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Adriatic Metals (ASX:ADT) strikes early-stage offtake deals for Vares concentrate

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ASX:ADT      MCAP $1.115B
20 April 2022 16:10 (AEST)

Pre-construction of the Vares processing plant. Source: Adriatic Metals

Adriatic Metals (ADT) has struck early-stage offtake deals with four international companies for concentrate production from its Vares silver project in Bosnia & Herzegovina.

The metals explorer said it had struck heads of terms deals with the commodities trading and smelting businesses to maximise revenue from its Vares silver-lead and zinc concentrates.

While the agreements are still subject to final contract negotiations, at this stage Adriatic plans to sell zinc concentrate to commodities traders Trafigura and Transamine, as well as an unnamed European smelter.

Adriatic will also sell silver-lead concentrate to Glencore International and Transamine.

All up, the off-takers have been allocated 82 per cent of the total projected concentrate production from the first 24 months of Vares operations. Adriatic said it would intentionally leave the remaining 18 per cent of concentrate production for spot market sales or for later long-term offtake deals.

The company has not hedged any commodity prices through today’s deals.

Adriatic Managing Director and CEO Paul Cronin said the company was “incredibly pleased” with the outcome of its offtake tender process.

“The high degree of interest received for the Vares silver project’s concentrate confirms their marketability and underpins the exceptional financial performance of the project,” Mr Cronin said.

“The completion of the offtake marks one of the final condition precedents for the drawdown of the Orion debt package, which we expect will start in Q3.”

He said Adriatic would now go into a period of exclusivity with its potential offtake partners to finalise and complete the agreements in full.

The offtake deals will be broadly based on assumptions made in Adriatic’s definitive feasibility study (DFS) for the Vares project released in August 2021, though treatment charges (TCs) for both concentrates will be higher than laid out in the study.

Adriatic said benchmark TCs were expected to settle at US$160 (A$216) per tonne for silver-lead concentrates compared to the DFS assumption of US$65 per tonne. Zinc concentrate TCs will settle at US$230 a tonne compared to the DFS estimate of US$195 a tonne.

However, rising commodity prices will “more than offset” these increased charges, Adriatic said, with zinc currently worth US$4500 per tonne — US$1500 more expensive than the DFS price assumption.

Shares in Adriatic Metals were down 3.07 per cent to $2.53 at 3.17 pm AEST.

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