According to James Dunn looking at miners moving from...

According to James Dunn looking at miners moving from exploration to production, ADT is one of "three of the very best on offer, across a range of commodities". Here is James full article published at Switzer Report:

Adriatic Metals PLC (ADT, $2.48)

Market capitalisation: $657 million

Three-year total return: 34.7% a year

Analysts’ consensus target price: $4.43 (Thomson Reuters, four analysts)

Adriatic Metals has just about ticked every box on bringing its flagship project, the world-class Vares project in the Balkan nation of Bosnia and Herzegovina, to production. The polymetallic Vares project is often described in the media as a silver project, but the planned processing plant will create both a zinc concentrate and a silver-lead concentrate; copper, gold and antimony will also be produced.

Vares will have a mine life of at least ten years once production commences, which is expected in the second quarter of 2023, but Adriatic expects to more than double this mine life through further exploration. In August last year, and again in December, the company hit mineralisation at a grade similar to the main Rupice orebody in drilling to the north-west of the core deposit. If this mineralisation proves to be a repetition or extension of the Rupice orebody, that mine life extension could be just the start.

The reserve currently stands at 8.41 million tonnes at average grades of 179 grams per tonne (g/t) of silver, 1.66 g/t of gold, 5.04% zinc, 3.18% lead and 0.55% copper. The resource is 12 million tonnes at 149 g/t silver, 1.4 g/t of gold, 4.1% zinc, 2.6% lead and 0.5% copper, for 58 million ounces of contained silver, 526,000 ounces of gold, 488,000 tonnes of zinc, 312,000 tonnes of lead and 56,000 tonnes of copper.

To mine this, in an underground operation, Adriatic estimates an all-in-sustaining cost (AISC) – a figure that incorporates not only the “cash cost” of production but all the costs that allow production to be sustained – of US$7.30 an ounce of AgEq (silver equivalent). That would put Vares in the lowest-cost 10% in its peer group of equivalent mines in the world. To put that in context, silver currently trades at US$24.30 an ounce.

According to the definitive feasibility study (DFS), silver and gold will account for almost half of the forecast revenue, which is estimated at US$377 per tonne of ore milled, or about US$2.7 billion over Vares’ initial ten-year mine life. The DFS also projects a net present value after tax for the operation of a huge US$1.06 billion, with an internal rate of return (IRR) estimated at 134% – those are very big numbers, and they’re predicated on lower commodity prices than currently prevail.

Vares is fully-funded through to production. This month, Adriatic struck early-stage offtake deals with four international companies for concentrate production from Vares: the company has pre-sold 82% of the total projected concentrate production from the first two years of Vares’ operations to the four buyers. Adriatic wants the flexibility to sell the remaining 18% of concentrate production on the spot market, or into other long-term offtake deals.

Further down the track, Adriatic will look to develop its Raska zinc-silver project in Serbia. But for now, the focus is squarely on Vares, which is considered one of the best mining projects in development anywhere in the world in terms of its quality, its economics, and its positive relationship with the host government and communities. There is also the prospect that a lot of big miners, who would like to boost their base metals exposure (and inventories), and see Adriatic Metals glowing bright green on their mergers and acquisitions (M&A) radar screens.