Adriatic Metals ADT.AX
January 11, 2022 - 10:11pm EST by
2022 2023
Price: 2.58 EPS 0 0
Shares Out. (in M): 291 P/E 0 0
Market Cap (in $M): 465 P/FCF 0 0
Net Debt (in $M): 4 EBIT 0 0
TEV (in $M): 461 TEV/EBIT 0 0

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Adriatic Metals (ADT.AX, ADT1.L) is a UK-based precious and base metals explorer and developer. It owns a 100% interest in the polymetallic (silver, gold, zinc, lead, copper, and barium sulfate) Vares project in Bosnia, which includes an open-pit mine (Veovaca) and an underground brownfield exploration (Rupice). Additionally, Adriatic also owns the rest of the mineral belt surrounding Vares, as well as the Raska project in Serbia, which it acquired after buying Tethyan Resource in 2020.

Adriatic was set up in 2017 to explore mineral deposits in Bosnia by a team led by Australian executive and investor Paul Cronin, and Bosnian-Australian lawyer Milos Bosnjakovic. Paul and Milos each own ca. 7% of the shares outstanding, individually worth $26mm. Another relevant investor is Spanish mining executive Alberto Lavandeira, CEO at Atalaya Mining (ATYM.L) who owns 1% of the company, worth $4mm. Directors Peter Bilbe and Julian Barnes are also heavily invested with individual stakes worth $2.6 and $1.8mm, respectively. In total, founders, board members and management own ca. 12.3% of the stock.

The Balkans have historically been a prolific mining territory, although mining activity has been moderate since WWII, especially in Bosnia where Adriatic is the only publicly traded mining company I’m aware of.

The Vares project already has access to basic infrastructure, including water and a train line, which connects Vares with the capesize capable port in Ploce. Although Rupice will be an underground mine, it is not deep, and the area is not prone to flooding. Veovaca should be even less risky as it is an open pit.

Vares is arguably the best undeveloped mineral deposit in the world due to its very high mineral concentration, and it alone offers significant upside to Adriatic´s current share price. The definitive feasibility study (DFS) conducted in 2021 shows a $1.1bn post-tax NPV8 and a 134% IRR for the project. In total, the project is expected to deliver $1.5bn in cash flows from mining operations starting in 2023 through 2031. This compares to a market cap of $0.4bn. Hence, although Adriatic has been a ten-bagger since its IPO in May 2018, I believe it still offers a significant upside at a very low risk given that now we have a DFS and a fully-permitted and fully-financed Vares project. The chart below shows that the bulk of the cash flows will be generated in the early years of operation, which increases the IRR and de-risks the investment.




Free optionality comes from the exploration of the mineral belt surrounding Vares, as well as from the Raska project in Serbia. In October 2021, Adriatic raised $244 million ($120mm senior secured debt, $20mm copper stream, plus $102 million equity at AUD 2.8/share). A big portion of this will be used to build Vares, but Cronin reserved $20mm for exploration

Why does the opportunity exist?

Adriatic has historically traded at a P/NPV discount to comparable pre-producing projects. I believe a big portion of this discount was attributable to Bosnia’s limited track record as a mining jurisdiction. I don’t believe harm will come from the Bosnian authorities as Adriatic will be a material contributor to Bosnia’s GDP over the next years, and Bosnia wants to attract more investment in the mining space. Just before the financing, the stock had a nice run to AUD 3.2/share. However, it lost momentum after a fairly dilutive raise, which was also done at a significantly lower price (AUD 2.8/share); in hindsight, a good move. Recently, reviving fears of a political break-up have also weighed on the sentiment towards the stock providing a nice entry point if one can underwrite that the situation won’t escalate. Project execution is still the most material risk in my opinion, especially considering Rupice will be an underground mine.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


The company has gone radio silent as Serbia is heading into a general election scheduled for April 3, where mining is a key topic. I believe an update on ongoing exploration activities will come shortly afterwards.


Regardless of how the market views the stock, Vares should be up and running in Q1 2023 and printing cash at a rate of $200mm+ per year (50% of the current market cap, per year) until 2028 (absent any additions from ongoing exploration activities).

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