Adriatic Metal. Regulatory News (ADT1)

Adriatic Metals PLC 

('Adriatic Metals' or the 'Company')

EXCEPTIONAL PRE-FEASIBILITY STUDY RESULTS FOR THE VARES SILVER PROJECT INCLUDING US$1,040 MILLION POST-TAX NPV8 AND 113% IRR

To read the release with images, please use this linkhttps://www.investi.com.au/api/announcements/adt/409f6b06-d98.pdf

HIGHLIGHTS

• Post-tax net present value of US$ 1,040 million (8% discount rate)

• Internal Rate of Return of 113%

• Low upfront capital of US$ 173 million

• 1.2 years payback

• Average annual EBITDA of US$ 251 million in years 1-5

• 11.1 Mt of Probable Ore Reserves mined over a 14-year mine life, annual throughput of 800 kt

• 88.5% conversion of Indicated Resources to Ore Reserves at Rupice

• 45.3% of revenues from silver and gold

• Study relies on significantly more robust inputs over 2019 Scoping Study:

• 2020 Mineral Resource estimate with improved geological interpretation

• Metallurgical domaining of the orebody

• Low environmental impact with underground mining and partial tailings backfill at Rupice, and use of brownfield Veovaca mine site for majority of plant infrastructure

• Based on the positive outcome of the Pre-Feasibility Study, work is immediately commencing on the Definitive Feasibility Study

Adriatic Metals Plc (ASX:ADT, LSE:ADT1) ("Adriatic" or the "Company") is pleased to announce the outcome of a Pre-Feasibility Study ("PFS") for the Vares Silver Project in Bosnia & Herzegovina, which has been completed by a number of international consultants and led by Ausenco Pty Ltd ("Ausenco").

Paul Cronin, Adriatic's Managing Director and CEO commented "This Pre-Feasibility Study has been the culmination of hard work and effort by international consultants and the team at Adriatic Metals. Despite covid-19 hampering efforts of mining companies around the globe, I am pleased that we are able to deliver a hugely positive PFS, with improved economics in comparison to our 2019 Scoping Study, thus showing that Vares is indeed a world class project."

Forward Looking Statements

Some statements in this document may be forward-looking statements. Such statements include, but are not limited to, statements with regard to capacity, future production and grades, projections for sales growth, estimated revenues and reserves, targets for cost savings, the construction cost of new projects, projected capital expenditures, the timing of new projects, future cash flow and debt levels, the outlook for minerals and metals prices, the outlook for economic recovery and trends in the trading environment and may be (but are not necessarily) identified by the use of phrases such as "will", "expect", "anticipate", "believe" and "envisage".

By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and may be outside Adriatic Metals' control. Actual results and developments may differ materially from those expressed or implied in such statements because of a number of factors, including levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operational problems, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or regulation.

Production Targets Cautionary Statement

The Production Target and forecast financial information derived from the Production Target referred to in this ASX release is based on 100% of the Ore Reserves being classed as Probable, and 100% Mineral Resources being classed as Indicated. No Inferred Mineral Resources have been included in the Ore Reserves or the Production Target. The modifying factors used in the estimation of the Ore Reserve were applied to the Indicated Resources.

The material assumptions used in the estimation of the Production Target and associated forecast financial information are set out in this announcement, as well as the Vares Silver Project Mineral Resource Estimate for Rupice as of 1 September 2020 and the Veovaca Mineral Resource Estimate as at 18 July 2019.

The Ore Reserve and Mineral Resource Estimates underpinning the Production Target were prepared by a Competent Person in accordance with the JORC Code 2012.

Key PROJECT METRICS

The key project metrics are shown in Tables 1 and 2. Details of the study, including key improvements on the 2019 Scoping Study, are explained in the summary below.

Table 1: Key Metric PFS Outcomes

* PFS Metal Price Au 1900 USD/oz | Ag 24 USD/oz | Zn 2,500 USD/t | Pb 2,000 USD/t | Cu 6,500 USD/t | BaSO4 150 USD/t | Sb 6,500 USD/t

** Cash costs are inclusive of mining costs, processing costs, site G&A, treatment, refining charges (including transportation charges) and royalties

*** AISC includes cash costs plus sustaining capital, closure cost and salvage value

Table 2: Annual EBITDA, Revenue Split and Production of Payable Products

Vares silver project pre-feasibility summary

Context

The Vares Silver Project consists of two deposits, Rupice & Veovaca, located approximately 12 km apart. Veovaca was a previously operating open pit mine producing lead, zinc and barite concentrates, but ceased operations in 1988. At this time Rupice was being drill tested, and whilst mineralisation was intercepted, the main orebody was not encountered until the project was acquired by Adriatic Metals in 2017.

Location

The Vares Silver Project is centred around the town of Vares, within the Vares municipality, of the Zenica-Doboj Canton, Bosnia and Herzegovina, a 50-min drive from the capital Sarajevo. Access to the main project area of Veovaca is via 9 km of well-maintained sealed roads, and 25 km of well-maintained sealed and unsealed roads for Rupice. Access is all year round.

The Vares Silver Project lies within a mountainous region with widespread forests and meadows. The Rupice brownfield site is located predominantly on the eastern side of the Vruci Potok valley on forestry land.

Veovaca, a brownfield site, comprises the previously worked open pit and the previously operated process plant, located on a small plateau above the open pit valley. A historic tailings dam is located east of the process plant, utilised during the previous period of mining in the area.

Historic mine workings are present throughout the Veovaca and Rupice areas, predominantly old iron ore pits in the vicinity of Vares, along with other worked-out open-pits and waste facilities such as those at Veovaca.

A national electricity grid is operated and maintained by the State company, JP Elektroprivreda BiH. Powerlines run to the open pit and abandoned processing facility at Veovaca, and thereafter to nearby villages. This line will be inspected and upgraded as necessary. A new powerline will be provided to deliver electricity to Rupice. A rail link exists from Vares to the port of Ploce in Croatia, and plans exist to extend the rail line north into the main Balkan network.

Potable water is supplied to all surrounding villages and the Veovaca plant site. It is maintained by JKP Vares d.o.o., a public company owned and operated by the Vares municipality.

Table 3a: Project Overview

Table 3b: Summary of Overall Metal Recovery

Table 3c: Summary of Metal Payability

Cost Estimate

The capital and operating cost estimates were compiled by Adriatic with inputs from various engineering consultants, including Ausenco for the process plant and infrastructure and Axe Valley Mining Consultants Ltd ("Axe Valley") for the mining costs. As this is a Pre-Feasibility Study, the cost accuracy is estimates at ± 25% and has a base date of September 2020. Preliminary engineering has been completed on critical packages to an advanced PFS level of definition including sufficient drawings to allow material take off for bulk materials. All major equipment and bulk materials have been quoted directly for this project, as have local labour rates, while minor equipment costing, has been sourced from internal databases of recently executed projects completed by Ausenco and Axe Valley. Capital cost contingency for the initial capital were determined through risk assessment and line-by-line deterministic basis, resulting in a project contingency of US$25 million. Initial and sustaining capital costs, and LOM operating costs are summarised in the tables below.

Table 4: Capital Cost Estimate, LOM

Table 5: Initial Capital Costs

Table 6: LOM Average Operating Costs

* Cash costs are inclusive of mining costs, processing costs, site G&A, treatment and refining charges and royalties

** AISC includes cash costs plus sustaining capital, closure cost and salvage value

Financial Analysis

Key financial metrics are presented in Table 7.

Table 7: Key Financial Metrics

Mineral Resources

The updated Indicated and Inferred Mineral Resource Estimate was prepared by CSA Global in Perth and comprises 12.0 Mt at 149 g/t Ag, 1.4g/t Au, 4.1% Zn and 2.6% Pb, as set out in Table 8.

Table 8: Rupice MRE by Classification

Table 9: Veovaca MRE by Classification

Mining

The Ore Reserve estimate was prepared by Axe Valley and comprises 11.12 Mt at 150 g/t Ag, 1.28g/t Au, 4.22% Zn and 2.67% Pb, as set out in Table 10.

Table 10: Vares Silver Project Ore Reserves

The Ore Reserves for the Vares Silver Project deposits have been estimated using the JORC Code and the Ore Reserves are part of the Mineral Resource. The JORC Code defines an Ore Reserve as:

"An 'Ore Reserve' is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified."

The Ore Reserve assumes a direct conversion between Indicated Resources and Probable Reserves.

As discussed below, the selected mining method for the Rupice deposit was underground mining, whilst the Veovaca deposit is amenable to conventional open mining methods. Conceptually, the mining recovery for both Rupice and Veovaca have been estimated at 95% and the average dilution factors for Rupice and Veovaca are 10.5% and 10% respectively.

Rupice Underground Mine

It is proposed that primary access to the underground workings will be via two parallel declines developed from surface and will be suitable for trackless equipment. Following the anticipated excavation of a box cut, the declines are anticipated to be developed with dimensions of 5.5m wide X 5.8m high and a maximum gradient of 16% (1 in 6). Generally, declines are developed at 14.3% (8.3 degrees or 1:7), but the Rupice ore body requires the portal positions to be located to enable optimal placement of mining infrastructure on surface, yet require to get to a certain mining elevation (1045 ASL) reasonably quickly to enable the development of the best value regions. The remaining declines going up and down from the different underground access positions are all developed at the 1:7 ramp inclination. All decline ramps have conceptually been positioned to minimise development required to access the initial high-grade stoping area and to provide the shortest distances to the centre of mass of each of the major stoping areas. The decline cross-section area proposed has been selected to allow for future haulage using diesel trucks of 50 tonne capacity but could also use the larger 63 tonne capacity truck option. The two main declines to surface are anticipated to allow for dedicated traffic in each direction with minimal disruption to the hauling operations. These twin declines are also the essential intake airways into the underground mine.

Internal decline ramps will be developed off the main decline at appropriate positions to allow for access to the sub-level development. The proposed ramp dimensions will be 5.2m wide X 5.2m high with a maximum gradient of 14.3% (1 in 7) and a minimum curve radius of 20m for the turns which would allow trucks from loading points on each sub-level to enter the ramp and then the main decline for transport to surface. The size of trucks and truck cycles would ensure there is not significant equipment traffic in these declines and there are several underground stockpiles and re-muck bays planned to allow for passing of equipment. The declines were also developed in a "figure of 8" geometry to allow for better visibility and to gradually follow the higher-grade zones along the strike of the orebody.

Secondary development is anticipated to consist of sub-level ramps that are driven to connect with the footwall drive on each sub-level with a minimum of 20m stand-off from the deposit (measured from the outside of the drive to the inside of the stopes. The footwall drives are proposed to have dimensions of 5m wide X 5m high.

The sub-levels will be spaced at 20m vertical intervals. Horizontal cross-cut drives, at dimensions of 5m wide X 5m high, are proposed to be developed at right angles to the strike of the deposit with the cross-cutting ore/drill drives spaced 15m apart to adequately traverse the deposit and provide for a 15m stope strike drilling envelope in a primary-secondary stope sequence and retreating back from the hanging wall to the footwall (direction). Conceptually, once the crosscut ore-drive is in its final position (just through the hanging wall contact), a 10-hole (9-holes charged) blast slot will be developed using a long-hole production drilling rig to create a free face for subsequent ring blasting (1.5 metre spaced rings) by retreat extraction. The mine design of the rings has the holes spaced to optimise drilling and to allow for a suitable Powder Factor (PF) whilst not over breaking the stopes and fracturing the surrounding secondary stope envelopes. Further to this, the mining costs allowed for the drilling of Twin-strand anchor bolts in the hanging wall in a fan shape at the ends of the ore-drives prior to the slotting being done. This will further improve the hanging wall stope stability on retreat. It is proposed that loading of the blasted material be at the intersection point of the crosscut and the footwall drive and hauled via the internal ramp and decline to surface, tipped into the primary crusher and then deposited in different stockpiles before being reloaded onto on-highway trucks for haulage to the Veovaca processing plant. Further provision has been made underground for additional temporary mine stockpiles (on the 1045 ASL) as the surface area outside the portal is limited.

Figures 1 & 2 illustrate the proposed declines, ramps, levels and stopes at Rupice. The conceptual mine design comprises largely of main declines (light pink-figure 3), trackless ramps (blue) and the sub-level footwall drives (green). The mine was sub-divided into two main divisions namely the Longitudinal Longhole Open Stoping zone (LHOS) and the Transverse Longhole Open Stoping Zone (TLHOS). The proposed LHOS zone is positioned from and above the 1,065 level and the TLHOS zone below the 1,065 level. The anticipated main ventilation infrastructure includes raise-bored shafts that are shown in the diagram below. The intake air will conceptually travel down the twin declines and into the mine via the internal ramps and onto the levels where it will leave the mine via the return air raises and ultimately exhausted through the main exhaust ventilation shaft. This will be a push ventilation system in year 1 turning into a pull ventilation system from year 2 onward.

Figure 1: Mine Design (View 1)

Figure 2: Mine Design (View 2)

Scheduling rates are based on the anticipated activities required and the estimated cycle times for each activity in the mining cycle. Proposed general sequencing followed geotechnical considerations for primary and secondary extraction, "bottom-up" general mining direction and delays in stope void filling.

This underground mine operating model assumes the following underground working calendar and shift arrangements:

· Working days per year - 365

· Working shifts per day - 2

· Underground shift duration, hours - 11

· Effective hours per shift - 7.8 hrs

The scheduling rates used in the development of the proposed underground production schedule are summarised in Table 11 below. The rates have been estimated based on anticipated available shift time, cross-sectional dimensions, planned advance per blast and mining activity cycle time estimates.

Table 11: Key Scheduling Instantaneous Single End Rates

Note 1: Crews per Shift. Note 2: lin = linear

The Effective stope rates are calculated on all the activities required to establish, slot, drill and blast, muck and then fill a stope. The backfill test results indicate that the secondary stopes can commence with slotting within 14 to 16 days after backfilling of the primary stopes has taken place. The backfill costs furthermore made provision for high binder content to enable strong fill curing within 14 to 16 days. The mine scheduling still allowed for a total of 18 to 21 days post backfilling to ensure strong curing but to also allow for the development through the brow-fill to establish the next stope slot (on retreat in very wide stope zones).

The long-hole drilling metres are calculated from the stope drill and blast designs concluded (which essentially has a 7tonnes per blast hole factor). Two longhole drill rigs should be employed to do all the slotting, the smaller level ventilation holes and the stope drilling. A derived activity has been used to estimate the required fill volumes and is dependent on preceding stoping completion with an added curing delay on the fill to neighbouring stope. When a stope mines up to the sill pillar it was ensured that there be at least 40 days between the upper stopes (above a sill) to the stopes to mine the sill. Most of the stopes actually have much longer lag times than this which allows the backfill above the sill pillar to cure to its absolute full strength. Stopes above the sill pillar could also be filled with a 6.5 to 7% binder content if the geotechnical engineers believe it necessary.

The mine proposes a mechanised longhole blast-hole retreat method for stoping and trackless equipment for transport. The proposed mining cycle consists of the following key production areas:

Trackless mechanised development (drilling, supporting, blasting, loading and hauling) with the longhole open stoping comprising of the following sequential activities:

Mechanised longhole stoping

· ore drive development

· hangingwall cable bolting

· stope slotting

· stope production drilling

· charging and blasting

· remote stope loading

· truck loading at stockpiles

· hauling

· backfill wall installation

· backfill plug pour

· complete stope backfilling and

· allowing for sufficient time to cure prior to starting any neighbouring stope slotting activities

The drilling activities are separated into short shot-hole, long-shot-hole and support drilling. Different mechanised drilling machines are proposed for each of these activities. Support drilling would be performed by up to two support drilling rigs (bolters) capable of drilling long holes for installation of cable bolts and other ground support bolts. Short hole drilling would be performed by double boom drill-rigs (jumbos). Primary support of resin rebar and friction bolts may be performed using the jumbos and bolters where required. Longhole drilling is anticipated to be performed by a top hammer long-hole drilling machine capable of drilling up to 32 to 35m tubed long holes, 76mm - 102mm in diameter.

It is expected that the blasting activities will be supported by charge-up crews and utility vehicles modified for the purposes of transporting explosives, blasting accessories and charging of the blast holes. The modified utility vehicles would be loaded at the surface magazines where emulsion will be sensitised and loaded into the special purpose explosives kettle located on the charge-up vehicle. It is planned that water-resistant emulsion explosives would be used in conjunction with cast boosters as a primer and shock tube detonators. Blasting would be initiated at fixed intervals at the end of the shift from a central control room once shift clearance procedures are complete. Longhole stoping blast holes will have at least two primer-boosters per hole. It is also proposed that investigations into semi-autonomous longhole drilling be completed to further enhance drilling accuracy and safety. Drilling personnel set up the rig and stand in a safe, remote supported location during longhole drilling and therefore also improving productivity.

The loading of blasted feed material and waste as well as the backfilling of the stopes will conceptually be achieved using a single type of load haul dump unit (LHD) model and size in order to minimise the inventory of equipment spares. Mucking of waste development, drive development and stoping materials would utilise a 14-tonne class LHD.

Backfilling of waste (when available) into the open stopes would utilise the same class 14-tonne LHD, but stope backfilling will mostly try to utilise the backfill plant and system.

Transport of feed material and waste to surface is proposed to be achieved by the loading of broken rock into 50-tonne class diesel haul trucks and hauling via the main transport drives, ramps and declines to surface. The proposed cross-sectional dimensions of primary and secondary development have the potential for a 63-tonne class truck to be used at the intersection of the orebody drive and strike drive so that LHDs can load blasted rock into haul trucks for transport to surface.

The proposed ancillary equipment fleet at Rupice Project will consist of various utility vehicles for the transport of equipment, consumables and stores in and out of the underground mine. In addition to the utility vehicle fleet, an underground motor grader, integrated tool handler and light vehicles are proposed. The estimated mechanised mining machinery is summarised in Table 12 below.

Table 12: Estimated Mechanised Mining Machinery

The processing plant would operate on a similar shift arrangement to the mining operations. Management, administration and technical services would operate on a 11-shift fortnight with leave allowance being covered by junior or supporting roles.

Table 13: Rupice Estimated Labour Requirements

The Rupice underground schedule was developed on a month by month basis from start to finish. The schedule allowed for operator learning curves and also reasonable linear advance rates. This schedule is largely driven off the assumption that the mining crews will be experienced at the onset with skilled supervision to ensure the schedule progress is achieved. The initial stopes targeted also allows for some stope learnings and these were scheduled within a couple of medium grade stopes whilst the access development progresses down to the intended high value mining block.

Veovaca Open Pit Mine

Mining will be by conventional open pit methods, including Drill and Blast (D&B), followed by Load and Haul (L&H). D&B and L&H are anticipated to be performed on 10m benches, with selective mining of ore on 5m flitches. Where possible in the near surface weathered zone, free diggable material could be mined without requiring drilling and blasting. Ripping by bulldozers may also be employed in transitional areas to reduce the quantity of drilling and blasting required.

The envisaged scale of mining at the Veovaca Deposit is relatively small scale with a peak total material movement of approximately 4 Mtpa. The annual processing plant feed requirement target is 800 ktpa.

The conceptual mining fleet would consist of 90-tonne hydraulic backhoe excavators and 30-tonne capacity off highway articulated dump trucks. The estimated fleet size 2 x 90-tonne class excavators, 1 x Front End Loader and 15 x 30-tonne class trucks will be the peak requirement. It is not anticipated that the fleet size will vary significantly over the life of the open pit due to topography and the reference elevation. The primary mining fleet of trucks and excavators would be supported by standard open-cut drilling and auxiliary equipment.

Waste material will be hauled to the allocated waste rock dump positions to the south of the pit.

Apart from any free dig or ripping, rock fragmentation is proposed as being accomplished utilising drilling and blasting. The rigs would be supported by a stemming tractor loader backhoe (TLB), explosive delivery vehicle and several light vehicles for carrying personnel and explosive accessories.

The proposed bench height and rock type suits drill-rigs capable of drilling 89mm to 152mm diameter blast holes. Burden, spacing and sub-drill designs will be dependent on the varying material types of the deposit. A bench height of 10m, with a flitch height of 5m, have been selected to ensure selective mining of the feed material.

As part of the geotechnical optimisation of the pit, pre-split blasting is anticipated for the final walls. The pre-split blasting would reduce ground vibration and improve the final high wall condition.

Pit support equipment for the Veovaca operation is estimated to consist of a fleet of at least one each of the following: dozer, grader, fuel bowser, water bowser, hydraulic rock-breaker, front end loader and TLB. The function of this equipment would be to support the primary mining equipment by the maintenance of pit floor and haul roads, cleaning up around the excavators to prevent excessive tyre damage, secondary breakage of oversize rocks and to water-down road surfaces to suppress dust.

The majority of the plant feed material is planned to be loaded directly from the pit into the primary crusher reception bin. It has been assumed that a small buffer stockpile will be maintained at 10 % of the total monthly feed tonnage.

Ancillary equipment for the operation would consist of service trucks, tyre handlers, mobile crane, water pumps, lighting plants and light vehicles. The function of this equipment would be to support the pit equipment and maintenance workshops.

Grade control drilling and sampling is assumed to form part of the mine planning and execution to control feed definition at the Veovaca deposit. It is planned to sample the blasthole chippings during blast hole drilling in advance of the loading activity to develop a grade control model that will inform the short and medium term mine planning.

In-pit water management is assumed to primarily consist of run-off control and sumps. The de-watering infrastructure and equipment would be sized to handle ground water inflows and precipitation. The surface water handling plan would be based on diverting as much surface water as possible away from the open pit, using collection ditches and sumps, then pumping the water to a mine water pond. As the estimated pit deepens intermediate sumps may be required on the pit's walls and on the surface between the pit and the mine water storage dam.

The proposed mining schedule has assumed that the operations work 24/7 365 days in a year, less 15 days for unscheduled delays such as high rainfall / snowfall events which may cause mining operations to be temporarily suspended.

A contract mining approach has been assumed to be adopted, and an estimate of the mining contractor staff required to ensure delivery of the production mining plan estimated based on 2 x 12 hr shift for the operators, with a 3rd shift on break. The total contractor manpower will be approximately 128 full time employees.

Waste rock deposition is proposed to occur in three main phases, namely:

1. Pre-stripping waste used as rock-fill for infrastructure (e.g., water storage dams);

2. Waste Rock Dump (WRD) West located in the valley to the immediate north of the Veovaca processing facility; and

3. Long term storage on the WRD South located in the southern valley adjacent to the processing facility.

The proposed waste rock dump associated with mining operations would be constructed to meet the requirements of international best practices. Waste Rock deposition would utilise a valley fill method and provide approximately 4.5 million m3 storage capacity with a final dump profile gradient of 1:2.5. Dumps would initially be constructed with the natural fill angle of approximately 35o or the angle of repose of the dumped material. The waste dump would be progressed by tipping from a higher level against a windrow and progressively pushing the waste out with a dozer.

Table 14: Waste Rock Deposition Infrastructure

* "TMF" defined as Tailings Management Facility

Conceptually, waste dumps will be progressively rehabilitated with topsoil, where possible. Surfaces of dumps would be contoured to minimise batter scour. Seepage and shallow ground water flow along the perimeter of the mine residue deposits would be controlled with suitable toe drains.

All areas impacted by the project, including all waste and tailings dumps, tailings dams and water dams would be stripped of topsoil before commencement of construction. This topsoil would be stockpiled for future rehabilitation work at the end of the mine production life.

Pre stripping the open pit to expose ore will take approximately 12 months assuming a mining material limit of 4 Mtpa. Ore mining is then proposed to start in December 2031 and would ramp up the Veovaca feed supply from April 2032 and reach steady state production in November 2032. In order to ensure a seamless "dove-tail" with the ramp-down production tail from the Rupice underground mine initial ramp-up material is proposed to be stockpiled and reclaimed during the switch-over from underground to open pit feed.

Metallurgy & Processing

The process design for the Rupice and Veovaca project is based on the mine plan and corresponding feed grades, metallurgical test-work, and Ausenco's in house database. The Rupice and Veovaca mineralisations are amenable to concentration through sequential flotation circuits producing saleable bulk (copper-lead), zinc, pyrite, and barite concentrates. The plant has been designed to accept a maximum throughput of 800 kt/y. 

Process Overview

The main processing facility is located at the Veovaca site and receives ore from both the Rupice underground mine and Veovaca open pit. During underground operation, primary jaw crushing occurs at the Rupice site and the crushed ore is trucked to the Veovaca concentrator. For open pit operations, a contracted crusher will be used for the Veovaca site and ROM will be trucked there directly. Crushed ore is received and stored in two coarse ore bins prior to the Semi-Autogeneous Mill and Ball mill (SAB) grinding circuit, which consists of a Semi-Autogenous Grinding (SAG) mill, ball mill, and cyclone to grind and classify material to a P80 of 40 µm.

The cyclone overflow reports to the sequential flotation circuit, which consists of bulk (silver-lead) flotation and regrinding, zinc flotation and regrinding, pyrite flotation, and barite flotation. The process produces four saleable concentrates, (bulk, zinc, pyrite and barite), that are subsequently thickened, filtered, and placed in sealed shipping containers for transport.

Tailings from the facility reports to a tailings thickener and filter press where the material is dewatered to produce filtered tailings, and the resulting process water is recycled to the facility. This arrangement results in a high-water efficiency, minimising makeup water requirements. The filtered tailings are then trucked to the Rupice site for use as backfill in the underground mine or trucked and placed at the tailings storage facility located near the Veovaca concentrator.

Filtered tailings which report to the Rupice site are stockpiled next to the backfill plant. Waste rock from the underground mine is crushed and mixed with the tailings and cement binder in the backfill mixing system. The paste backfill is then pumped to the underground reticulation system.

Figure 3: Overall Process Flowsheet

Process Design Criteria

The key process design criteria for the mineral processing facilities are listed in Table 15.

Table 15: Process Design Criteria

Layout Overview

The Rupice site is a greenfield location and consists of several terraces accommodating the portal access to the twin declines, the primary jaw crusher, and stockpiles required for management of ore and waste rock. The aggregate crushing plant, paste backfill plant and the associated stockpiles and ancillary facilities are located near the underground portal at the site.

The Veovaca site is a brownfield site currently home to an abandoned process facility. Existing buildings and equipment will be demolished as necessary to accommodate the revised site layout. Notably, the existing tailings thickener is to be re-used as the process water tank in the design. The tailings storage facility is proximal and southeast of the concentrator.

Process Description

Primary Crushing

Run-of-mine (ROM) material will be received at a ROM bin at the Rupice site. The ROM bin will be equipped with a static grizzly with an aperture size of 600mm to prevent oversize material from entering the crushing circuit. The material will be then fed into the primary crusher by means of a vibratory feeder.

The primary crusher will be a single-toggle jaw type and will be designed to reduce the feed size from 80% passing 317mm to 76mm. The crushed material will be then transported via the haulage decline from the underground mine to a radial stacker on surface. The radial stacker distributes the material between stockpiles corresponding to waste rock and ore of various grades.

Ore will be reclaimed from the stockpiles at the Rupice site by a front-end loader and loaded into haul trucks. The trucks then transport the material approximately 30 km to the Veovaca concentrator. Waste material will be reclaimed and either transported by truck to the Veovaca tailings facility or loaded directly into the aggregate crushing circuit feeding the paste backfill plant.

Paste Backfill Plant and Aggregate Crushing

Aggregate Crushing

The aggregate crushing plant will consist of a single stage cone crushing system designed reduce the crushed waste rock size from 80% passing 76mm to 100% passing 12mm.

A front-end loader will reclaim waste rock from the waste rock stockpile into a 40m3 feed hopper. The material will be deposited onto an inclined crusher feed conveyor by means of a vibrating feeder. The conveyor transports the material to the cone crusher, where it will be crushed and subsequently conveyed to a vibrating screen. Screen undersize will be directed to the -12mm aggregate stockpile, while the oversize will be recirculated to the feed hopper.

Paste Backfill Plant

The paste backfill plant combines concentrator tailings, crushed aggregate, and cement to produce a product suitable for deposition as backfill. The backfill composition varies over the life of mine, but on average contains 35% aggregate, 6.6% binder, and 58% concentrator tailings on a dry weight basis. The materials are combined in a continuous mixer and subsequently pumped to the underground reticulation system.

Tailings will be trucked from the Veovaca concentrator site and stockpiled next to the paste backfill plant. A front-end loader reclaims the tailings to a hopper, where a belt feeder meters the material at a fixed mass flowrate on to a common inclined mixer feed conveyor.

Waste rock from the underground mine will be crushed to -12mm to produce an aggregate material suitable for backfill production. The stockpiled aggregate will be reclaimed by a front-end loader into a hopper, where a belt feeder meters the material at a fixed mass flowrate on to the mixer feed conveyor.

Binder will be trucked to site and stored in a silo integral to the backfill plant facility. The binder will be then fed to the mixer at a fixed mass flowrate. Water will also be added to the mixer to control the solids density at a nominal value of 78% w/w. The design water consumption for the backfill and aggregate crushing plant is 5.6 l/s.

The mixed backfill reports to a pump box where a swing-tube backfill distribution pump will direct material to the underground reticulation system. There will be provision for the backfill material to be sent to a bunker in the event of a process or downstream upset.

Coarse Ore Handling

Crushed ore will be trucked from the Rupice site to the concentrator at the Veovaca site and end-dumped into a coarse ore hopper with a capacity of 50t. The coarse ore will be transported by a belt conveyor to a reversible conveyor, where it can be discharged into two coarse ore bins. Each bin provides a live residence time of 23 hours and a corresponding capacity of 2260t of ore on a wet basis. Ore will be reclaimed from the bins by belt feeders and discharged to the SAG mill feed conveyor. The SAG mill feed conveyor weightometer will be used to control the throughput of ore into the mill.

In the event of a process upset, the material can be stockpiled at a nearby coarse ore storage pad with 48 hours of storage capacity and reclaimed with a front-end loader.

Grinding

The grinding circuit consists of a SAG mill, ball mill and cyclones. The grinding circuit will be designed to reduce ore from an 80% passing size of 76mm to 40µm.

The SAG mill will be a single pinion low aspect mill, operating in a closed circuit. The mill has an inside diameter of 3.8m and an effective grinding length (EGL) of 5.0m. The mill receives coarse ore and process water at a variable flowrate to achieve the correct pulp density. Lime and zinc sulphate are also dosed to the SAG mill to condition the feed prior to flotation. The SAG mill will be charged with high chrome grinding media at a diameter of 125mm by means of the grinding building hoist and ball kibble.

The discharge of the SAG mill will be received at a cyclone feed hopper and pumped to the cyclones. The cyclone will be designed to achieve an overflow density of 35% at a product size of 40µm. the overflow reports to the bulk rougher flotation cells and the underflow reports to the ball mill. The cyclone operates at a nominal recirculating load of 250%.

The ball mill will be a single pinion overflow mill, operating in closed circuit with the mill cyclones. The mill has a diameter of 3.8m and an EGL of 6.6m. The mill will be charged with high chrome grinding media at a diameter of 40mm by means of the grinding building hoist and a ball kibble. The discharge reports to the cyclone feed hopper, where it combines with the SAG mill discharge and will be pumped to the mill cyclones.

Flotation

The flotation circuit at the Veovaca concentrator consists of a bulk flotation circuit, zinc flotation circuit, pyrite flotation circuit, and barite flotation circuit. Each circuit will be discussed in the following subsections.

Bulk Flotation

The purpose of the bulk flotation stage will be to recover a lead/copper concentrate. The mill cyclone overflow reports to a horizontal vibrating trash screen to remove any oversize particles or material prior to flotation. The screen undersize then reports to a conditioning tank where lime, sodium metabisulphite (SMBS), promotor, and frother are added. The resulting slurry will be then pumped to bulk rougher flotation at a nominal density of 40% w/w and pH 9.

Bulk Rougher Flotation

The bulk rougher flotation cells are conventional forced air tank cells. The concentrate of the bulk rougher flotation tank reports to a primary cleaner, while the tailings report to the bulk rougher scavenger cells. The scavenger concentrate reports to the bulk regrind surge tank, while the tailings report to the zinc flotation circuit.

The primary cleaner will be a Jameson cell, and process water will be added to modify the slurry density to 25% w/w. The concentrate reports to the bulk concentrate thickener, while the tailings report to the bulk regrind surge tank. Jameson flotation cells are not mechanically agitated but rely on induced aeration and mixing.

Bulk Regrind Circuit

The regrind circuit consists of a cyclone cluster and stirred horizontal regrind mill operating in open circuit. Slurry from the surge tank will be pumped to the cyclones targeting an overflow product size of 10µm. The cyclone overflow reports to the bulk cleaner circuit, while the underflow flows by gravity to the regrind mill. The regrind mill uses a ceramic media with a 2-3mm diameter. The mill discharge reports to the bulk cleaner circuit.

Bulk Cleaner Flotation

The bulk cleaner circuit consists of three sequential stages of cleaning. In the first stage will be dosed with zinc sulphate, lime, SMBS, promotor and frother to promote concentrate recovery. The flotation concentrates flow from the first stage through to the third and concentrate from the third stage reports to the bulk concentrate thickener. The tailings flow counter-current to the concentrate, and tailings from the first stage reports to the zinc flotation circuit.

Zinc Flotation

The purpose of the zinc flotation circuit will be to recover a zinc concentrate. Tailings from the bulk flotation circuit reports to a condition tank prior to the zinc circuit, where copper sulphate, lime, collector, and frother are added. The conditioned slurry will be then pumped to the zinc rougher cells. The zinc flotation circuit follows the same arrangement as the bulk circuit, described as follows.

Zinc Rougher Flotation

The zinc rougher flotation cells are conventional forced air tank cells. The concentrate of the zinc rougher flotation tank reports to a primary cleaner, while the tailings report to the zinc rougher scavenger cells. The scavenger concentrate reports to the zinc regrind surge tank, while the tailings report to the pyrite flotation circuit.

The primary cleaner will be a Jameson cell, and process water will be added to modify the slurry density to 23% w/w. The concentrate reports to the zinc concentrate thickener, while the tailings report to the zinc regrind surge tank.

Zinc Regrind Circuit

The regrind circuit consists of a cyclone cluster and stirred horizontal regrind mill operating in open circuit. Slurry from the surge tank will be pumped to the cyclones targeting an overflow product size of 10µm. The cyclone overflow reports to the zinc cleaner circuit, while the underflow flows by gravity to the regrind mill. The regrind mill uses a ceramic media with a 2-3mm diameter. The mill discharge reports to the zinc cleaner circuit.

Zinc Cleaner Flotation

The zinc cleaner circuit consists of three sequential stages of cleaning. In the first stage will be dosed with zinc sulphate, lime, SMBS, promotor and frother to promote concentrate recovery. The flotation concentrates flow from the first stage through to the third and concentrate from the third stage reports to the zinc concentrate thickener. The tailings flow counter-current to the concentrate, and tailings from the first stage reports to the pyrite flotation circuit.

Pyrite Flotation

The purpose of the pyrite flotation circuit will be to recover pyrite prior to the barite flotation circuit. The zinc flotation tailings report to a conditioning tank, where sulphuric acid, copper sulphate, collector, and frother are added. The slurry will be then pumped to the pyrite rougher flotation cells.

Pyrite Rougher Flotation

The pyrite rougher flotation cells are conventional forced air tank cells. The concentrate of the pyrite rougher flotation tank reports to a primary cleaner, while the tailings report to the barite flotation circuit.

Pyrite Cleaner Flotation

The primary cleaner will be a Jameson cell, and process water will be added to modify the slurry density to 23% w/w. Additional sulphuric acid and collector are also dosed at this stage. The concentrate reports to pyrite thickening and loadout, while the tailings report to the cleaner scavenger flotation cells.

The cleaner scavenger concentrate reports to the barite flotation circuit, while the tailings are re-circulated back to the primary cleaner.

Barite Flotation

The purpose of the barite flotation circuit will be to recover a barite concentrate. The pyrite flotation tailings report to two conditioning tanks in series, where lime, sodium silicate, promotor, and frother are added. The resulting slurry will be then pumped to the barite rougher cells.

Barite Rougher Flotation

The barite rougher flotation cells are conventional forced air tank cells. The concentrate of the barite rougher flotation tank reports to the cleaner circuit, while the tailings report to the tailings thickener.

Barite Cleaner Flotation

Concentrate from the rougher cells reports to the 5 stages of cleaning. The concentrate from each stage flows from stage one to 5, where it reports to the barite thickener. The tailings flow counter current to the concentrate, and the tailings from the first stage of cleaning reports to the tailings thickener. In each stage, lime will be added to maintain a pH of 9.5. Additional sodium silicate and promotor will be added to the first three stages of cleaning.

Concentrate Handling

The concentrate handling circuit consists of thickening and filtration equipment required to dewater the bulk, zinc, pyrite, and barite concentrate prior to loadout and shipment.

Each concentrate stream reports to a dedicated high rate thickener, where flocculant will be added to assist in the settling of the solids. The thickener overflows report to the process water thickener, while the underflows report to dedicated filter feed tanks which have a residence time of 12 hours.

The bulk and zinc thickener underflows report to a common concentrate filter at nominally 65% solids. The filter will be a horizontal plate type membrane filter press, and discharges filter cake at a target moisture content of 6 and 9% for the bulk and zinc concentrates respectively. The filter washing cycle will be sufficient to prevent contamination of the concentrates when switching between the two feeds. The filter discharges to two indoor stockpiles, one for zinc concentrate and one for the bulk concentrate each with a 12-hour storage capacity.

The barite thickener underflow reports to a barite concentrate filter at nominally 58% solids, which will be a horizontal plate type membrane filter press. Filter cake will be discharged at a target moisture content of 6%, which reports to an indoor barite concentrate stockpile with a 12-hour storage capacity.

The concentrates are reclaimed from the stockpiles by a front-end loader and placed into shipping containers. The containers are stacked by a forklift outdoors, and subsequently loaded onto trucks for shipment. The yard has sufficient storage space for 4 days of production of each concentrate.

Tailings Handling

Tailings from the flotation circuits reports to a tailings thickener, where flocculant will be added to promote settling of the solid particles. The overflow reports to the process water thickener, while the underflow reports to a filter feed tank at 65-70% solids. The filter feed tank has a residence time of 12 hours and feeds a vertical plate and frame membrane filter press. The press produces a filtered tailings product at 9.5% solids and discharges it to a covered stockpile which has a 12 hours residence time. The tailings are recovered by a front-end loader and transported by haul truck back to the Rupice site for use as backfill. Alternatively, the tailings are deposited at the tailings storage facility.

Reagents Handling and Storage

Reagents are received onsite at dedicated storage areas prior to mixing and dosage to the process. The reagents used in the nominated flowsheet are as follows:

· Lime

· SMBS

· Zinc Sulphate

· Sodium Silicate

· Copper Sulphate

· Sulphuric Acid

· Aerophine 3418A

· Xanthate

· Aero 845

· MIBC

· Flocculant

Plant Services

Services at the Veovaca concentrator include process water, raw water, fire water, potable water, gland water, and low and high pressure air services,

The existing 50m diameter tailings thickener will be used to store process water.

Process Recommendations

It is recommended to complete further test work programs to optimize and confirm the flowsheet to treat Rupice and Veovaca mineralised material as follows:

· Complete further geometallurgical test work to improve the ore characterization of the resource and when combined with the spatial modelling, the resulting block model and mine schedule will provide the optimal ore feed schedule to the processing plant;

· Optimize metal recovery and concentrate grade to further improve the project economics, particularly silver in the concentrates;

· Further assess the implementation of preconcentration technologies to potentially reduce the plant capital and operating costs, such as heavy media separation and XRT ore sorting;

· Identify alternate techno-economical opportunities to lower penalty elements from the concentrates; and

· Further investigate economic alternatives for upgrading the barite concentrate to produce a range of products.

Infrastructure

The Rupice and Veovaca projects are located approximately 8.7km west-north-west and 3.5km east respectively from the town of Vares and 35km to the north-north-west of the capital city Sarajevo. The Rupice deposit is largely a greenfield site located some 1.5km from the nearest small village of Borovica Gornja and no infrastructure currently exists at the proposed mining operations. The site is currently accessed from the main sealed road. Travelling north from Sarajevo on the R444 and then turning west onto the R444a, north of Vares, toward the site. From the R444a, a secondary sealed road (bi-directional single lane) accesses the village of Borovica Gornja and ultimately the exploration site via an unsealed exploration track in reasonable repair. There are no waterways or channels within close proximity to the project area and all construction material, equipment and consumables will need to be transported via rail or heavy truck and trailer from Sarajevo or Ploce port located on the coast of Croatia.

The overall site plan (see Figure 4) shows the major project facilities, including the open pit mine and underground mine portal, TMF, waste rock facilities, mine services, access and haul road, and process plant area.

Figure 4: Overall Site Plan

Electrical Power Infrastructure

The existing power distribution network infrastructure in the Vares region is provided by the Public Enterprise Electric Utility of Bosnia and Herzegovina (EPBiH) and consists of a north-south 220KV and 400KV line in close proximity to the town of Vares. Additional 132 KV network lines, run north-south in close proximity to the Rupice mine site along the main sealed R444a road.

Construction of approximately 2.5 km of 35 kV overhead line will be required to connect to the 132 KV line for distribution to the Rupice site location. The new 35 kV overhead distribution line will be constructed by the utility company to deliver the expected load of 8.9 MW within the Rupice site area. This will be stepped down to 10 kV for local distribution on feeders to the paste plant, local electrical room, administration & ancillary buildings, aggregate crusher, primary crushing station, and underground mine reticulation. Electrical power to surface infrastructure consumers will be supplied at 400 V via secondary distribution transformers which will feed 400 V motor control centres or distribution panes. Electrical power to underground mining consumers via the underground reticulation will be supplied at 10 kV and stepped down via secondary distribution transformers which will feed 1 kV underground power distribution centres. Emergency power for the critical underground loads will be provided by a 1 MW emergency diesel generator located near the 35 kV to 10 kV substation.

There is currently a 35 kV tie-in connection from the HT electrical network to the existing main substation building at the Veovaca site next to the administrative building. The electrical infrastructure will be refurbished and stepped down to 6 kV for power distribution. From this 35kV/6kV substation, local 6 kV feeders will provide power to the process plant, administration building and open-pit dewatering pump station. A peak demand of 12 MW with an average load of 10.3 MW is required for the processing area at Veovaca. One 2.5 MW diesel generator, located close to the main 35 kV to 6 kV substation, will provide emergency power to the process plant at Veovaca.

Site Access and Haul Roads

The Veovaca site is currently accessed from the main sealed road (R444) connecting the town of Vares to the capital city of Sarajevo. From the R444, a secondary sealed road runs east towards the Tisovci village surrounding the proposed processing facility. An unsealed public road from the village of Dastansko currently links the proposed processing facility to the Veovaca deposit. This public road will be diverted to run further north of the Veovaca deposit as the existing unsealed public road crosses the proposed pit area.

The Veovaca site contains existing unpaved roads around the legacy infrastructure from the previous operation. Minor upgrades will be required, as well as 495 metres new road building to the South of the existing thickeners to allow for full ring-road access around the process plant infrastructure.

The Rupice site is currently accessed from the main sealed road. Travelling from north from Sarajevo on the R444 and then turning west onto the R444a, north of Vares, toward the site. From the R444a, a secondary sealed road (bi-directional single lane) accesses the village of Borovica Gornja.

The proposed mine haulage route for the purposes of transporting material from the Rupice mine to the processing facility and the subsequent transport of dewatered tailings back to the proposed route of 28.1 km is comprised of three main areas:

1. 6.8 kms indicate non-existing routes that require construction and approval and will limit traffic to mine vehicles only;

2. 12.1 kms indicate existing public routes of medium impact that may require upgrade and traffic control and state approval for the use of public and mine operated vehicle; and

3. 9.2 kms indicated existing public routes of low impact that will require upgrade and traffic control and state approval for the use of public and mine operated vehicles.

All mine vehicles, other than underground vehicles, will comply with state laws and will be legally allowed to travel on public roads.

Buildings - Veovaca

There is currently no mining infrastructure at the Veovaca deposit, however, a derelict processing facility is located some 2 km southeast of the proposed surface operation. A large administrative building, located at the plant site, is currently at an advanced stage of repair and refurbishment.

As shown in Figure 5, the process plant is separated into three main buildings located southwest of the open pit mine and southeast from the town of Vares. The three buildings are the grinding/classification building, flotation/regrind building, and concentrate filter building. All buildings are pre-engineered structures, supported on reinforced concrete footings and are complete with concrete slabs and pedestals. All pre-engineered buildings will be fully enclosed with insulated metal panel (IMP) roof and wall cladding.

Ancillary facilities at Veovaca includes a modular laboratory and other fabric buildings such as tailings storage building, concentrate filter tank and air services building and the workshop/warehouse buildings. All fabric buildings are supported on a reinforced concrete raft foundation.

Figure 5: Veovaca Site Infrastructure

Buildings - Rupice

The Rupice deposit is largely a greenfield site located some 1.5 km from the nearest small village of Borovica Gornja and no infrastructure currently exists at the proposed mining operations. Figure 6 shows the proposed infrastructure at the Rupice site.

From the portal to the west, a low-cost single storey wood-frame building has been considered to house the administrative offices, lamproom and changehouse. The other ancillary buildings supporting the Rupice mining operation will be fabric type buildings and supported on a reinforced concrete raft foundations. These include the workshop/warehouse and washbay building, fuel and lube storage building, mine storage area, backfill paste plant building and compressor building.

Figure 6: Rupice Surface Infrastructure

Figure 7: General Arrangement of Dry Stack Tailings Facility

The TMF will be constructed in two stages, providing with capacities of 1.5 Mt and 4.1 Mt respectively at an assumed average dry density of 1.65 t/m3. The starter embankment is constructed of rock fill, and the facility will employ upstream construction techniques utilizing compacted filtered tailings.

Diversion ditches upstream of the deposition area will divert meteoric water away from the facility. Contact water and seepage will be captured in ditches and a High-density polyethylene (HDPE) underdrain system reporting to a downstream collection pond to be pumped back to the process plant. The seepage pond and drainage channels will be lined with an HDPE liner.

Water Management

The Veovaca and Rupice sites have been undertaking hydrological monitoring and studies since 2018 in both catchments to build a data-base describing surface water flows, correlated rainfall and meteorological information, water quality analyses, and hydraulic tests to determine the baseline hydrological processes and behaviour. Since 2020 a more detailed suite of studies assessing potential underground mine hydrogeology and groundwater control (dewatering) has been undertaken. Additional studies include surface water supply potential at Rupice and Veovaca and assessment of potential surpluses and deficits of water resources across the mine systems (water balance) and design work on the necessary water management system for the operations.

Following Environmental Scoping carried out in 2019, additional measurements have been established. This was based on the recognition that the stream flow recordings in the Veovaca catchment area (the Mala river) were influenced by a regulating effect from the upstream TMF. The Rupice catchment where the underground mine will be located is affected by the dolomitic limestone hydrogeology of the area which results in spring discharges, a modified streamflow hydrograph due to groundwater baseflow and rapid recharge components affecting groundwater flow. Additional measurements were established to record flow, water level and water chemistry of the surface water, additional spring monitoring and groundwater wells. In both catchments the frequency of recordings for stream flow and water level measurements were increased to 15 minute intervals so that the effect of storm events and short-term rainfall could be evaluated as these were likely to convey rapidly through the limestone catchment and be materially significant to the water balance of the hydrological systems.

The project requires approximately 5 l/s and 8.6 l/s respectively as make-up water from the respective catchments for the Veovaca and Rupice sites. In both catchments, this raw water will need to be supplied from surface water systems using reservoir impoundments to store sufficient volumes to enable reliable supply during dry periods.

Ground water inflow into the underground mine has been modelled using available hydrogeological information. The assessments are steady-state and analytical meaning that the calculations are based on lumped average parameters and general mine design descriptions. Inflowing groundwater may be affected be acid generating metalliferous geochemical reactions in the ore, hanging wall and footwall zones although there is some likelihood, still to be confirmed and modelled, that the natural alkaline limestone water quality may neutralise some of the acidity and limit metal dissolution. While the steady-state predictions indicate flows will reduce during the life-of-mine, the effect of geo-mechanical stress relaxation from stoping could induce greater fracture flows through the groundwater system.

A site wide water balance for the operations was developed for the PFS based on mine production, water demand, run-off and supply from the reservoir sources. The water balance indicates the operations are continually net negative i.e. requiring make-up water. This means that aside from standard water drainage philosophies of segregating contact and non-contact site run-off, the water discharges from the project should be limited.

Marketing & Logistics

A recognised marketing expert was retained by Adriatic Metals to prepare a commercial report focussing on the high value zinc, lead-silver concentrates and precious metals pyrite concentrate predicted to be produced from the Rupice deposit at a processing plant at Veovaca. The main focus of their study was on the high-grade concentrates that have been shown to be produced from the Rupice deposit.

The high silver and gold content in both the Ag/Pb and Zn concentrates was of significant interest as was the low iron levels in the concentrates. The Silver/Lead concentrate will be extremely attractive to specialist Chinese smelters with silver tolling licenses. Chinese smelters will pay for the lead, silver, antimony and gold, and charge minimal mercury penalties increasing the NSR values. Additionally, most European smelters are experienced in dealing with high levels of mercury in zinc concentrates.

The precious metal pyrite concentrate represents a marketable product. Chinese smelters are able to process a wide range of materials, similar to this and we would expect that this would be most suited to the lead smelting industry. Other smelters have also expressed an interest.

Five smelters were approached on a no-name basis for both the Ag/Pb and Zn concentrates. Selecting a Chinese destination for the Ag/Pb concentrate and a European destination for the Zn concentrate their respective payabilities, penalties, treatment and refining charges, shipping and transport costs and other charges were used in the Financial Model to produce the revenue stream for each concentrate. Similarly, a Chinese destination was selected for the pyrite concentrate and all revenue and charges used in the model. These produce the following revenue streams for the main commodities in the first ten years.

Table 16: Revenue Stream First 10 Years

The processing plant at Veovaca will produce metal concentrates for silver-lead, zinc, barite and precious metal pyrite products, which will need to be moved by truck and by rail to the Port of Ploce for export onto bulk carrier vessels. All concentrates will be packed into Twenty-foot Equivalent Unit (TEU) containers at the railhead in Vares in either ~ 2 mt bulker bags or loose in plastic lined containers.

The journey to the port will traverse three distinct areas, where locomotives will be changed according to the line requirements. The first section of the line from Vares to Podlugovi needs repair but is considered to be easily remediated at minimal cost. The remaining journey to the port of Ploce will be on electrified lines, with regular freight traffic. The journey with stops is expected to take approximately 10 hours from Vares to Ploce.

Provided that the containers have been suitably packed at Vares in accordance with container line regulations, it may then be possible to discharge the containers, with their concentrate contents intact, directly to the holding areas of the contracted container lines for onward shipping to final destination, the so called "Stacks".

Delivery in bulk is assumed to be on a CIF FO basis to European and Chinese smelters; for sales in containers delivery will be assumed to be on a CIP basis.

Barite

A study of the market potential for barite from the Vares Silver Project was prepared in December 2017 by Peter W. Harben Inc. The fundamentals of the sector and the market drivers have not changed significantly, and this was subject to a 2019 update by Ted Dickson of TAK Industrial Mineral Consultancy.

To get a better understanding of the drivers for the barite market, potential markets and real-life specification requirements (API and other specifications can be quite vague), Wood Mackenzie were commissioned by Adriatic Metals to investigate and report on a "Barite Marketing Strategy". They presented their report in May 2020 at a time when major parts for the barite market had already been impacted by COVID-19.

Industrial minerals are marketed differently from metal concentrates and because Adriatic Metals will produce a ready ground product, marketing requires more direct discussions between the company and end users in the oil & gas industry. The grade and high SG (Specific Gravity) of the barite (4.3) produced from Rupice make it an attractive product for drilling muds for the oil and gas industries and it has passed the current API (American Petroleum Institute) tests in terms of sizing and other specifications.

The Vares Silver Project is expected to become the largest barite producer in Europe at up to 250,000 tons per year at peak capacity. This scale offers Adriatic the opportunity to drive costs down through economies of scale as well as invest in best in class logistics for getting product to various markets. The scale of the operation also ensures that Adriatic Metals should be able to be a more reliable supplier than some of the other, smaller operators in the region.

Based on indicative specifications, it appears that Adriatic's barite is best suited for use in the oil and gas drilling industry, although it could also find application in concrete and as a filler in some rubber products. There is potential for beneficiation of the barite to potentially produce other saleable barite products and this will be further investigated in the next phase of project development. Wood Mackenzie's report considered that the barite concentrate will likely produce products that can be sold in the $100-200/tonne range. Adriatic Metals will continue to explore possibilities for further beneficiation of the barite to potentially produce different grades that could be sold into multiple industries. A price of $150/t FOB has been used for the PFS. In discussions and exchanges with a barite trader it has been suggested that shipping in bulk to larger users/traders in the USA Gulf of Mexico ports may be the best option.

Wood Mackenzie's analysis of other barite mines shows that margins are maximised by selling product further down the value chain (i.e. self-processing and vertically integrating transportation). End users' value standard specification production (i.e. they dislike variable quality), so it is worthwhile to invest in equipment and processes that produce a highly consistent and specific grade of barite. Minimising logistics costs/investing in value-add services is a proven way to increase margin (i.e. own transport outright, offer just-in-time delivery). Adriatic Metals will be investing into barite marketing expertise to get maximum value from the barite concentrate in the future.

Closure & Rehabilitation

Under current proposals, the historic processing plant site at Veovaca will be demolished and redeveloped for a new processing plant which will be used to process ore from Rupice and then Veovaca. There are no current plans to use the historic TMF at Veovaca site. Instead, it is intended that the bulk of the tailings from the new plant will be dewatered and returned to Rupice to be repulped and disposed of underground as Paste Aggregate Fill (PAF).

Excess tailings will be disposed of in an area to the south of the plant site in a new co-disposal facility. The closure plan that has been developed is for the end of life of the planned operations at both Rupice and Veovaca and therefore the cost of the proposed demolition of the historic processing plant is not be included. It is assumed that such costs are part of the pre-production funding for both Rupice and Veovaca Mines.

At this stage, the after use of the two sites has not been decided but conceptual decisions have been made and this has been used to develop the methodology and cost, in particular those facilities which will be removed and those which should remain.

At Rupice, the planned closure will be a full closure of the operation and all its associated infrastructure including the filling and sealing of access drifts and ventilation raises, removal of plant and equipment and remediation of the site but leaving the main access road and electricity supply in place.

At Veovaca, the site will be remediated to a status suitable for other light manufacturing or fabrication uses but closure will include removal of the processing plant and equipment, closure of the Veovaca open pit and remediation of the waste co-disposal area to the south of the site.

Again, it is anticipated that the main access roads and electricity supply will remain for any light engineering or manufacturing works that may supersede the mines. There is a water supply requirement for the processing plant via a water dam which, it has been assumed will be required once mining has finished to support the development of light industry.

A template itemising the closure required at each mine has been developed and the total closure budget has been assessed at Rupice as $7.3M and Veovaca as $12.1M.

Permitting

A summary of the current permitting status at Veovaca is contained in Table 17 below.

Table 17: Veovaca Permitting Status

Rupice Permitting

The Company submitted applications for obtaining Preliminary Water Permit and Environmental Permit for the Rupice underground mine and its required infrastructure on 9 and 10 April 2020, respectively. The water permit is currently progressing through the cantonal approvals process and the necessary Public Hearing for the Environmental Permit successfully took place on 31 August 2020 in open-air COVID-19 secure conditions. On receipt of the Environmental Permit, the Urban Planning Permit will be immediately submitted for approval. After which the Exploitation Permit will be applied for in 2021.

CONSTRUCTION

Demolition of the historic Veovaca plant will begin shortly, as a pre-cursor to the permitting and start of construction of the processing plant in late-2021. Prior to issuance of final operational permits the Company is able to start development of the Rupice decline, supporting mine surface infrastructure and haul road in H2 2021. Mining operations, to develop a feed stockpile, are scheduled to commence 4 months prior to the commissioning of the processing plant in late Q4 2022. Full capacity mining and processing are scheduled for 2023.

Environmental & Social

The proposed Veovaca and Rupice mines and processing facilities are currently undertaking both local environmental permitting and working towards adherence to the EBRD Performance Requirements (2019) and other international standards (Equator Principles). The Veovaca Project has obtained the required environmental permits and at Rupice, a public hearing for the environmental assessment was carried out in August 2020, which is a precursor to the grant of the license.

Environmental Scoping was carried out in Q3 and Q4 2019 and baseline studies for an ESIA were commenced in May 2020, utilizing local consultants and contractors where possible. Studies are being undertaken regarding air quality, noise, soils, biodiversity, hydrology, hydrogeology, geochemistry, landscape and visual impact assessment, social aspects, traffic, and archaeology and cultural heritage, across the defined Project area of influence. To ensure data is seasonally representative, especially for water studies, air quality and biodiversity, the baseline programme will continue until the end of April 2021.

The proximity of the plant site to residential dwellings in Tisovci led to early stage noise modelling. Results showed that noise emissions would be above the maximum allowance under local and international requirements. Several design aspects were adjusted to assist in reducing noise levels, including the movement of the crusher to Rupice, and the mapping of routes taken by mobile equipment. A second phase of noise modelling includes additional acoustic cladding to the mill building and a 5.2m noise barrier (2 containers high) around the north western and northern edges of the plant site; with this mitigation in place it is anticipated that noise levels will be within acceptable limits, based on the current Project design.

Stakeholder engagement and consultation has occurred both as part of baseline collection and for information dissemination. The Information Centre was established in Vares in 2019 and acts as a central point for local stakeholders to obtain information and raise concerns or questions with Eastern Mining. A Stakeholder Engagement Plan was developed and is in the process of being implemented for the project. A Public Liaison Committee was established during 2020 and now meets quarterly; members are representative of all local communities in the region, as well as of local government, business owners and religious groups.

During baseline data collection it is evident that the local communities are supportive of the Project and the associated anticipated economic opportunities that it may bring.

Environmental and Social aspects are managed on site by a dedicated team based at Tisovci, the manager of which reports directly to the Managing Director & CEO. A framework Environmental and Social Policy is to be developed at the corporate level, providing guidance and an umbrella for an environmental and social management system and all other environmental and social policies, plans and procedures to sit under. The Board of Adriatic has established an Environmental Social & Governance committee to oversee and advice on policy implementation. Governance policy aspects will also be addressed at the corporate level and will apply to all subsidiary companies. Some progress has been made regarding these policies, and this will be a focus in the period leading up to and during the Feasibility Study.

SENSITIVITY ANALYSIS

Table 18: Sensitivity Input - Post-Tax NPV (US$M)

Table 19: Sensitivity Input - IRR (%)

Key Risks

· To achieve the range of outcomes indicated in the PFS, funding of in the range of US$180 million will likely be required in capital expenditure to construct the mine, process plant and project infrastructure. It is anticipated that the finance will be sourced through a combination of equity and debt instruments from existing shareholders, new equity investment and debt providers.

· Development approvals and investment permits will all be sought from the relevant Bosnian authorities. Delays in any one of these key activities could results in a delay to the commencement of mine development (planned for Q2-2021). This could lead on to a delay to first production which is planned for Q4-2022. The Company's government relations stakeholder and community engagement programs will reduce the risk of project delays.

· The project proposes to produce silver-lead, zinc, barite and precious metal pyrite concentrates. Further marketing will be required to confirm end users and develop potential contracts.

Authorised by, and for further information please contact: Paul CroninManaging Director & CEOinfo@adriaticmetals.com

** ENDS **

Market Abuse Regulation Disclosure

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

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

COMPETENT PERSONS REPORT

The information in this report that relates to the Mineral Resources is based on and fairly represents information and supporting information compiled by Dmitry Pertel. Dmitry Pertel is a full-time employee of CSA Global and is a Member of the Australian Institute of Geoscientists. Dmitry Pertel has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves (JORC Code). Dmitry Pertel consents to the disclosure of information in this report in the form and context in which it appears.

The information in this report which relates to Exploration Results is based on and fairly represents information and supporting information compiled by Mr Phillip Fox, who is a member of the Australian Institute of Geoscientists (AIG). Mr Fox is a consultant to Adriatic Metals Plc, and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the "Australian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Fox consents to the inclusion in this report of the matters based on that information in the form and context in which it appears.

The information in this report that relates to Ore Reserves is based on and fairly represents information and supporting information compiled by Dr Matthew Randall for the Veovaca Reserves and Mr Anton von Wielligh for the Rupice Reserves. Matthew Randall is a Member of the Institute of Materials, Minerals and Mining (IOM3) and Anton von Wielligh is a Fellow of the Australian Institute of Mining and Metallurgy (AusIMM). Neither Matthew Randall or Anton von Wielligh are employees of Adriatic Metals. Both Matthew Randall and Anton von Wielligh have sufficient experience relevant to the style of mineralisation and type of deposits under consideration and to the activity which they are undertaking to qualify as a Competent Persons as defined in the 2012 Edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources, and Ore Reserves (JORC Code). Matthew Randall and Anton von Wielligh consent to the disclosure of information in this report in the form and context in which it appears.

The information in this report which relates to processing plant design and metallurgical results is based on and fairly represents information and supporting information compiled by Mr Richard Whittering, who is a member of the Australian Institute of Mining and Metallurgy (AusIMM). Mr Whittering is a consultant to Ausenco Pty Ltd, and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the "Australian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Whittering consents to the disclosure of information in this report in the form and context in which it appears.

ABOUT ADRIATIC METALS

Adriatic Metals Plc (ASX:ADT, LSE:ADT1) is a precious and base metals explorer and developer that owns the world-class Vares silver project in Bosnia & Herzegovina and the Raska zinc deposit in Serbia.The Vares silver project consists of two polymetallic deposits, located at Rupice and Veovaca. Located within the Raska Zinc project are Kizevak and Sastavci, two past-producing zinc, lead and silver open-pit mines.Both Bosnia & Herzegovina and Serbia are well-positioned in central Europe and boast 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 efforts to fast-track the project to production. Leveraging its first-mover advantage, Adriatic is rapidly advancing this project into the development phase and through to production.

Kizevak and Sastavci are two past-producing zinc, lead and silver open pit mines located within the Raska District. The Kizevak and Sastavci exploration licences cover a total area of 3.28 km2 and are contiguous with Tethyan's existing exploration rights in the district.

There have been no material changes to the assumptions and technical parameters on the updated Rupice Mineral Resource Estimate announced on 1 September 2020 and these assumptions continue to apply.

DISCLAIMER

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

APPENDIX 1: RUPICE MRE JORC TABLES