I have been sitting on the idea to start a blog of my thoughts about mining companies and commodities for the past 12 months. I have found when searching the internet there aren’t many millennials like myself exploring the space so I thought I would give it a go and see how people take it.
The first company I will be looking into is Adriatic Metals, Disclaimer on this one, I am a holder of this company and this is for educational purposes only.
A brief background on Adriatic, they were listed on the ASX in May 2018 at $0.20 per share raising $10 million and ended 2018 being the top performing IPO of the year up 188% from the IPO price. The companies head office is in the UK with land holdings in Bosnia. In 2017 the company purchased 100% of zinc-polymetallic projects near the town of Vares in Bosnia by acquiring Eastern Mining . The concession now covers an area of 452ha and contains two advanced exploration projects – Veovaca which was historically mined for lead, zinc, and barite, and Rupice which was historically mined for barite but also contains Gold, Silver, Copper, Lead, and Zinc mineralization.
The company also has an interest in a few smaller exploration locations close to Rupice and Veovaca. Below is a image from the company showing where the projects are located on the Balkan Metallogenic belt. Adriatic has first-mover advantage and support from all levels of government.
There are many reasons why someone may invest in Adriatic but here are 5 reasons why I am a holder and will hold until the company is hopefully taken over by a mid-tier.
- Share structure, when I look to invest in a new company this is one of the first things I look at, who are the main shareholders, how many shares do the board and directors hold, outstanding shares. All of this is public information and can be found on the companies website. Adriatic has 170 million shares fully diluted, this may seem a lot but if you compare it to other junior mining companies on the ASX that have similar deposits and metals like Galena Mining 419 million shares fully diluted and Myanmar Metals 1826 million shares fully diluted.
- Shareholders, if the companies board and directors don’t have skin in the game this is always very worrying and most of the time shows there interest isn’t aligned with shareholders. Luckily in Adriatic’s case, the board and directors are. Two of the main shareholders are the founders of the company, Paul Cronin who owns around 16.2 million shares or 11.2% and Miloš Bošnjaković who owns 16 million shares or 10.6%. With the two founders owning close to 22% of the company it gives me faith everyone is on the same page. Below is a break down of shareholders, i must add Sandfire Resources ($959 MC) have been in since IPO with a $2.2 million investment in the company.
- Grades. The grades of the deposits Adriatic holds is the top reason why i hold this company. For the people who don’t research mining companies every day, the higher the grade of the samples when drilling the better the deposit is. Below is a chart showing types of minerals and what defines low, medium and high grade.
The types of minerals Adriatic is finding in their deposits are Zinc, Lead, Copper, Silver, Gold, and Barite. The below shows some of the drill intercepts Adriatic has had at Rupice
As you can see from the table above the drill results show very high-grade Zinc, Silver and Barite with medium to high-grade Gold, Copper, and Lead. The image below will show the company is finding high-grade samples to the north and to the south which means the more they drill in both directions the larger the deposit is.
It is my understanding the company will have a JORC out on Rupice June or July. This will provide us with the total grade of the deposit so far. It is estimated by mining analyst that Rupice could site between 15 – 20 Zn Eq%.
If you compare grades to other mines and miners that have been taken over in recent years the best comparison I have found is Hod Maden, total resource at Hod Maden was 9Mt @ 13g/t AuEq. Sandstorm paid US$175M for 30% of the project. On a 100% basis that is US$583M or A$818M. If Adriatic was taken out for $800M the share price would be around $5.5 per share. At current levels that is a 6x upside. (source Pamplona trader)
If you compare grades to other mines and miners that have been taken over in recent years the best comparison I have found is Hod Maden, total resource at Hod Maden was 9Mt @ 13g/t AuEq. Sandstorm paid US$175M for 30% of the project. On a 100% basis that is US$583M or A$818M. If Adriatic was taken out for $800M the share price would be around $5.5 per share. At current levels that is a 6x upside. (source
Another deposit Adriatic holds is Brestic-Jurasevac (BJ) which is located 900m south of Rupice, currently, Adriatic is serveying the 900m area between to two deposits using (30kVA) 3D array Pole-Dipole method which looks for mineralisation down to 400m depth. These results should be out in the next few months. The results of the IP will give an indication if there is continued mineralization in the 900m corridor between the two deposits. If the survey shows this it would be a company making announcements and I would expect a very significant re-rate. Below shows results from grab samples from BJ, as you can see another lot of high-grade results.
- Type of deposit / Size, The type of deposit Adriatic has is a zinc-polymetallic which in laymen’s terms is a deposit with multiple types of metals in the ore normally the main types are lead and zinc. In Adriatic’s case they have 6 most being high grade. Because of multiple types of metals and being high grade the value of the deposit will be significantly higher than a deposit with one or two types of metals in the ore.
Most analysts predict the size of Rupice to be between 7 – 8 MT on current drilling with Paul Cronin saying at the latest Discovery fund conference that Hartley’s latest numbers from currently drill holes would be a good estimate at 8MT, 20% Zn Eq
https://www.youtube.com/watch?v=htcrVNS09IY Link for the presentation
Foster Stockbroking 13/06
Sprott Capital 07/06
- Location Location Location The deposits are located in a small town called Vares which is south of the Bosnian capital of Sarajevo. The Vares area was a historic mining town in the 1980s until the civil war broke out in the 1990s since then there hasn’t been any more mining. Adriatic is the first listed international mining company to explore since the cival war which gives the company a first mover advantage.
Bosnia has one of the lowest cost for power in Europe coming in at a average of USD6-8 cents per KW, this is due to the fact most of the electricity is hydro generated. The average cost of labour in Bosnia is $280EUR per month this along with the low cost of power will mean a significantly lower OPEX compared to peers around the world.
Veovaca which is the companies other main deposit is a open pit with a JORC of 4.4MT, there is an old rail line running almost up to the side of the deposit, this line connects to main deep water ports which is a massive logistical win for the company. Veovaca also has a old processing plant which will need a full refurbishment. Below are photos of the rail line and processing plant.
Finally, there are a few major milestones I think will move the share price forward.
- IP results from the corridor between Rupice and BJ I am expecting these by the end of July
- Veovaca updated JORC, the tonnage of 4.4MT won’t change too much but the grades will be higher due to precious metals now being included, I would expect this by the end of June.
- Rupice JORC, this is a major and I would expect this by end of July
I really hope you enjoy my points as to why I have invested in Adriatic Metals and they help in your research journey. Disclosure this is not financial advice. Do your own research.