Adriatic expands Balkans footprint after Tethyan deal

ASX and London-listed aspiring project developer, Adriatic Metals, has completed an all-scrip acquisition to the value of approximately C$15 million of fellow Balkans precious and base metals player Tethyan Resource Corp. The merged group will subsequently have an expanded footprint in two mining-friendly jurisdictions in the region as it looks to step up exploration and feasibility study activities.

Tethyan’s shareholders will receive 0.166 Adriatic shares for each share they hold in Tethyan. After the allotment of approximately 13.2 million new Adriatic shares, UK-based Adriatic will still have a tightly issued capital structure of about 196.2 million shares. The transaction was approved by Tethyan’s shareholders and the British Columbia Supreme Court in August and shares in the Vancouver-based junior were expected to be delisted from the TSX Venture Exchange this week.

Adriatic owns the exciting Vares underground silver-lead-zinc project in Bosnia and Herzegovina that comprises two deposits at Rupice and Veovaca. Rupice hosts a very recently updated JORC-compliant indicated and inferred mineral resource of 12 million tonnes going 149 grams per tonne silver, 1.4 g/t gold, 4.1 per cent zinc and 2.6 per cent lead for a contained 58 million ounces of silver, 527,000 ounces of gold, 489,000 tonnes of zinc and 312,000 tonnes of lead.

The A$400 million market-capped company, which has seen a remarkable 10-fold rise in its share price since listing on the ASX in May 2018, hopes to use the updated Rupice resource estimate as a catalyst to a pre-feasibility study as it looks to flesh out the project economics for a possible Vares stand-alone development, prove up ore reserves and build its confidence in the metallurgy.

Initial projections provided in the scoping study, or “SS” undertaken by Adriatic last year were compelling. The SS suggested a CAPEX of US$178.4 million for the potential development of Vares and eye-catching free cash flows in the early years of mining starting around 2023 through to 2031 of between US$100 million and US$250 million per annum courtesy of very impressive average operating costs of US$57 per tonne. Capital payback period has been predicted at an incredible eight months.

Tethyan brings a couple of intriguing brownfields assets to the table in the form of the historic Kizevak/Sastavci silver-lead-zinc project and the Rudnica copper-gold porphyry project, both in Serbia. Adriatic is aiming to deliver a maiden JORC-compliant mineral resource estimate for Kizevak/Sastavci in the March 2021 quarter.

Early signs have been encouraging with a round of confirmation diamond drilling encountering a high-grade, lead-zinc-rich mineralised structure in one of the holes at Kizevak. It returned an impressive 12.9m polymetallic intersection grading 8.2 per cent zinc, 4.1 per cent lead, 98.3 g/t silver and 0.4 g/t gold within a broader interval of 35.3m at 4.2 per cent zinc, 2.2 per cent lead, 46.7 g/t silver and 0.4 g/t gold from 124.8m.

According to Adriatic, a potential bonus in terms of operational synergies is that Kizevak/Sastavci’s metallurgical characteristics may be favourable for concentrate blending with Vares ore. Nonetheless, the low strip ratios of the project’s open pittable resources offer the company a route to maximising tonnages and generating revenues based on potentially enviable costs of mining.

Following the Tethyan takeover, Adriatic now holds advanced projects – roughly 200km apart as the crow flies – in the two jurisdictions of Bosnia and Serbia that have established mining pedigrees and infrastructure, skilled workforces and low-cost operating environments.

The company has a first-mover advantage in the region, and with the two countries attracting significant investment from the likes of Rio Tinto, Toronto-based Dundee Precious Metals, Chinese group Zijin Mining, Vancouver-based Mundoro and Vancouver-based Fortuna Silver, it’s a case of watch this space ...

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