Adriatic Metals (LSE: ADT1; ASX: ADT), which until now has focused its efforts in Bosnia-Herzegovina, is diversifying into neighbouring Serbia, with the acquisition of Tethyan Resource (TSXV: TETH) in an all-share deal worth US$10 million.
Tethyan has two brownfield projects in southwestern Serbia: the Kizevak zinc-lead-silver project, which consists of two past-producing open-pit mines, and the Rudnica copper-gold porphyry.
The Tethyan acquisition will distinguish Adriatic as the leading polymetallic explorer and developer in the Balkans, the company says, and complements its flagship Vareas project in neighbouring Bosnia-Herzegovina.
“The Balkans are a treasure trove of historical exploration and mining projects, conducted under a socialist era, but forgotten following the separation of Yugoslavia,” Paul Cronin, Adriatic’s co-founder and CEO, told The Northern Miner. “As we continue to broaden our networks, and demonstrate our credentials as a trustworthy and reliable custodian, we will continue to see projects like these presented to us, and where appropriate, will attempt to incorporate into them the Adriatic Metals portfolio, leveraging our reputation and knowledge to maximize their value.”
Adriatic was one of the first mining companies to test the waters in Bosnia Herzegovina, and acquired its flagship Vares project out of bankruptcy proceedings in 2017 for US$760,000.
The brownfield project consists of Rupice and Veovaca, two past-producing polymetallic deposits, and several satellite targets, 50 km from Sarajevo.
“As the first company to enter the country, we had the chance to review an extensive inventory of properties and we got what we think is the best opportunity,” Cronin said in an interview.
“It was an opportune time,” he added. “Licenses for concessions were much cheaper than they are now, currently running in the order of US$500,000 per square kilometre. This poses a significant barrier when considering where to invest.”
Adriatic also benefited from getting access to historical data accumulated by the former operating company. “There were literally piles of data, not only from the Vares area from the 1960s right up until the 1990s, but from all over, as someone decided that the filing cabinets in the admin building were more important than the files of data,” Cronin said.
Exploration and development on the Vares project began in the 1940s and peaked in the 1980s, when a quasi-state-run company, Energoinvest, completed exploration, subsequent drilling and limited underground development on the Veovaca deposit.
Much of Adriatic’s work so far has focused on the Rupice deposit, which historically produced about 15,000 tonnes of high-grade zinc and lead material from exploration adits. Exploration at Rupice began in 1952 and continued intermittently until 1990.
The Rupice deposit begins at surface, extends to a known depth of 300 metres and remains open. The Veovaca deposit, on the other hand, begins at surface and extends to a known depth of 200 metres. Veovaca was a more extensively worked open pit, operating between 1983 and 1987, and produced zinc, lead and barite concentrates that were sold to European smelters.
Adriatic completed a scoping study on Vares in November 2019 that assessed the viability of running an underground mine at Rupice followed by an open pit operation at Veovaca, with all material mined at a central processing plant that would produce three concentrates: lead-copper, zinc, and barite.
Based on the study, Rupice would be accessed by twin parallel declines of about 410 metres in length from the north end of the deposit and utilize long hole stoping to recover on average 715,000 tonnes per year over a ten-year mine life. Veovaca would then be mined at an annual average rate of 679,000 tonnes a year for seven years.
Initial capex was estimated to run to about US$178.4 million, and the combined operation would generate a post-tax net present value, at an 8% discount rate, of US$917 million, an internal rate of return of 107% and a payback period of eight months.
Now the company is working on a feasibility study that it hopes to complete in the fourth quarter of the year and is applying for development approval and investment permits. Barring any delays, the project could be in production as early as the second quarter of 2022, which would make it Bosnia’s first modern mine, Cronin said.
In the meantime, the drills continue to turn. Four drill rigs are operating at Vares, two of which are drilling mineralized extensions at Rupice and the other two are testing a recently defined gravity target at Jurasevic-Brestic, 900 metres to the southeast of Rupice.
While the work program seems more than enough to keep the junior occupied, Cronin thinks this could be just the beginning. “We are hopeful that once we are up and running, this database will help us define other deposits in the Balkans, not only in BiH but in Serbia and elsewhere in the Balkans.”
Rupice has a JORC-compliant indicated resource of 7.5 million tonnes grading 5.7% zinc, 3.7% lead, 34% barite, 2 grams gold per tonne, 207 grams silver per tonne and 0.6% copper, and inferred resources of 1.9 million tonnes grading 5.1% zinc, 3.3% lead, 31% barite, 0.9 gram gold, 86 grams silver and 0.3% copper.
In early May, Adriatic released drill results from Rupice. Highlights included drill hole BR-02-20, which intersected massive sulphide mineralization in the southeastern extension of the Rupice deposit and is the deepest mineralized intersection drilled to date.
The drill hole returned 9 metres averaging 2.4 grams gold, 398 grams silver, 1.79% zinc, 3.16% lead, 0.35% copper and 45% barite starting from a depth of 369 metres, and extended the known mineralization 20 metres down-dip.
BR-02-20 was drilled 170 metres down-dip of an early drill hole, BR-49-19, which hit 11 metres averaging 4.37 grams gold, 406 grams silver, 16.1% zinc, 9.8% lead, 1% copper and 50% barite from a depth of 245 metres, and remains the highest grade intercept from Rupice to date.
In addition, the hole was drilled between the Rupice deposit and the nearby Jurasevac-Brestic prospect. Jurasevac-Brestic is characterized by a 600-metre-long IP chargeability anomaly, and high-grade grab and soil samples returned values of up to 3.47 grams gold, 339 grams silver,19.4% zinc, 12.25% lead and 6.49% copper.
Infill drill holes BR-06-20, BR-07-20 and BR-09-20 also hit multiple intercepts confirming high-grade mineralization exists in the central portion of the Rupice deposit.
“The latest drill results show that the mineralization at Rupice continues down-dip to the south of the deposit, and remains open to the south, north, east, and at depth,” Cronin said. “The results from the infill drill holes have confirmed that there is a good understanding of the geological and structural complexities of the deposit, with a good grade correlation to the existing neighbouring drill holes. This increased understanding will be utilized for future drill hole planning.”
Adriatic has drilled more than 30 holes at Veovaca to confirm the historic resource and to incorporate precious metals. Adriatic updated the resource for Veovaca in June 2019, outlining indicated resources of 5.3 million tonnes grading 1.6% zinc, 1.0% lead, 16% barite, 0.1 gram gold and 50 grams silver. Inferred resources add 2.1 million tonnes averaging 1.1% zinc, 0.5% lead, 6% barite 0.1 gram gold and 17 grams silver.
Mineralization remains open in all directions and an expansion program is underway. Adriatic has completed an IP survey and the interpretation is being tested.
While much of Adriatic’s will be spent advancing Vares towards a PFS before the end of the third quarter, it also has big plans for the projects it is picking up through its acquisition of Tethyan Resource.
It plans to advance Tethyan’s Kizevak and Sastavci polymetallic mines in southwestern Serbia’s Raska district towards a JORC compliant resource by the end of this year.
In 2018 and 2019, Tethyan drilled 14 holes about 1 km southeast of the property’s historic Kizevak open pit, and intersected high-grade lead, zinc and silver mineralization, including 12 metres of 22.03% zinc, 10.49% lead, 167 grams silver and 0.18 gram gold starting from 130 metres in hole KSEDD002, and 23 metres of 7.02% zinc, 3.16% lead, 35 grams silver and 0.26 gram gold from 212 metres in hole KSEDD001.
Tethyan’s Sastavci deposit, 3.5 km northwest of Kizevak, was also mined historically as an open pit. Tethyan collected 65 rock chip samples from the old pit, with values of more than 30% zinc, 7.1% lead, 94.3 grams silver and 0.47 gram gold.
In addition, to the north of the Sastavci open pit, Tethyan has defined an 800-metre long by 400-metre wide soil anomaly exhibiting greater than 100 parts per billion (ppb) gold.
Under the terms of its acquisition of Tethyan announced on May 12, each Tethyan shareholder will receive 0.166 Adriatic shares for each Tethyan share they own, giving them about 6.9% of the enlarged Adriatic.
The deal represents an implied price for Tethyan of 18.4¢ per share –a 29% premium to Tethyan’s closing share price of 15¢ on May 8.