Joel’s Resource Report – a precious opportunity?

Joel’s Resource Report – a precious opportunity?

At the time of writing the author holds long position in the shares discussed.

Apologies for last week’s hiatus – I didn’t have any inspiration for an article last weekend.

On the Monday , Bushveld Minerals came out with an RNS which I almost wrote an article about.

A couple of years back, Bushveld discussed publicly the idea of “vanadium rental” for VFRB batteries. This opens up an additional revenue stream for Bushveld and removes a potential hurdle for VFRBs in the future – the cost of vanadium. Whilst not immediately value accretive, I view this as Bushveld finally starting to show investors the way in which shareholders can benefit from their Energy division.

Another company that I believe has a bright future is ASX and London listed Adriatic Metals (LON:ADT1). At £1.37, Adriatic’s market cap is c. £250 million, (note: I’m showing the ASX share price chart because Adriatic hasn’t yet been listed for a year):

(Source: Google)

This is a pre-revenue mining company progressing the polymetallic (multiple metals) Vares project in the Balkans towards production. The capex is low, the IRR high and the NPV meaningful:

(Source: Adriatic)

Why I believe Adriatic can re-rate despite having a £200 million+ valuation

Adriatic will release an updated feasibility study this month and has an exciting pipeline of newsflow.

1. Increased Resources not yet included – Adriatic increased the mineral resource estimate in tonnes by 32% earlier this month. Increased resources equals increased tonnes to mine and therefore an increased NPV.

2. Silver/Gold prices have dramatically increased – Scoping study numbers were completed with the following metal prices:

(Source: Adriatic)

Silver & gold prices are now dramatically above those prices. Adriatic’s project has a lot of silver – and so the project metrics are substantially improved.

3. Operating Costs down – scoping study metrics were done using international labour rates. Bosnia and Herzegovina have some of the lowest cost labour in Europe. Dominic Roberts, Head of Corporate Affairs states in the below interview that he can’t disclose exactlyhow much lower the cost per tonne shall be, but indicated that it would be at least 10% cheaper at a minimum.

4. Non-dilutionary funding potential – given the incredibly high IRR even before increased metal prices, the project has the potential to be entirely debt-funded. In the below interview, Dominic discusses that one option is debt plus a net smelter royalty to fund construction. Non-dilutionary funding if exercised correctly would be incredible news for shareholders, as we would retain more upside!

5. Exploration potential – Adriatic has just been awarded a 32sq km land concession. Paul Cronin, CEO has stated that Adriatic’s goal is to continue to identify the right structural, lithological and geo-chemical conditions that resulted in the high grade Rupice silver deposit and explore for possible repeats of that mineralisation in the new concession area”.

Adriatic is also in the process of acquiring Tethyn Resources.

6. Newsflow – aside from the aforementioned feasibility study there’s plenty of newsflow for investors to look forward too:

(Source: Adriatic)

For all of the above reasons, should metals prices remain where they are and permits be forthcoming I believe that Adriatic should re-rate over the short, medium and long term.

As with any pre-revenue mining company there are multiple risks – financing, permitting etc. One risk that is not ordinary is having litigation filed against you by your largest shareholder. Sandfire evidently believe they have the right to purchase ~4 million shares at certain prices and Adriatic believe they do not. Given that Adriatic’s share count is about 182m, for me this is a distraction rather than a major concern.

Dominic Roberts, Head of Corporate Affairs, presented for Proactive last Thursday:

(source: proactive)

One final fun fact for readers – Adriatic HQ is in Cheltenham and less than a ten minute walk from my house. Any company which doesn’t splash out on expensive city offices gets my vote of confidence for minimising unnecessary expenses!

Till next week!



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    interesting …..but wary of the region and its business practices . Be ready to bail at the first sign of antics .

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