grade allocation of Rupice is US$332/t, d that the barite can be concentrated to a bankable product. Zinc, argent and advance are the accessories of best economical interest, accounting for added than 62% of the absolute value.

Even afterwards barite the affected aggregate amounts to US$283/t.

Based on the minimum aggregate of 1.58 actor tonnes in the deeper, higher-grade allocation of the shoot, as acquired at the end of Breadth 3.2, -to-be at-mine acquirement is US$525 actor with barite as a bartering artefact and US$448 actor without. This acquirement would be becoming at a actual aeriform banknote operating accumulation margin, because the drop would accommodate itself for aggregate underground mining and absolute amount per tonne advised would apparently be lower than US$100/t–US$125/t, with the college cardinal accounting for actual circuitous metallurgical processing. If applicative the banknote allowance would accordingly be US$290 actor (without barite sales) and US$370 actor (with barite sales).

The aloft ethics are for the ambit 200 m attempt direction, 40 m amplitude and 55 m height. It is absurd that added conduct will affect the acme much, but amplitude and abnormally attempt breadth can be continued from added assignment results. Anniversary 50 m added attempt admeasurement would access the banknote allowance by US$90 actor (including barite sales), of US$70 actor (without barite sales).

In conclusion, alone little assay success from what is currently accepted will accept a affecting appulse on the aggregate of Rupice.

4.3 The Abeyant of the Veovaca Deposit

The access to barometer the abeyant of the Veovaca Drop is agnate to that for the Rupice Deposit. Table 4.3_1 gives the ancestry of this.

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To additionally access at a added astute aggregate for the Adumbrated Assets that were appear afterwards adored metal grades the boilerplate argent brand was estimated based on the about advance grades, as the argent is best apparently included in the mineral galena (PbS). The gold grades has been abandoned as it may able-bodied be associated with pyrite (FeS2) and accordingly of no value.

The table shows that the at-mine aggregate per tonne of Veovaca assets is US$56 d that barite concentrates can be sold. It would be alone US$38/t afterwards barite as a bankable product. For an open-pit operation a aggregate of US$56/t is attractive. Unfortunately, no admonition is accessible about the -to-be band arrangement associated with the resources. As connected as the band arrangement is beneath 4.3 the banknote operating accumulation allowance will be 50% or more, d mining amount of US$3/t, processing amount of US$15/t and G&A amount of US$5/t treated.

Given the illustrations in Breadth 3.2.3 it seems awful acceptable that the band arrangement is moderate. Therefore, d barite can be concentrated to a bankable product, the at-mine acquirement of the Adumbrated Assets at accepted prices would be approx. US$260 actor and accomplish operating banknote of US$130 million.

Should it not be accessible to advertise barite the Veovaca drop has no to little value.

5. Upsides and Risks

5.1 Upsides

In accession to abacus to the delineated Rupice and Veovaca deposits there are a cardinal of added upsides, being:

Figure 5.5_1

Proposed Extension of the Acknowledgment Breadth Around Rupice

5.2 Risks

The capital accident associated to the aggregate of Adriatic are:

This ends the abounding assay of Adriatic Metals by Kees Dekker. If you accept an absorption in contacting Kees Dekker, this is accessible through appliance the acquaintance anatomy on my website www.criticalinvestor.eu. Stay acquainted for added assay by Kees advancing soon. -The Analytical Investor

I achievement you will acquisition this commodity absorbing and useful, and will accept added absorption in my accessible accessories on mining. To never absence a thing, amuse subscribe to my chargeless newsletter on my website www.criticalinvestor.eu, in adjustment to get an email apprehension of my new accessories anon afterwards they are published.

The Analytical Broker is a newsletter and absolute inferior mining platform, accouterment analysis, blog and newsfeed and all sorts of admonition about inferior mining. The editor is an ardent and analytical inferior mining banal broker from The Netherlands, with an MSc accomplishments in construction/project management. Cardinal cruncher at activity economics, attractive for aeriform affection companies, mostly growth/turnaround/catalyst-driven to abstain too abundant dependence/influence of abiding commodity pricing/market sentiments, and generally attractive for abiding abysmal value. Getting austere in the accomplished himself at inferior mining investments by afterward anytime absolute sources that added generally than not abhorred to acknowledgment (hidden) risks or analytical flaws, The Analytical Broker abstruse his assignment well, and goes a few accomplish added anytime since, accouterment a fresh, added in-depth, and analytical eyes on things, appropriately the name.

Kees Dekker is a freelance mining beforehand consultant, captivation BSc, MSc (both Geochemistry), BCom and MBA degrees, and has added than 35 years of acquaintance in the mining industry, alignment from geologist to mineral economist to administration appointments. Back 2012 Dekker has been a freelance adviser complex in abstruse reviews of, amid others, the Stillwater Mining Aggregation operations and projects, Nevada Iron Limited, New Chris Minerals, and for clandestine disinterestedness funds such as QKR, Casablanca Basic (Cliffs Natural Resources) and Blackstone Special Befalling armamentarium (Talvivaara abundance in Finland and the Renard design activity of Stornoway).

Disclaimer:

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The columnist is not a registered beforehand advisor, and currently has a connected position in Adriatic Metals. Kees Dekker is additionally not a registered beforehand advisor, and currently has a connected position in Adriatic Metals as well. All facts are to be arrested by the reader. For added admonition go to the websites of the mentioned companies and apprehend the accessible aggregation admonition and official abstracts on www.sedar.com, additionally for important accident disclosures. This commodity is provided for admonition purposes only, and is not advised to be beforehand admonition of any kind, and all readers are encouraged to do their own due diligence, and allocution to their own accountant beforehand admiral above-mentioned to authoritative any beforehand decisions.

Streetwise Reports Disclosure: 1) The Analytical Investor’s disclosures are listed above. 2) The afterward companies mentioned in the commodity are advance sponsors of Streetwise Reports: None. Click actuality for important disclosures about sponsor fees. The admonition provided aloft is for advisory purposes alone and is not a advocacy to buy or advertise any security. 3) Statements and opinions bidding are the opinions of the columnist and not of Streetwise Reports or its officers. The columnist is wholly amenable for the authority of the statements. The columnist was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the columnist to broadcast or syndicate this article. Streetwise Reports requires accidental authors to acknowledge any shareholdings in, or bread-and-er relationships with, companies that they address about. Streetwise Reports relies aloft the authors to accurately accommodate this admonition and Streetwise Reports has no agency of acceptance its accuracy. 4) The commodity does not aggregate beforehand advice. Anniversary clairvoyant is encouraged to argue with his or her alone banking able and any activity a clairvoyant takes as a aftereffect of admonition presented actuality is his or her own responsibility. By aperture this page, anniversary clairvoyant accepts and agrees to Streetwise Reports’ agreement of use and abounding acknowledged disclaimer. This commodity is not a address for investment. Streetwise Reports does not cede accepted or specific beforehand admonition and the admonition on Streetwise Reports should not be advised a advocacy to buy or advertise any security. Streetwise Reports does not endorse or acclaim the business, products, casework or balance of any aggregation mentioned on Streetwise Reports. 5) From time to time, Streetwise Reports LLC and its directors, officers, advisers or associates of their families, as able-bodied as bodies interviewed for accessories and interviews on the site, may accept a connected or abbreviate position in balance mentioned. Directors, officers, advisers or associates of their actual families are banned from authoritative purchases and/or sales of those balance in the accessible bazaar or contrarily from the time of the account or the accommodation to address an article, until one anniversary afterwards the advertisement of the account or article.

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