Adriatic Metal. Regulatory News (ADT1)

Adriatic Metals PLC 

('Adriatic Metals' or the 'Company')

Annual Report & Full Year Results

Adriatic Metals PLC (ASX:ADT & LON:ADT1) is pleased to announce the release of its full year results for the year ended 30 June 2020. 

The Board advises all shareholders and interested investors that the Company's Annual Report including the audited full year results for the year ended 30 June 2020 is available on the Company's website: https://www.adriaticmetals.com/investors/financial-reports-2/

An abridged version of the full year results is included below.

By order of the Board

Geoff Eyre

Chief Financial Officer and Joint Company Secretary

Market Abuse Regulation Disclosure

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 June 2020

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

The Consolidated Financial Statements of Adriatic Metals Plc, registered number 10599833, were approved and authorised for issue by the Board of Directors on 28 September 2020 and were signed on its behalf by:

Paul Cronin Geoff Eyre

Managing Director & Chief Financial Officer &

Chief Executive Officer Joint Company Secretary

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2020

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

Consolidated Statement of Changes in Equity

For the year ended 30 June 2020

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

Consolidated Statement of Cash Flows

For the year ended 30 June 2020

See note 21 for details of the restatement of the prior year comparatives in the Consolidated Statement of Cash Flows.

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

Notes to the Consolidated Financial Statements

1. Corporate information

The consolidated financial statements present the financial information of Adriatic Metals Plc and its wholly owned subsidiary Eastern Mining d.o.o. (collectively, the Group) for the year ended 30 June 2020. Adriatic Metals Plc (the Company or the parent) is a public company limited by shares and incorporated in England & Wales. The Registered office has changed during the year. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham GL50 1HX, United Kingdom.

The Group's principal activity is precious and base metals exploration and development. The Group owns the world-class advanced Vares Silver Project in Bosnia & Herzegovina. The Vares Silver Project consists of two high-grade polymetallic deposits, located at Rupice and Veovaca.

Bosnia & Herzegovina is well-positioned in central Europe and boasts a strong mining history, pro-mining environment, highly skilled workforce as well as extensive existing infrastructure and logistics.

The Vares Silver Project's captivating economics and impressive resource inventory have attracted Adriatic's highly experienced team, which is expediting exploration efforts to expand the current JORC resource. Results of a recent scoping study indicate an NPV8 of US$917 million and IRR of 107%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the project into the development phase and through to production.

2. Basis of preparation

a Statement of compliance

These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively "IFRS") as adopted by the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006.

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

The Consolidated Financial Statements were authorised for issue by the Board of Directors on 28 September 2020.

b Basis of measurement

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

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

c Going Concern

The Group incurred a loss in the year of £6,238,324 (2019 - £2,417,653). However, the Group also had a net asset position at the balance sheet date of £20,895,753 (30 June 2019 - £10,248,889).

The Company and Group meet their working capital requirements with the support of investors. The recent results from the Vares Silver Project scoping study indicated a project NPV8 of US$917 million and IRR of 107%.

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

Cashflow forecasts prepared inclusive of discretionary expenditure, based on planned levels of future activity, indicate that the Group will need to raise additional finance within the next 12 months. However, the Directors' believe that the Group can secure the additional funding necessary to continue in operational existence for the next 12 months at planned activity level from the date of this report.

Cashflow forecasts prepared based on current committed expenditure and non-discretionary spend only indicate that the company has sufficient cash resources to continue in operation for a period in excess of 12 months from the date of signing the Consolidated and Parent Company Financial Statements. The Directors therefore believe there is not a material uncertainty regarding going concern that it is appropriate to prepare the financial statements on a going concern basis.

3. Significant accounting polices

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

The Consolidated Financial Statements comprise the Financial Statements of the Company and following subsidiaries at 30 June 2020:

* Financial year end 31 December

b Standards, amendments and interpretations adopted

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

i) IFRS 16, Leases

IFRS 16, which supersedes IAS 17, sets out principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer ("lessee") and the supplier ("lessor"). Lessee accounting has changed substantially under this new standard while there is little change for the lessor. IFRS 16 has removed the classification of leases as either operating leases or financing leases and, instead, introduced a single lessee accounting model. A lessee is required to recognise assets and liabilities for all leases with a term of more than 12 months (unless the underlying asset is of low value) and is required to present depreciation of leased assets separately from interest on lease liabilities in the Consolidated Statement of Comprehensive Income. A lessor continues to classify its leases as operating leases or financing leases, and to account for those two types of leases separately.

On 1 July 2019, the Group adopted IFRS 16. The Group has reviewed its contracts and agreements and the impact of IFRS 16 is shown in note 10.

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.

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

d Foreign currency transactions and translations

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

i) Transactions and balances

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

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

Differences arising on settlement or translation of monetary items are recognised in profit or loss.

ii) Group companies

On consolidation, the assets and liabilities of foreign operations are translated into GBP (£) at the rate of exchange prevailing at the reporting date and their income statements are translated at average exchange rates prevailing during the period. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. 

e Cash and cash equivalents

Cash and cash equivalents are comprised of cash held on deposit and other short-term, highly liquid investments with original maturities of three months or less. These deposits and investments are readily convertible to known amounts of cash and subject to an insignificant risk of change in value.

f Other receivables

All receivables are held at amortised cost less any provision for impairment. A loss allowance for expected credit losses is made to reflect changes in credit risk since the initial recognition.

g Exploration and evaluation assets

Pre-licence costs

Pre-licence 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 and finance studies

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

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 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.

Costs expensed during this phase are included in 'Other operating expenses' in the statement of profit or loss and other comprehensive income.

Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the particular licence as exploration and evaluation assets up to the point when a JORC-compliant reserve is established. Capitalised exploration and evaluation expenditure is considered to be an intangible asset and measured at cost less accumulated impairment.

Exploration and evaluation assets acquired in a business combination are initially recognised at fair value, including resources and exploration potential that is considered to represent value beyond proven and probable reserves. Similarly, the costs associated with acquiring an exploration and evaluation asset (that does not represent a business) are also capitalised and subsequently measured at cost less accumulated impairment.

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

h Property, plant and equipment

i) Land

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

ii) Short lived property, plant and equipment

Short lived property, plant and equipment consists of buildings, plant and machinery, office furniture and equipment, transportation assets and computer equipment. Short lived property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of short lived property, plant and equipment consists of the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

iii) Depreciation and amortisation

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

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

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

i) Transition Method and Practical Expedients Utilised

The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 January 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 January 2019.

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

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

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

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

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

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

ii) Group as a lessee

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

iii) Right-of-use assets

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

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

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

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

iv) Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

v) Revision of lease term

When the group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.

j Rehabilitation provision

The Group recognises provisions for contractual, constructive or legal obligations, including those associated with the reclamation of mineral interests and property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding provision is added to the carrying amount of the related asset and the cost is amortised as an expense over the economic life of the asset. Following the initial recognition of the rehabilitation provision, the carrying amount of the liability is increased for the passage of time and adjusted for changes to the current market-based discount rate, and amount or timing of the underlying cash flows needed to settle the obligation. Currently the Group has not done any significant mining and thus management have assessed that no rehabilitation provision is necessary.

k Interest income

Interest income is recorded on an accrual basis using the effective interest method.

l Financial instruments

Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expired.

Except for trade and other receivables which do not contain a significant financing component, financial assets and financial liabilities are measured initially at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transactions costs that are directly attributable to the acquisition or issue of the financial instrument. Trade receivables which do not contain a significant financing component are recognised at their transaction price. Financial assets and financial liabilities are subsequently measured as described below.

i) Financial assets

Financial assets are subsequently recognised at amortised cost under IFRS 9 if it meets both the hold to collect and contractual cash flow characteristics tests. A financial asset is measured at fair value through other comprehensive income if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

If neither of the above classification are met the asset is classified as fair value through the profit and loss or unless management elect to do so provided the classification eliminates or significantly reduces a measurement or recognition inconsistency.

a) Cash and cash equivalents and trade and other receivables

Cash and cash equivalents and trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment, if any.

b) Fair value through profit or loss

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

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

ii) Financial liabilities

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

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

The Group's financial liabilities initially measured at fair value and subsequently recognised at amortised cost include accounts payables and accrued liabilities, and the liability associated with the right of use asset (note 10).

m Impairment of assets

i) Financial assets

A financial asset that is not carried at fair value through profit or loss is assessed at each reporting date to determine a loss allowance for expected credit losses. If the credit risk on a financial instrument has increased significantly since initial recognition, the loss allowance is equal to the lifetime expected credit losses. If the credit risk has not increased significantly, the loss allowance is equal to the twelve month expected credit losses.

The expected credit losses are measured in a way that reflects the unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes; the time value of money and reasonable and supportable information that is available about past events, current conditions and forecasts of future economic conditions.

ii) Non-financial assets

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

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

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the profit and loss statement.

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

n Income taxes

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

Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not recognised on the initial recognition of goodwill, on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction, and on temporary differences relating to investments in subsidiaries and jointly controlled entities where the reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred income tax assets and liabilities are measured, without discounting, at the tax rates that are expected to apply when the assets are recovered, and the liabilities settled, based on tax rates that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities and assets are expected to be settled or recovered.

The Group has no deferred tax assets or liabilities.

o Earnings/loss per share

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

p Share premium

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

q Share-based payments

i) Share-based payment transactions

The Company grants share options and performance rights to Directors, Officers, Consultants and employees ("equity-settled transactions"). The Board of Directors determines the specific grant terms within the limits set by the Company's share option plans.

ii) Equity-settled transactions

The costs of equity-settled transactions are measured by reference to the fair value at the grant date and are recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled to the award (the "vesting date"). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the Company's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and the corresponding amount is represented in share option reserve. No expense is recognised for awards that do not ultimately vest.

Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the date of modification.

Where equity-settled transactions are awarded to employees, the fair value of the options at the date of grant is charged to the profit and loss statement over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of the options that will eventually vest.

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

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

r 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.

Non-current segment assets comprise the non-current assets used directly for segment operations, including intangible assets and property, plant and equipment. Current segment assets comprise the current assets used directly for segment operations, including other receivables and deferred costs. Inter-company balances comprise transactions between operating segments making up the reportable segments. These balances are eliminated to arrive at the figures in the Consolidated Financial Statements.

4. Critical accounting estimates and judgements

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

Estimates

a Exploration and evaluation asset impairment testing

The Group reviews and tests the carrying value of exploration and evaluation assets when events or changes in circumstances suggest that the carrying amount may not be recoverable in terms of IFRS 6. When such indicators exist, management determine the recoverable amount by performing value in use and fair value calculations. These calculations require the use of estimates and assumptions. When it is not possible to determine the recoverable amount for an individual asset, management assesses the recoverable amount for the cash generating unit to which the asset belongs. The key estimates made includes discount rates, being the Group's weighted average cost of capital, future prices, E&E costs, production levels and foreign currency exchange rates.

b Convertible loan valuation

The financial instrument as a whole is valued at fair value thought the profit and loss account. The Group has utilised the Black-Scholes Option Pricing Model to estimate the fair value of the conversion option associated with a loan granted to Tethyan Resource Corp. The use of the Black-Scholes option pricing model requires management to make various estimates and assumptions that impact the value assigned to the loan granted to Tethyan Resource Corp. including the forecast future volatility of the share price and the risk-free interest rate. See note 6 for further details regarding these inputs.

c Share-based payments

The Group utilises the Black-Scholes Option Pricing Model to estimate the fair value of share options and performance rights granted to Directors, Officers and employees. The use of the Black-Scholes Option Pricing Model requires management to make various estimates and assumptions that impact the value assigned to the share options and performance rights including the forecast future volatility of the share price, the risk-free interest rate, dividend yield, the expected life of the share options and performance rights and the expected number of share which will vest. See note 13 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.

Adriatic Metals PLC's functional currency is GBP and the functional currency of Eastern Mining d.o.o. is BAM, which is pegged to the Euro, 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.

b Capitalisation of exploration costs

The Group uses its judgement to determine whether or not costs can be capitalised in accordance with IFRS 6 for exploration costs and IAS 16 for capitalised costs or whether they should be expensed.

c Dispute with Sandfire

In connection with the legal claim by Sandfire Resources Limited ("Sandfire"), further details of which are disclosed in note 22 of the Consolidated Financial Statements, the Company has used its judgement to determine that as at 30 June 2020 no obligation exists to issue shares to Sandfire and the accounts have been prepared on that basis.

5. Other receivables and prepayments

All receivables are due within one year.

6. Financial assets at fair value through profit and loss

As part of the agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. via a plan of arrangement in British Columbia, the Company provided a convertible loan facility of €1.3 million to Tethyan during the year and had advanced €1 million under the facility as at 30 June 2020.

This loan, is secured by first-ranking security over all or any part of Tethyan Resource Corp assets, is repayable at the earlier of 12 months from 10 May 2020, or by being terminated by letter agreement by either party. The loan accrues interest at 10%. The Group has the right to convert the loan to shares in Tethyan Resource Corp. at a rate of CAD 0.15 per share.

The loan was revalued at its fair value using the following inputs to the Black-Scholes valuation model:

The sensitivity of the value of the loan to changes in assumptions is as follows:

7. Property, plant and equipment

The Group has one operating location which is Bosnia & Herzegovina.

8. Exploration and evaluation assets

Exploration and evaluation assets are in respect of the Vares Silver Project concession, located in Bosnia & Herzegovina. The concession is 100% owned by Eastern Mining d.o.o. From 25 May 2020, the Vares Silver Project became subject to a minimum annual concession fee of €199,325 per annum. Concession fees are included in additions to exploration and evaluation assets.

9. Accounts payable and accrued liabilities

10. Right of use asset

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

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

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

Of this amount, £10,530 is recognised as a current liability and the remainder is shown within non-current liabilities.

The following are the amounts recognised in profit or loss:

11. Financial instruments

12. Financial risk management

a Credit risk

Credit risk arises from the risk that a counter party will fail to perform its obligations. Financial instruments that potentially subject the Group to concentrations of credit risk consist of cash and cash equivalents and other receivables.

Due to the nature of the business, the Company's exposure to credit risk arising from routine operating activities is currently inherently low. However, the Audit and 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 largest exposure to credit risk is the convertible loan made to Tethyan Resource Corp. The Company has not yet completed the acquisition of Tethyan, but has sought to mitigate the credit risk by securitising the loan via first-ranking security over all or any part of Tethyan Resource Corp assets.

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

The Group's cash is held in major UK, Australian and Bosnian financial institutions, and as such the Group is exposed to the risks of those financial institutions. Under Standard & Poor's short-term credit ratings, the Group's cash balances are all held in institutions with a A-1+ rating and as such are considered to have low credit risk.

The Group's other receivables predominantly relate to value added tax receivables due from governments in the UK and Bosnia. These amounts are excluded from the definition of financial instruments in the accounts and in and event are considered to have low credit risk. Of the remaining other receivables and prepayments, any changes in management's estimate of the recoverability of the amount due will be recognised in the period of determination and any adjustment may be significant.

The Board of Directors, with input from the Audit and Risk Committee is ultimately responsible for monitoring exposure to credit risk on an ongoing basis and does not consider such risk to be significant at this time. As such, the Group considers all if its accounts financial assets to be fully collectible.

b Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses.

The following table illustrates the contractual maturity analysis of the Group's gross financial liabilities based on exchange rates on the reporting date. Contractual gross financial liabilities, shown below, are undiscounted estimated cash outflows which were applicable includes estimated future interest payments.

c Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the value of the Group's financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximising long term returns.

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

As at 30 June 2020, a 10% change in the exchange rate between the Great Britain Pound and the Bosnian Mark, which is a reasonable estimation of volatility in exchange rates, would have an approximate £0.8 million change to the Group's total comprehensive loss.

d Fair values

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

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

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

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

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

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

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

e Capital management

The Group's objectives in managing capital are to safeguard its ability to operate as a going concern while pursuing exploration and development and opportunities for growth through identifying and evaluating potential acquisitions of assets or businesses. The Company defines capital as the equity attributable to equity shareholders of the Company which at 30 June 2020 was £20,895,753 (30 June 2019: £10,248,889).

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.

13. Equity

a Authorised share capital

The authorised share capital of the Company consists of an unlimited number of voting ordinary shares with a nominal value of £0.013355.

b Common shares issued

The average price paid for shares issued in the year was £0.49 per share (30 June 2019: £0.31 per share)

c Share options and performance rights

All share options and performance rights are issued under the Group's share option plan.

The following tables summarise the activities and status of the Company's share option plan as at and during the year ended 30 June 2020:

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 year were valued using the Black-Scholes method (section e).

On exercise, holders of performance rights are required to pay £0.013355 for each performance right exercised, being the nominal value of one ordinary share.

There were no performance rights outstanding at 30 June 2019.

d Share-based payment reserve

The following table presents changes in the Group's share-based payment reserve during the year ended 30 June 2020:

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

e Share-based payment expense

During the year ended 30 June 2020; the Group recognised £3,443,359 (30 June 2019: £456,616) 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:

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

With the exception of 3,000,000 options granted to non-executive directors during the year (30 June 2019: 2,500,000) that vested immediately, all options and performance rights have both market and non-market vesting conditions. Non-market vesting conditions include group and individual performance targets such as permitting milestones, exploration drilling rates or completion of business improvement projects. Details of the vesting condition relating to options and performance rights issued to executive Directors are included in the Remuneration Committee Report.

f Per share amounts

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

14. Taxation

a Current taxation

The tax charge for the period comprises:

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:

b Deferred tax

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

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

15. General and administrative expenses

16. Finance income and expense

17. Segmental information

It is the opinion of the Directors that the operations of the Group represent one segment, as they are treated as such when evaluating performance.

18. Related party disclosures

a Related party transactions

The Group's related parties include key management personnel, companies which have directors in common and their subsidiaries.

The Company engaged Swellcap Limited, a related party controlled by Paul Cronin to provide the Company with corporate office facilities and services, payments totalled £34,622 for the period ending 30 June 2020 (30 June 2019:£67,000). The Company entered a lease for office premises in December 2019 and office facilities and services in the sum of £6,131 (30 June 2019: nil) were invoiced to Swellcap Limited.

There were no balances outstanding with related parties at the 30 June 2020 (30 June 2019: nil)

Transactions with key management personnel are disclosed below.

b Key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. Key management personnel are considered to be the Directors of the Company, the former CEO Geraint Harris and the current and former CFOs Geoff Eyre and Sean Duffy respectively, their remuneration for the year is presented below:

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 13e of the accounts.

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

There were no balances outstanding with related parties as at 30 June 2020 (30 June 2019: nil).

19. 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.

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 13e of the accounts.

Director' remuneration totalled the following:

Additionally, the monetary value of directors' share awards that vested in the year, 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 £853,978 (30 June 2019: £1,025,620) of which £233,247 relates to non-executive directors (30 June 2019: £771,605).

The highest paid Director in the year ended 30 June 2020 received cash remuneration, excluding notional gains on share options or performance rights, of £238,897 (30 June 2019: £80,807). The highest paid Director in the year ended 30 June 2020 received remuneration, inclusive of the monetary value of share awards that vested in the year, of £858,889 (30 June 2019: £512,813).

Of the total amount incurred as Directors remuneration, £nil (30 June 2019: nil) remains in accounts payable and accrued liabilities on 30 June 2020.

20. Commitments and contingencies

The Group had no significant commitments as at 30 June 2020 (30 June 2019: nil), other than the lease of the Group's head office disclosed in note 10 and annual concession fees disclosed in note 8.

21. Prior year adjustment

The consolidated statement of cash flows for the prior year has been restated to amend the disclosure of certain grouped line items to align them to the current year groupings. There has been no change to the cash and cash equivalents at either the start or the end of the prior year as a result of the restatement.

22. Subsequent events

On 31 July 2020 the Company announced that Sandfire Resources Limited ("Sandfire"), which holds 15.9% of the ordinary shares of the Company, had commenced legal proceedings in the Supreme Court of Western Australia against the Company. Sandfire's purported claims include a declaration that Adriatic has breached the Collaboration and Strategic Partnership Deed ("Deed"), specific performance of the Deed, damages, interest and costs.

Sandfire alleges that it was entitled to acquire a total of 4,127,139 shares in Adriatic, at various issue prices pursuant to its anti-dilution right in the Deed.

The Company intends to vigorously defend these claims.

In July 2020 the Company provided a further €300,000 to Tethyan under the loan facility in note 6. In August 2020 the facility was increased from €1,300,000 to €1,800,000 and a further €500,000 provided to Tethyan bringing the total amount advanced under the loan to €1,800,000.

Parent Company Statement of Financial Position

As at 30 June 2020

The Parent Company Financial Statements should be read in conjunction with the accompanying notes.

The Company's loss after tax for the year ended 30 June 2020 was £5,782,084 (year ended 30 June 2019: £2,048,501).

The Parent Company Financial Statements of Adriatic Metals Plc, registered number 10599833, were approved and authorised for issue by the Board of Directors on 28 September 2020 and were signed on its behalf by:

Paul Cronin Geoff Eyre

Managing Director & Chief Financial Officer &

Chief Executive Officer Joint Company Secretary

Parent Company Statement of Changes in Equity

For the year ended 30 June 2020

The Parent Company Financial Statements should be read in conjunction with the accompanying notes.

Parent Company Statement of Cash Flows

See note d for details of the restatement of the prior year comparatives in the Statement of Cash Flows.

The Parent Company Financial Statements should be read in conjunction with the accompanying notes.

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 30 June 2020.

Adriatic Metals Plc (the Company or the parent) is a public company limited by shares and incorporated in England & Wales. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham, GL50 1HX.

b. Basis of preparation

a Statement of compliance

These Parent Company Financial Statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively "IFRS") as adopted by the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006.

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

The Parent Company Financial Statements were authorised for issue by the Board of Directors on 28 September 2020.

b 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.

c Going concern

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

c. Accounting polices

In addition to the accounting policies in note 3 of the Consolidated Financial Statements, the following accounting policies are relevant only to the Parent Company Financial Statements.

a Investments in subsidiaries

Unlisted investments are carried at cost, being the purchase price, less provisions for impairment. Additional consideration paid when subscribing for new shares, which is the primary mechanism used for funding the subsidiary, are made via capital contributions and recorded as additions to investments in subsidiaries.

d. Prior year error

In the parent company financial statements, expenditure incurred by the company in relation to the Bosnian exploration projects has been reclassified from an intangible exploration asset to an investment in subsidiary. The reason for this change is that intangible exploration assets can only be recognised by the company which has the rights to explore - in accordance with IFRS 6. This is a change in classification only and resulted in an increase in investments and a decrease in intangible assets of £345,761 at 1 July 2018 and an increase in investments and a decrease in intangible assets of £734,414 at 30 June 2019. On the 30 June 2019 Parent Company cash flow statement, cash flows for the purchase of exploration and evaluation assets of £388,653, have been reclassified as Investments in subsidiaries.

The parent company statement of cash flows for the prior year has been restated to amend the disclosure of certain grouped line items to align them to the current year groupings. Alongside the error noted above, there has been no change to the cash and cash equivalents at either the start or the end of the prior year as a result of the restatement.

e. 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.

a Value of investments in subsidiaries

The Parent Company, investments in subsidiary, which are made via capital contributions, are reviewed for impairment if events or changes indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the net present value of expected future cash flows of the relevant generating unit or disposal value if higher. No impairment indicators were identified in the year ended 30 June 2020.

f. 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 year is £5,782,084 (Year ended 30 June 2019 - £2,048,501).

g. Other receivables and prepayments

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

h. Property, plant and equipment