Final Results

31 March 2025

Adriatic Metals PLC 

("Adriatic Metals" or the "Company")

Annual Report and Audited Financial Statements 

for the year ended 31 December 2024

Adriatic Metals PLC (ASX:ADT, LSE:ADT1, OTCQX:ADMLF) is pleased to announce its Annual Report and Audited Financial Statements for the year ended 31 December 2024.

The Board advises all shareholders and interested stakeholders that the Company's Annual Report including the audited results for the year ended 31 December 2024 is available on the Company's website: https://www.adriaticmetals.com/downloads/adriatic-annual-report-2024.pdf

An abridged version of the results for the year ended 31 December 2024 is included below. The results for 2024 are presented in United States Dollars.

A copy of the Annual Report 2024 will be submitted to the Financial Services Authority's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

By order of the Board

Michael Rawlinson

Chairman of the Board

For further information please visit: www.adriaticmetals.com; email: [email protected], @AdriaticMetals on Twitter; or contact:

MARKET ABUSE REGULATION DISCLOSURE

The information contained within this announcement is deemed by the Company (LEI: 549300OHAH2GL1DP0L61) to constitute inside ‎information for the purpose of Article 7 of EU Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended. The person ‎responsible for arranging and authorising the release of this announcement on behalf of the Company is Laura Tyler, CEO and Managing Director.

CHAIRMAN'S STATEMENT

OVERVIEW

I am proud to have overseen the remarkable transformation of Adriatic Metals. In just seven years, the Company has evolved from an exploration and development stage entity to a revenue-generating European mining company. This achievement is especially noteworthy given the challenges of establishing a new mining operation in Bosnia and Herzegovina - a country with a rich mining heritage but only a few small hard rock mines today. The Vareš Silver Operation has brought significant foreign direct investment to the country, created numerous employment opportunities, and revitalised the local economy in a region that has long faced economic challenges. Adriatic has demonstrated that it is not only possible to build a modern, sustainable, and efficient mine in Europe, but that such projects can also bring substantial benefits to all stakeholders involved.

2024 has been a year of profound global change, marked by an unprecedented number of elections worldwide. The mining industry continues to face significant challenges. Commodity prices have diverged sharply, with some, like lithium, falling to historic lows, while others, such as gold and antimony, have soared to new heights. As we approach 2025, industry sentiment remains uncertain. Gold prices are projected to rise further, while the strength of the US dollar will largely hinge on upcoming tariff decisions. Political risk is also on the rise, as miners and investors grapple with a new wave of resource nationalism spanning regions from Mali to Indonesia.

The start of operations at Vareš coincides with a period when mining in Europe is under intense political scrutiny. This comes as the EU strives to meet the ambitious goals set by its Critical Raw Materials Act 2023, driven by the pressing need to establish a regional, critical minerals supply chain. Collaboration across Europe is essential to achieving this objective. Zinc, recently added to the UK's Critical Minerals list, underscores its pivotal role in the global transition to Net Zero. Similarly, silver - renowned as the world's most efficient energy conductor - is indispensable for manufacturing solar panels, wind turbines, and batteries.

Meanwhile, the once-contentious role of mining in society is undergoing a shift. Even former critics now acknowledge that the transition to green energy relies heavily on an increased supply of minerals and metals. However, to meet this surging demand, the extractive sector must navigate additional pressures; advancing sustainable mining practices, maintaining capital discipline, and fulfilling ever-growing stakeholder expectations.

Bringing the Vareš Silver Operation into production within seven years has been an exceptional accomplishment. This remarkable achievement was further celebrated during the mine's official opening in early March. The event was attended by notable dignitaries, including Bosnia and Herzegovina's Prime Minister, Nermin Nikšić, and the British Ambassador, Julian Reilly, who joined us to commemorate the launch of Europe's newest metals mine. This official event was followed by a celebratory 'Vareš Fest' in the town square, with the local community, employees and key suppliers coming together to mark the momentous occasion. 

Firstly, I would like to extend my commendation and gratitude to outgoing CEO Paul Cronin, whose bold vision turned the ambitious goal of building a silver-zinc-lead mine in the emerging mining jurisdiction of Bosnia and Herzegovina into a reality. I wish him every success in his future endeavours and I am confident that, as a founder and shareholder, he will continue to strongly support the business.

I would also like to warmly commend Laura Tyler for taking the role of permanent CEO during a crucial inflection point for Adriatic as it transitions to the next phase of growth. With her extensive experience, exceptional skill set, and adaptability, I have every confidence in her ability to steer the company forward and drive its continued success.

Throughout 2024, we further strengthened our Board to align with Adriatic's corporate transition, welcoming several esteemed new members. Among them was Eric Rasmussen, formerly with Rio Tinto and the EBRD as Global Head of Natural Resources, who brings extensive expertise in financing European and global mining projects. In October, we also appointed Mirco Bardella as a Non-Executive Director. Mirco is an experienced specialist in assurance and governance, predominantly in the natural resources sector, having previously advised companies including Xstrata, Rio Tinto, Gold Fields and Hochschild Mining in his capacity as Assurance Partner at professional services firm, Ernst & Young. An expert in assurance and governance within the natural resources sector, Mirco's skills have already proven to be invaluable to both our Board and management team.

Additionally, our Non-Executive Director, Sandra Bates, was promoted to Senior Independent Director, a milestone as the first such role on the Adriatic Board. This appointment reflects the evolution of the Company's corporate structure in line with its growth into a stronger and more dynamic entity. Additionally, Sanela Karic was appointed as Executive Director for Corporate Affairs at Adriatic and as a Director of Adriatic's operating subsidiary in Bosnia and Herzegovina. A Bosnian native and practicing lawyer, Sanela has the relevant experience for this key role, which involves engaging with all levels of government and leveraging her deep expertise to support the Company's strategic goals.

In May 2024, we completed a successful capital raising of $50m, which saw a number of new institutional investors join our share register and was also backed by our existing shareholders. This is not only a huge vote of confidence in Adriatic, but also provided vital flexibility to the balance sheet during the crucial stages of operational ramp up. 

Throughout the year, the fourth and final tranche of $30m of senior secured debt from Orion was drawn down and the first debt repayment of $19m was rescheduled to 31 March 2025. Post-period, in January 2025, Adriatic completed a $25m concentrate prepayment arrangement with our offtaker, Trafigura, at competitive terms, and in February 2025, Adriatic raised $50m, through a well-supported placement. The proceeds of this placement will be used to fast-track the Vareš Processing Plant expansion to 1.3Mtpa, initiate studies and workstreams at Rupice Mine to support this production growth and de-risk the ramp-up to nameplate production. Our 2025 strategy will prioritise debt repayment as ramp up continues to nameplate capacity in the second half of the year.

In February 2025, we also announced that Adriatic is working with its advisors regarding the transfer of the listing category of all of its ordinary shares from the Equity Shares (Transition) category of the Official List to the Equity Shares (Commercial Companies) category of the Official List on the London Stock Exchange. Among other benefits, the Board believes the transfer will enable the ordinary shares to be considered for inclusion in the FTSE UK Index Series (subject to meeting certain other eligibility criteria), which are widely utilised investment benchmarks for institutional investors, in due course. We hope to update our stakeholders on this process in due course.

We are excited to share the success of Vareš with our loyal shareholders and stakeholders who have supported us throughout this journey to production. Our vision extends beyond current operations - we aim to leave a lasting legacy for future generations in the country and community where we operate. By fostering employment, driving sustainable economic growth, and supporting the community through the Adriatic Foundation, we strive to enable this vibrant region to thrive and prosper.

On behalf of the Board, I extend my heartfelt thanks to our management team, employees, and stakeholders at all levels - local, regional, and national - for their dedication, hard work, and unwavering support during this remarkable period of success.

As we look ahead, we are filled with excitement as the Company begins to execute its strategy for long-term sustainable growth. I would also like to express my gratitude to our shareholders for their steadfast support during what has been, at times, an unprecedented and challenging year. Thanks to your confidence in us, we are now firmly on track to achieve nameplate production in 2025.

CEO STATEMENT

CEO Statement

I am delighted to deliver this message as the new CEO of Adriatic Metals. I joined the Company as a Non-Executive Director on 1 July 2024 and was drawn in by the immense potential of the Vareš Silver Operation based on the world-class, high-grade orebody at Rupice. I was equally impressed by the speed at which the project progressed, from the first drill hole in 2017 to the commencement of concentrate production in February 2024.

Since assuming the CEO role in August and relocating to Sarajevo, I have worked closely with the exceptional team in Bosnia and Herzegovina. Witnessing their commitment and pride to deliver this project is inspiring; they fully understand the transformative impact this investment will have. The Vareš Silver Operation is the largest private foreign direct investment in the country since the war in Bosnia and Herzegovina ended in 1995. This world-class asset stands to bring substantial benefits, not only through local employment and regeneration but also on a national scale. Once operating at nameplate capacity of 0.8Mtpa, it is expected to make a significant contribution to the economy of Bosnia and Herzegovina and future prosperity of the nation.

Sustainability and Governance

Our people are the foundation of our business, and ensuring the health, safety, and well-being of our team at the Vareš Silver Operation is my top priority.

Sadly, in August we experienced the loss of a subcontractor in a fatal incident onsite. This heartbreaking event meant we intensified our efforts to enhance safety protocols for our team, contractors, and subcontractors. Our commitment is unwavering: we strive to make sure every employee and contractor returns home to their families safely at the end of each day.

Despite this tragic occurrence, our overall health and safety performance continued to improve throughout the year. At the end of Q4 2024, the 12-month rolling total recordable incident frequency rate (TRIFR) was 1.05, a marked improvement compared to 1.40 in 2023. Hazard reporting continues to improve and our critical control management program has matured through the year with increased use of structured safety dialogue - Life Conversations. This progress reflects our ongoing dedication to fostering a safer working environment for all.

Sustainability is a cornerstone of our business model. Our primary commitment is the health and safety of our employees and contractors, the protection and preservation of the natural environment, and the adoption of sustainable practices across all aspects of our operation.

The Company has long recognised the importance of maintaining our social license to operate, by sustaining strong relationships with our local communities, as well as with Bosnian governmental bodies and ministries; they underpin our way of working.

Our commitment to responsible stewardship is embedded in our Environmental and Social Management System to make sure responsible business practices are at the heart of our operational design through the use of modern mining methods and technology. Adriatic understands that our social and environmental footprint is constantly evolving, and that the scope and impact of our sustainability initiatives will grow in significance in the years ahead.

In 2024, we saw a significant increase in our employee headcount, growing from under 300 employees in 2023 to over 500 by the end of the year. This exciting growth reflects Adriatic's transition from contract mining to owner-operator and from a project phase to operational status.

The expansion of our workforce also has underscored the importance of people management and placed a strong emphasis on our corporate culture. We remain dedicated to ongoing skills assessments and training to make sure our team is equipped to meet the challenges of our evolving operations while continuing to drive excellence in all areas.

Operations

2024 saw Adriatic transition from a mine developer into a fully functioning mining and concentrate processing operation with the potential to be a leading European producer of critical metals. Early in the year, first concentrates were produced from the Vareš Silver Operation and since then operations have been ramping up, with a total of 146,000 tonnes mined in 2024. Our team achieved total underground development of 3km across 2024, doubling the development totals in 2023. The Rupice Mine is now operating from two active production levels and the Vareš Processing Plant is operating 24/7 with recoveries improving as expected.

In May, Adriatic announced the first sale of on-specification grade concentrates from Vareš with the first shipment leaving site for the port of Ploče. Subsequently, all our concentrates have been sold and shipped to European smelters and beyond.

We have faced our share of challenges throughout the year. In July, the Constitutional Court ruled against previous permit issuances which impacted on the original location of our proposed tailings facility. However, this setback underscored the strength of our collaboration with local, regional, and national stakeholders. Together with the relevant authorities, Adriatic worked effectively to identify, fully permit, and construct the Veovača Tailings Storage Facility, now expected to begin operations in Q1 2025. This achievement highlights the power of cooperation, teamwork, and a shared vision for the Vareš Silver Operation's contribution to Bosnian society.

Another significant challenge was the extreme weather that affected Bosnia and Herzegovina at the end of 2024. In October, a severe storm and flooding caused significant damage to a section of the railway line connecting Sarajevo to the port of Ploče, a critical component of our transport infrastructure. Fortunately, the country's robust transport network allowed us to pivot to a road haulage solution, ensuring uninterrupted delivery of concentrates while repairs to the railway were underway.

In late December, a severe snowstorm swept across the Balkan region, disrupting operations as blocked roads and widespread power and communication outages hampered the transportation of ore and concentrates. Throughout this period, our priority was the safety of our employees. The team's response to these challenges provided valuable winterisation experience and we have since implemented additional procedures for winter production.

In the Q4 QAR announcement, we introduced an exciting opportunity to the market: Ausenco had completed a comprehensive technical review to evaluate the potential to increase throughput at the Vareš Processing Plant. The review confirmed that throughput could be increased from the nameplate capacity of 0.8Mtpa to 1Mtpa without significant capital expenditure. Additionally, achieving a throughput of up to 1.3Mtpa would require approximately $25m in process plant growth capital.

This proposed expansion aligned with longer dated plans to increase mine production, following the Ore Reserve expansion at Rupice Northwest to 13.8Mt announced on 20 December 2023. After consulting key shareholders, Adriatic successfully completed a $50m capital raise in February 2025 to fast-track this debottlenecking and expansion project. Increasing capacity by 63% will position the Vareš Silver Operation among the world's largest primary silver producers, enabling the Company to produce over 20Moz AgEq annually.

Finances

During the reporting period, our balance sheet was significantly strengthened by two key developments: the conversion of the $20m convertible bonds held by Queens Road Capital in March and a $50m equity fundraise in May. These actions were taken to cover the costs associated with transitioning to an owner-operator mining model and to reinforce our financial position.

In Q4 2024, we reached an agreement with our debt provider, Orion Mine Finance, to defer the first debt repayment to 31 March 2025. We also secured a term sheet for a $25m prepayment facility with Trafigura, enhancing our liquidity further. As of the end of the year, Adriatic held $21m in cash. With increasing revenues, combined with efficiency initiatives implemented during the period, we are well positioned financially, with sufficient contingency to ensure a smooth path to sustainable commercial production.

In conclusion

All the progress made in 2024 could not have been possible without the extraordinary determination of my predecessor, Paul Cronin. Paul worked tirelessly to bring the Vareš Silver Operation into production over the past seven years and I would like to thank him for his time and support. His commitment to ensure the Company is a sustainable, modern mining operation that will ensure prosperity to all stakeholders has been uncompromising.

Looking into 2025, the opportunity that lies ahead for Adriatic is immense and we are excited about the future. However, I acknowledge that there is still much work to be done. This includes a strengthened safety culture, consistency of our operational performance, and making sure we seize strategic opportunities to create value for all our stakeholders. We remain committed to continuous improvement and to building on our successes as we progress toward our long-term goal to be a multi-generational source of sustainable, critical metal in the heart of Europe.

I would like to extend my sincere thanks to the Board, particularly Michael Rawlinson, Chairman, for their invaluable counsel, guidance, and support during this pivotal time. The strengthening of the Board is a crucial development for the Company as we place increased emphasis on enhancing our corporate governance. Their leadership will continue to be instrumental as we navigate the next phase of our growth and success.

I would also like to extend my thanks to both our new and long-term investors for their confidence and continued commitment. We look forward to delivering significant returns over the years to come as we ramp up production in the coming months and continue our corporate evolution.

In closing, I would like to express my deep gratitude to our dedicated employees across the Company and to our stakeholders around the world. On behalf of the entire team, thank you for your unwavering support. Your commitment and partnership are vital to our continued success, and we look forward to achieving even greater milestones together in the future.

Laura Tyler

Managing Director and Chief Executive Officer

Consolidated INCOME Statement

FOR THE YEAR ENDED 31 DECEMBER 2024

¹Refer to note 4.3 for details of the restatement of prior year results. 

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 31 DECEMBER 2024

¹Refer to note 4.3 for details of the restatement of prior year results

The above consolidated income statement and consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

Consolidated Statement of Financial Position

AT 31 DECEMBER 2024

¹Refer to note 4.3 for details of the restatement of prior year results. 

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

The consolidated financial statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 30 March 2025 and were signed on its behalf by:

Consolidated Statement of Changes in Equity

FOR THE YEAR ENDED 31 DECEMBER 2024

¹ Retained deficit include all other net gains and losses and transactions with owners, including dividends. No dividends paid to date. Refer to note 4.3 for details of the restatement of prior year results. 

2 Foreign currency reserve include gains or losses arising on retranslating the net assets of entities from their functional currencies into the Group presentation currency.

3 The merger reserve was created and warrants issued as part of Tethyan Resources Corp acquisition. 

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated Statement of Cash Flows

FOR THE YEAR ENDED 31 DECEMBER 2024

¹Refer to note 4.3 for details of the restatement of prior year results. 

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Notes to the Consolidated Financial Statements

1. Corporate information

The consolidated financial statements present the financial information of Adriatic Metals PLC and its subsidiaries (collectively, the "Group") for the year ended 31 December 2024. Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England and Wales. The registered office is located at 4th Floor, 3 Hanover Square, London, W1S 1HD, United Kingdom.

The Group's principal activity is precious and base metals exploration and development. During 2024 the Group has transitioned from a developer to a producer and seller of precious metals. The Group owns the Vareš Silver Operation in Bosnia and Herzegovina and the Raška Project in Serbia.

Bosnia and Herzegovina and Serbia are well-positioned in central Europe and boast strong mining history, pro-mining environment, highly skilled workforce as well as extensive existing infrastructure and logistics.

2. Basis of preparation

2.1 Statement of compliance

The consolidated financial statements have been prepared in accordance with the recognition, measurement, presentation and disclosure requirements of UK adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 (the "Companies Act").

The consolidated financial statements were authorised for issue by the Board of Directors on 30 March 2024.

2.2 Basis of preparation

The financial information set out herein does not constitute the Group's statutory financial statements for the year ended 31 December 2024, but is derived from the Group's audited financial statements.

The auditors have reported on the 2024 financial statements and their reports were unqualified and did not contain statements under s498(2) or (3) Companies Act 2006, nor did they contain a material uncertainty in relation to going concern.

The 2024 Annual Report was approved by the Board of Directors on 30 March 2025. The financial information in this statement is audited but does not have the status of statutory accounts within the meaning of Section 434 of the Companies Act 2006.

 The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including derivative instruments), at fair value through profit or loss. A summary of the Group's material accounting policies is set out below in note 3.

The consolidated financial statements are presented in United States Dollars ("USD" or "$") which reflects the fact that the USD is a more widely recognised currency for the mining sector in which the Group operates and that its Project Finance Debt Package, offtake agreements and mining services contracts are denominated in USD.

Unless otherwise stated, the Group financial statements are presented in US dollars ($) and rounded to the nearest thousand.

2.3 Going concern

The Company's going concern assessment has been performed as part of the Group's going concern assessment. The Group sells and distributes its concentrate product through annual offtake arrangements with third parties, which commit to purchasing 100% of the Vareš Silver Operation concentrate production.

The Group has a $120m borrowing facility with Orion that is fully drawn as at 31 December 2024, with the first repayment due 31 March 2025, which will be repaid from funds generated from concentrate sales. A Debt-Service Coverage Ratio ("DSCR") covenant is included in the Orion Debt Finance Package, and is required to be above 1.25x on a quarterly basis over each 6-month testing period, with the first testing period covering October 2025 to March 2026.

Post year end, the Group is meeting its day-to-day working capital requirements through its cash generating operations at Vareš. Expansionary capital expenditure for 2025 has been funded through equity financing. Post year end the Group raised $50m via an oversubscribed equity raise, and $25m via a concentrate prepay, gross of costs, to support this.

The Board has reviewed forecasts for the period to December 2026 to assess the Group's liquidity. The base case scenario demonstrates substantial headroom and compliance with the DSCR covenant ratio. The Board has considered additional sensitivity scenarios in terms of the Group's commodity price forecasts, mining grades, expected throughput volumes, operating cost profile and capital expenditure. The Board has assessed the key risks that could impact the prospects of the Group over the going concern period, including; commodity price outlook, cost inflation, negative grade reconciliation, and softer production performance, with reverse stress testing of the forecasts conducted in line with best practice.

Liquidity headroom and covenant compliance was demonstrated in each reasonably possible scenario with application of mitigation measures that are within the Group's control. Accordingly, the Directors continue to adopt the going concern basis in preparing the consolidated financial statements.

3. Material accounting policies

The principal accounting policies adopted in the preparation of these financial statements are set out below.

3.1 Basis of consolidation

The consolidated Group Financial Statements consist of the financial statements of the ultimate Parent Company (Adriatic Metals plc, a company registered in the UK), and all its subsidiary undertakings made up to the same accounting date. Subsidiary undertakings are those entities controlled by Adriatic Metals plc. Control exists where the Group is exposed to, or has the rights to, variable returns from its involvement with the investee and has the ability to use its power over the investee to affect its returns.

Subsidiaries are consolidated in the Group's financial statements from the date on which control is obtained. Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. The accounting policies of subsidiaries have been changed where necessary to ensure consistency with accounting policies adopted by the Group.

3.2 New standards, amendments and interpretations

The following amended standards and interpretations were adopted by the Group during the year ending 31 December 2024. These amended standards and interpretations have not had a significant impact on the consolidated Financial Statements.

· Lease Liability in a Sale and Leaseback - Amendments to IFRS 16

· Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants - Amendments to IAS 1

· Supplier Financing Arrangements - Amendments to IAS7 and IFRS 7

The following new and amended standards are effective for annual periods beginning on or after 1 January 2025 and have not been adopted early. Except for IFRS 18 - Presentation and Disclosure in the Financial Statements, which is effective from 1 January 2027, these new standards, amendments and interpretations are not expected to have a material impact on the Group in the current or future reporting periods:

· Lack of exchangeability - Amendments to IAS 21

· Classification and Measurement of Financial Instruments - Amendments to IFRS 9 and IFRS 7

· Annual Improvements to IFRS Accounting Standards - Volume 11

· Presentation and Disclosure in Financial Statements - IFRS 18

· Subsidiaries without Public Accountability: Disclosures - IFRS 19

3.3 Foreign currency transactions and translations

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated Financial Statements are presented in United States Dollars ("USD"), which is the Group's presentational currency.

I) Transactions and balances

Transactions in foreign currencies are initially recorded using the spot exchange rates between the functional currency and the foreign currency, at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the spot rates at the reporting date.

Foreign exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.

II) Group companies

On consolidation, the assets and liabilities of foreign operations are translated into USD at the rate of exchange ruling at the reporting date and their income statements are translated at average rate of exchange for the year. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. 

3.4 Receivables

All receivables are held at amortised cost less any provision for impairment. A loss allowance for expected credit losses is made to reflect changes in credit risk since the initial recognition.

3.5 Exploration and evaluation assets

Pre-licence costs

Pre-licence costs relate to costs incurred before the Group has obtained legal rights to explore in a specific area. Such costs may include the acquisition of exploration data and the associated costs of analysing that data. These costs are expensed in the year in which they are incurred.

Exploration and evaluation expenditure

Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource.

Exploration and evaluation activity includes:

· licence costs paid in connection with a right to explore;

· researching and analysing historical exploration data;

· gathering exploration data through geophysical studies;

· exploratory drilling and sampling;

· determining and examining the volume and grade of the resource;

· surveying transportation and infrastructure requirements; and

· conducting market studies.

Exploration and evaluation costs include directly attributable employee remuneration, materials and fuel used, surveying costs, drilling costs and payments made to contractors.

In evaluating whether the expenditure meet the criteria to be capitalised, several different sources of information are used. The information that is used to determine the probability of future benefits depends on the extent of exploration and evaluation that has been performed.

Exploration and evaluation expenditure in the year for activity on licences where a JORC-compliant resource has not yet been established is expensed as incurred until sufficient evaluation has occurred to establish a JORC-compliant resource. Costs expensed during this phase are included in exploration expenses and other operating expenses in the statement of profit or loss and other comprehensive income.

Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the licence as exploration and evaluation assets up to the point when a JORC-compliant reserve is established. Capitalised exploration and evaluation expenditure is considered to be an intangible asset and measured at cost less accumulated impairment.

Exploration and evaluation assets acquired in a business combination are initially recognised at fair value, including resources and exploration potential that is considered to represent value beyond proven and probable reserves. Similarly, the costs associated with acquiring an exploration and evaluation asset (that does not represent a business) are also capitalised and subsequently measured at cost less accumulated impairment.

Once a JORC-compliant reserve is established and development is sanctioned, exploration and evaluation assets are tested for impairment and transferred to mine under construction. Exploration and evaluation assets are not amortised during the exploration and evaluation phase and are considered to have an indefinite life until determined to be part of a mine plan.

3.6 Property, plant and equipment

I) Land

Land is held at cost less accumulated impairment losses. Once a JORC-compliant reserve is established and development is sanctioned, land is tested for impairment and transferred to mine under construction and depreciated in line with the useful economic life of the mine or on a unit of depletion basis. Land is not depreciated during the exploration and evaluation phase and is considered to have an indefinite life until determined to be part of a mine plan.

II) Short lived property, plant and equipment

Short lived property, plant and equipment consists of buildings, plant and machinery, office furniture and equipment, transportation assets and computer equipment. Short lived property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of short lived property, plant and equipment consists of the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for its intended use. Short lived property, plant and equipment depreciation is provided at rates calculated to expense the cost, less estimated residual value, using the straight-line method over the estimated useful life of the asset at the following rates:

III) Mine under construction

Mine under construction includes construction costs as well as exploration and evaluation and land balances transferred as noted above once a JORC-compliant reserve is established and development is sanctioned. Expenditure which is necessarily incurred whilst commissioning the mine is also capitalised as a mine under construction cost. Development costs incurred after the commencement of production are capitalised to the extent they are expected to give rise to a future economic benefit.

Expenditure which is necessarily incurred whilst commissioning the mine under construction, in the period prior to being capable of operating in the manner intended by management, are capitalised. Development costs incurred after the commencement of commercial production (as defined in Note 4.2 d), are capitalised to the extent they are expected to give rise to a future economic benefit.

IV) Depreciation and amortisation

The assets' residual values, useful lives and methods of depreciation and amortisation are reviewed at each financial year-end and adjusted prospectively if appropriate.

3.7 Leases

The Group has various lease arrangements for buildings. Lease terms are negotiated on an individual basis locally and subject to domestic rules and regulations. At the inception of the lease contract, the Group assesses whether the contract conveys the right to control the use of an identified asset for a certain period in exchange for consideration, in which case it is identified as a lease. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. Low value leases are those with an underlying asset value of USD 5,000 or less. For those leases, the Group recognized the lease payments as an operating expense on a straight-line basis over the term of the lease.

Right-of-use assets

At the commencement date of the lease right-of-use assets are measured at cost which comprises the following:

· The initial measurement of the lease liability;

· Prepayments before commencement date of the lease

· Initial direct costs; and

· Costs to restore.

Subsequent to initial recognition, right-of-use assets depreciated on a straight-line basis over the duration of the contract. The right-of-use assets are assessed for impairment where indicators of impairment are present.

Lease liabilities

At the commencement date of the lease, lease liabilities are measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

II) Revision of lease term

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying amount of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying amount of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term. If the carrying amount of the right-of-use asset is adjusted to zero, any further reduction is recognised in profit or loss.

3.8 Rehabilitation provision

The Group recognises provisions for contractual, constructive or legal obligations, including those associated with the reclamation of mineral interests and property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition of the liability, an amount equal to the corresponding provision is added to the carrying amount of the related asset and the cost is amortised as an expense over the economic life of the asset. Following the initial recognition of the rehabilitation provision, the carrying amount of the liability is increased for the passage of time as the discount is unwound, and adjusted for changes to the current market-based discount rate and amount or timing of the underlying cash flows needed to settle the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

3.9 Financial instruments

Financial assets and liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expired.

Financial assets and financial liabilities are measured initially at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transactions costs that are directly attributable to the acquisition or issue of the financial instrument. Trade receivables which do not contain a significant financing component are recognised at their transaction price. Financial assets and financial liabilities are subsequently measured as described below.

i) Financial assets

A financial asset is subsequently recognised at amortised cost under IFRS 9 if it meets both the hold to collect and contractual cash flow characteristics tests. A financial asset is measured at fair value through other comprehensive income if the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

If neither of the above classifications are met the asset is classified as fair value through the profit and loss, with changes in fair value recognised in the income statement. Even if an asset meets the above two requirements to be measured at fair value through other comprehensive income, IFRS 9 contains an option to designate, at initial recognition, a financial asset as measured at fair value through the profit and loss provided the classification eliminates or significantly reduces a measurement or recognition inconsistency.

Cash and cash equivalents and trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment, if any.

ii) Financial liabilities

Financial liabilities are subsequently measured at amortised cost using the effective interest method, except for financial liabilities designated at fair value through profit or loss, that are carried subsequently at fair value with gains and losses recognised in the income statement.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Where the movement in fair value is due to a change in the entity's credit risk, such gain or loss is recognised in other comprehensive income.

Any gain or loss on modification of a financial liability held at amortised cost is recognised in the income statement.

iii) Convertible debt

The proceeds received on issue of the Group's convertible debt are allocated to their debt and derivative liability components. The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest that would be payable on a similar debt instrument that does not include an option to convert. Subsequently, the debt component is accounted for as a financial liability measured at amortised cost until extinguished on conversion or maturity of the debt. The remainder of the proceeds is allocated to the conversion option and is recognised as a derivative liability.

3.10 Impairment of assets

I) Financial assets

A financial asset that is not carried at fair value through profit or loss is assessed at each reporting date to determine a loss allowance for expected credit losses. If the credit risk on a financial instrument has increased significantly since initial recognition, the loss allowance is equal to the lifetime expected credit losses. If the credit risk has not increased significantly, the loss allowance is equal to the twelve month expected credit losses.

The expected credit losses are measured in a way that reflects the unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information that is available about past events, current conditions and forecasts of future economic conditions.

II) Non-financial assets

The carrying amounts of capitalised exploration and evaluation expenditure for undeveloped mining projects (projects for which the decision to mine has been not yet been deemed commercially viable and development has not yet been authorised) are reviewed at each reporting date for indicators of impairment in accordance with IFRS 6, and when indicators are identified, are tested in accordance with IAS 36 Impairment of Assets.

Property, plant and equipment and intangible assets with finite lives are reviewed for impairment if there is an indication that the carrying amount may not be recoverable.

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is an indication that the assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. Where the asset does not generate largely independent cash inflows, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

The recoverable amount is the higher of fair value less costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than the carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the income statement. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Where an impairment loss is subsequently reversed, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior periods. A reversal of an impairment loss is recognised in the income statement.

3.11 Income taxes

Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years.

Deferred income taxes are calculated based on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not recognised on the initial recognition of goodwill, on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction, or on temporary differences relating to investments in subsidiaries and jointly controlled entities where the reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred income tax assets and liabilities are measured, without discounting, at the tax rates that are expected to apply when the assets are recovered, and the liabilities settled, based on tax rates that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities and assets are expected to be settled or recovered.

3.12 Share capital

Ordinary shares issued by the parent are classified as share capital and share premium and recorded at the proceeds received, net of direct issue costs.

3.13 Share-based payments and warrants payments

I) Share-based payment transactions

The Company grants share options and performance rights to Directors, officers, consultants and employees ("equity-settled transactions"). The Company may grant warrants to institutions in relation to an equity raise or other transaction. The Board of Directors determines the specific grant terms within the limits set by the Company's share option plans.

II) Equity-settled transactions

The costs of equity-settled transactions are measured by reference to the fair value at the grant date and are recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant persons become fully entitled to the award (the "vesting date"). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the Company's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period and the corresponding amount is represented in share option reserve. No expense is recognised for awards that do not ultimately vest.

Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense as if the terms had not been modified. An additional expense is recognised for any modification which increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee as measured at the date of modification.

Where equity-settled transactions are awarded to employees, the fair value of the options at the date of grant is charged to the income statement over the vesting period. Non-market performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of the options that will eventually vest. Market performance vesting conditions are incorporated into the fair value of the equity instrument at the grant date.

Where equity-settled transactions are entered into with non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at the fair value of the equity instruments issued. Otherwise equity-settled transactions with non-employees are measured at the fair value of the goods or services received.

Upon exercise of share options or warrants, the proceeds received are allocated to share capital, and share premium if applicable, and any associated balance in share-based payments reserve is transferred to retained earnings. The dilutive effect of outstanding options is reflected as additional dilution in the computation of diluted earnings per share.

The Group utilises the Black-Scholes option pricing model to estimate the fair value of share options and performance rights granted to Directors, officers and employees. The use of this model requires management to make various estimates and assumptions that impact the value assigned to the share options and performance rights including the forecast future volatility of the share price, the risk-free interest rate, dividend yield, the expected life of the share options and performance rights and the expected number of options and performance rights which will vest. See note 24.2 for further details regarding these inputs.

III) STIP equity scheme

The Group operates an STIP scheme which runs on a calendar year basis, with employees receiving cash or (exceptionally) shares subsequent to year end based on to their performance during the year. An option pricing model is used to measure the Group's liability at each reporting date, taking into account the terms and conditions on which the bonus is awarded and the extent to which employees have rendered their service. Movements in the liability (other than cash payments) are recognised in the consolidated statement of comprehensive income.

3.14 Segmental reporting

The reportable segments represent all the Group's activities. The reportable segments are an aggregation of the operating segments within the Group as prescribed by IFRS 8. The reportable segments are based on the Group's management structures and the consequent reporting to the chief operating decision maker, the Board of Directors. These reportable segments also correspond to geographical locations such that each reportable segment is in a separate geographic location. Income and expenses included in profit or loss for the period are allocated directly or indirectly to the reportable segments.

The Group's operating segments are as follows:

· Bosnia and Herzegovina (principally the Vareš Silver Operation);

· Serbia (principally the Raška Project); and

· Corporate (which supports the activities of the other two segments, principally the UK).

Segment assets are those used directly for segment operations. Inter-company balances comprise transactions between operating segments making up the reportable segments. These balances are eliminated to arrive at the figures in the Consolidated Financial Statements.

3.15 Inventory

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighed average method.

The cost of finished goods and work in progress comprises raw materials, direct labour and all other direct costs associated with mining the ore and processing it to a saleable product.

Assay data is used to verify the amount of metal contained within ore stockpiles, adjusted for expected recovery rates. Monthly surveys are used to verify the volumes of material.

Net realisable value is the estimated selling price in the ordinary course of business, less any further costs expected to be incurred to completion. Provision is made, if necessary, for slow-moving, obsolete and defective inventory.

3.16 Revenue

The Group sells metal concentrate product to smelters through offtake agreements with the customer. The agreements provide for provisional pricing, i.e. the selling price is subject to final adjustment at the end of the quotation period based on the average price for the month, two months, three months, or four months following delivery to the buyer and subject to final adjustment for assaying results. At each reporting date, if any sales are provisionally priced, the provisionally priced sales are marked to market using forward prices, with any significant adjustments being recorded in revenue in the income statement and in deferred revenue in the statement of financial position.

All revenue is measured at a point in time, being that point at which the Group meets its promise to transfer control of a quantity of metal concentrate to a customer. Control is transferred in accordance with the Incoterms specified in the contract, which are normally CIP. Adjustments to sales prices arising from settlement of provisional pricing arrangements are recognised as a debit or credit to revenue and are not separated or treated as an embedded derivative.

Revenue is measured at the fair value of consideration received or receivable from sales of metal to an end user, net of any buyers' discount, treatment charges and value added tax. Revenue is net of treatment charges, as the cost of smelting and refining is borne by the customer and the transaction price is agreed to be net of these charges.

4. Critical accounting estimates and judgements

In preparing these consolidated financial statements, management has made certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual amounts and results may differ from these estimates. The significant judgements, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are highlighted below.

4.1 Estimates

a) Copper Stream

The Group entered into an agreement with Orion Partners under which it received a prepayment of $22.5m on 13 February 2023 in respect of future deliveries of copper warrants under the Copper Stream. Consideration as to the substance of the agreement and the value of the Copper Stream has been made in line with the requirements of IFRS.

Regarding the accounting treatment, reference has been made to IFRS9 and IFRS15 as to the nature and substance of the agreement, with the conclusion that IFRS9 is the most appropriate treatment of financial liability because the liability can be settled by cash or delivery of another financial instrument. The agreement was not intended to be a sales and purchase agreement, implied by the nature of the transactions in that concentrate is sold to an offtaker and not directly to the holder of the stream.

Regarding the split of current and non-current liability, management use forecasts to estimate the volume of copper production in the next 12 months after the balance sheet date compared with volumes produced after this period.

The fair value of the Copper Stream obligation was valued by management on a nominal basis. The significant assumptions included the nominal future copper curve prices, the latest mine plan and nominal weighted average cost of capital which was calculated by the company's nominated experts. See note 19 for further details.

b) Rehabilitation provision

The Group recognises provisions for contractual, constructive or legal obligations, including those associated with the reclamation of mineral interests and property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a provision for the rehabilitation is recognised at its present value in the period in which it is incurred. Upon initial recognition of the liability, an amount equal to the liability is added to the carrying amount of the related asset and this amount is amortised as an expense over the economic life of the asset. Following the initial recognition of the rehabilitation provision, the carrying amount of the liability is increased for the passage of time by unwinding the discount, and adjusted for changes to the current market-based discount rate and to the amount or timing of the underlying cash flows needed to settle the obligation.

Management uses its judgement and experience to determine the potential scope of closure rehabilitation work required to meet the Group's legal, statutory and constructive obligations, and any other commitments made to stakeholders, and the options and techniques available to meet those obligations and estimate the associated costs and the likely timing of those costs.

Significant estimates are also required to determine both the costs associated with that work and the other assumptions used to calculate the provision, including timing of future expenditure, and discount and inflation rates. External experts support the cost estimation process where appropriate but there remains significant estimation uncertainty.

See note 18 for further details.

4.2 Judgements

a) Capitalisation of exploration costs

The Group uses its judgement to determine whether costs meet the capitalisation requirements in accordance with IFRS 6 and its accounting policy on exploration and evaluation assets, including whether the activities performed are directly attributable to increasing the value of the project.

Upon the establishment of a JORC-compliant resource (at which point, the Group considers it probable that economic benefits will be realised), the Group capitalises any further evaluation expenditure incurred for the licence as exploration and evaluation assets. There is an element of judgement involved by management as to which costs are directly attributable to increasing the value of the project. Broadly, activities in relation to scoping, exploration and development are deemed directly attributable, whilst activities in relation to supporting and administrative duties are deemed not to be directly attributable.

b) Indicators of impairment

The Group uses its judgement in assessing whether indicators of impairment have occurred.

The Group reviews and tests the carrying amount of exploration and evaluation assets when events or changes in circumstances suggest that the carrying amount may not be recoverable in accordance with IFRS 6. Indicators of impairment are as follows:

· the period for which the entity has the right to explore in the specific area has expired or will expire in the near future, and is not expected to be renewed;

· substantive expenditure on further exploration for, and evaluation of, mineral resources in the specific area is neither budgeted nor planned;

· exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and

· sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

The Group also reviews property, plant and equipment and intangible assets with finite lives for impairment if there is an indication that the carrying amount may not be recoverable.

In assessing whether an indicator of impairment has occurred, the Group considers external sources of information including observable indications of decline in market value, actual or expected negative changes in the technological, market, economic or legal environment, changes in market interest rates or other market rates of return on investments, and whether the carrying amount of its net assets is greater than its market capitalisation. As external sources of information will typically be broader and less clearly linked to a specific asset or cash generating unit, for example, a decline in market capitalisation below the carrying value of the entity's net assets. This may then require the use of judgement to determine which assets or cash generating unit should be tested in response to an external source of information.

The Group also considers internal sources of information including changes in planned development of the assets, evidence of obsolescence or damage, changes in the expected use or life of an asset, and evidence from internal reporting that an asset's economic performance is, or will be, worse than expected.

No changes in circumstances or other indicators of impairment occurred during the year in respect of the Raška Project exploration and evaluation asset.

No changes in circumstances or other indicators of impairment occurred during the year in respect of the Vareš Silver Operation.

c) Entities not consolidated

Adriatic Foundation

The Adriatic Foundation (the "Foundation") is a not-for-profit trust which was created in Bosnia and Herzegovina with the objective of supporting the communities around the Vareš Silver Operation. The Company provided the initial funding required for the formation of the Foundation.

The Company has the ability to appoint the Board of Trustees of the Foundation and hence transactions between the Company and the Foundation have been classified as related party on the basis of the company yielding significant influence.

An assessment has been carried out to determine whether the Company controls the Adriatic Foundation in accordance with IFRS 10. The conclusion of this assessment is that whilst the Company is able to yield significant administrative influence over the Foundation, it is not able to affect returns to the Company. The Foundation statute prevents the Company as the founder, and any other person associated with the Foundation, from directly or indirectly deriving profit, or any other material or financial benefit, from the activities of the Foundation. For the purposes of IFRS 10, the Directors have therefore concluded that the Company does not control the Foundation and as a result the Foundation is not included in the consolidated financial statements of the Group.

d) Commercial Production

Commercial production is deemed to have commenced when a mining interest is capable of operating at levels intended by management. This is achieved when management determines that the operational commissioning of a major mine and plant components is complete, operating results are being achieved consistently for a period of time, and that there are indications that these operating results will continue.

After this point, depreciation of the mining assets commences.

The Group determines commencement of commercial production based on the following factors:

· All major capital expenditures to bring the mine to the condition necessary for it to be capable of operating in the manager intended by management have been completed;

· Key major necessary permits in place;

· Key personnel required to maintain commercial production in place;

· First concentrate shipments achieved;

· The completion of a reasonable period of testing of the mine plant and equipment;

· The mine or mill has reached a pre-determined percentage of design capacity; and,

· The ability to sustain ongoing production of commercial levels of metal concentrate.

The list is not exhaustive and each specific circumstance is taken into consideration before making the decision. Based on a review of the above factors, management determined that the Vareš Silver Operation did not commence commercial production during 2024.

Any concentrate produced before commercial production has been reached is recognised in line with IFRS 15 as pre-production income earned and the cost of the output generated is recognised in the statement of comprehensive income in accordance with the principles of IAS 2.

e) Capitalisation of Borrowing Costs

The Group capitalises borrowing costs that are directly attributable to the construction of a mining asset and included in the cost of that asset. Accrued interest expense on the Orion Senior Debt Finance Package is capitalised as part of the mine under construction asset in property, plant and equipment.

The Group ceases the capitalisation of borrowing costs attributable to a part of the construction of a mining asset when it completes substantially all the activities necessary to prepare that part of the project, and where that part is capable of being used while construction continues on other parts of the mining asset.

Management considers the processing plant a distinct part of the construction of the Vareš Silver Operation asset. Management uses judgement to determine the element of borrowing costs attributable to that part that should cease to be capitalised.

The Group ceases the capitalisation of borrowing costs when substantially all the activities necessary to prepare the mining asset for its intended use are completed. The mining asset is judged to be ready for its intended use when physical construction is complete, but before commercial production has been reached.

f) Inventories

Stock is valued at the lower of cost or net realisable value. Costs that are incurred in or benefit the production process are accumulated as ore stockpiles, concentrate in circuit, and finished metal concentrate. Although the quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of metal actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor recoverability levels.

Where proceeds are not expected to be earned based on the mineral content being below what is considered economically viable, the stockpile ore is considered to be waste material generated. No costs are allocated to this waste material because proceeds are not expected to be earned from the sale of output.

Net realisable value tests are performed at each reporting date and represent the estimated future sales value less estimated costs to complete production and bring the product to sale.

These net realisable tests take into account management's estimate of the maximum values to be realised from ore stockpiles, in some instances through the blending of different ore stockpile grades, prior to these being added to future processing plant feeds. The carrying value of inventory is disclosed within note 15.

g) Deferred Tax

Judgement is applied in making assumptions about recognition of deferred tax assets in respect of the timing and value of estimated future taxable income and available tax losses.

Management has made assumptions in the recognition of deferred tax assets, including the timing and value of estimated future taxable income and available tax losses. The recognised and unrecognised deferred tax balances reflect amounts based on the actual submitted tax returns.

Where the realisation of deferred tax assets is dependent on future profits, the Group recognises losses carried forward and other deferred tax assets only to the extent that the realisation of the related tax benefit through future taxable profits is probable and losses are still available for use after expiry dates are considered.

4.3 Restatement of prior year financial statements

An error was identified in the prior year results (31 December 2023), whereby accruals for employment taxes and social security contributions owed were understated by $5.2m, mine under construction additions understated by $3.0m, administrative expenses understated by $1.2m, and retained deficit understated by $1.2m.

Basic and diluted loss per share was understated by 0.42 cents per share.

No other previous financial years are materially impacted by this restatement.

The error has been corrected by restating each of the affected financial statement line items for the prior periods as follows:

Statement of financial position

Income Statement and Statement of Comprehensive Income (extract)

5. Loss per share ("EPS")

Basic loss per share is calculated by dividing the net loss attributable to owners of the parent (2024: $62.5m loss, 2023: $30.1m loss) by the weighted average number of common shares in issue during the year (2024: 315,063,816; 2023: 282,504,794).

Diluted loss per share is calculated by adjusting the weighted average number of common shares outstanding to assume conversion of all potentially dilutive ordinary shares. The company has share options and performance rights as categories of potentially dilutive ordinary shares.

The options and performance rights only dilute earnings when they result in the issue of shares at a value below the market price of the share and when all performance criteria (if applicable) have been met. As at 31 December 2024, there are 3,195,866 potentially dilutive share options and performance rights (2023: 2,062,071 potentially dilutive share options and performance rights) which were not included in the calculation of diluted earnings/loss per share as their conversion to ordinary shares would have decreased the loss per share and because their exercise was contingent on the satisfaction of certain criteria that had not been met at the end of the respective year.

6. Segmental information

The segmental analysis of the Group's loss after tax and movement in non-current assets is as follows:

¹Refer to note 4.3 for details of the restatement of prior year results. 

7. Revenue

The Group sells zinc, silver, and lead concentrate product to smelters through offtake agreements with third parties. Agreements are in place with four international commodities trading and smelting companies ("Offtakers") for the purchase of concentrate production from the Vareš Silver Operation. The concentrates have been allocated to the Offtakers as follows:

· Zinc concentrate to Bolliden AB, Trafigura Pte Ltd, Transamine SA; and

· Lead-silver concentrate to Glencore International AG and Transamine SA.

During 2024, three customers contributed more than 20% of the Group's revenue each (2022: none), contributing $11.6m, $10.2m and $5.8m each. 

The Offtakers had been allocated 82% of the total projected concentrate production over the first 24 months. The remaining 18% of concentrate production was intentionally reserved either for advantageous spot sales or additional long-term offtake agreements. Post period, the 18% was allocated to Trafigura Pte Ltd in line with the prepayment agreement outlined in note 27.

The agreements with the smelters provide for provisional pricing, i.e. the selling price is subject to final adjustment at the end of the quotation period based on the average price for the month, two months, or three months following delivery to the buyer and subject to final adjustment for assaying results.

8. Operating loss

Operating loss is stated after charging:

The majority of exploration activities expensed during the year represent costs incurred at the Raška Project, for which a JORC-compliant resource has not yet been established.

Wages and salaries constitutes net payments made to employees together with social security and other contributions.

9. Wages and salaries

Wages and salaries comprise all employees of the Group including Directors, key management personnel and personnel in management positions engaged under management services contracts. The table below shows total costs for all employees, including costs capitalised during the year.

Share-based payments expense is stated at fair value at the time of grant using the Black-Scholes option pricing model. Further details are available in note 24.2 of the accounts.

The average monthly number of employees during the year increased to 549 in the year (2023: 296 employees). This is due to the ramp up of the Vareš Silver Operation from construction phase to test production phase.

Directors' remuneration is set out below:

There were no directors' share awards that vested in the year (2023: Nil).

The highest paid Director in the year ended 31 December 2024 received cash remuneration, excluding notional gains on share options or performance rights, of $0.6m (2023: $0.9m).

10. Finance income and expense

Interest income of $0.1m (2023: $0.8m) and accrued interest expense of $7.8m (2023: $13.0m) on the Orion Senior Debt Finance Package has been capitalised within additions to the mine under construction asset, a net capitalised amount of $7.7m (2023: $12.2m) as shown in note 13.

Interest income relates to interest earned on cash holdings.

$12.4m of interest expense comprises accrued interest on the Orion Senior Debt Finance Package (2023: $1.7m wholly relates to the QRC convertible bond). See note 19 for further details.

11. Taxation

a) Current Taxation

The table below reconciles the tax credit on the Group's loss for the year with the standard rate of corporation tax in the United Kingdom:

Corporate income tax is calculated at 25% (2023: 23.52%) of the assessable profit for the year for the UK parent company, 15% (2023: 15%) for the operating subsidiaries in Serbia, and 10% (2023: 10%) for the operating subsidiaries in Bosnia and Herzegovina.

Expenses not deductible for tax purposes include share-based payment charges, impairment and depreciation and amortisation charges.

b) Deferred income tax asset

The deferred tax asset comprises:

A $4.9m (2023: Nil) deferred tax asset has been recognised in respect of $48.6m (2023: Nil) tax losses at the main operating subsidiary in Bosnia and Herzegovina. The total tax losses carried forward were $49.3m (2023: $17.1m) however $0.7m (2023: Nil) have been excluded from the deferred tax asset calculation as they expire within twelve months.

At year-end, potential deferred tax assets of $17.1m (2023: $14.3m) relating to tax losses of $75.3m (2023: $75.6m) were not recognised as it is not probable that future taxable profits will be available against which the associated unused tax losses can be utilised.

$16.1m of these losses relate to the Serbia operating subsidiaries and have the below expiry dates:

·

· 1-2 years: $5.2m

· 2-5 years: $9.2m

The remaining losses relate to the UK parent company and have no expiry date.

12. Property, plant and equipment

¹Refer to note 4.3 for details of the restatement of prior year results. 

Capitalised interest consists of accrued interest expense in the year of $7.8m (2023: $13.0m) on the Orion Senior Debt Finance Package as set out in note 19, less $0.1m (2023: $0.1m) interest income, as set out in note 10.

Mine under construction amounts relate to the Vareš Silver Operation, located in Bosnia and Herzegovina.

13. Right-of-use assets and lease liabilities

Set out below are the carrying amounts of right-of-use assets accounted for in accordance with IFRS 16 and the movements during the year:

In June 2022, Adriatic and Nova Mining & Construction d.o.o, entered into a five-year mining services contract. On 20 April 2024, Adriatic and Nova agreed to terminate the Mining Services Contract, and enter into a settlement and termination agreement effective on 20 April 2024. Under the terms of the settlement and termination agreement, Adriatic assumed financial liabilities with Sandvik Mining and Construction amounting to $6.4m for underground mining equipment to be used by Adriatic.

This has been treated as a termination of the previous lease agreement with Nova Mining and a new lease addition under IFRS 16 with Sandvik Mining and Construction.

Depreciation relating to right-of-use assets taken to mine under construction includes capitalised depreciation of $2.7m (2023: $2.0m), as set out in note 12. The corresponding charge in the income statement is $0.6m (2023: $0.4m).

Set out below are the carrying amounts of lease liabilities and the movements during the year:

Of the total lease liabilities amount, $3.6m (2023: $1.5m) is recognised as a current liability and the remainder $1.5m (2023: $6.6m) is shown within non-current liabilities. The maturity analysis of contractual undiscounted cash-flows is in note 22b.

The following are the amounts recognised in the statement of comprehensive income:

The following are the amounts recognised in the statement of cashflow:

14. Exploration and evaluation assets

Exploration and evaluation assets relate to the Raška Project in Serbia. Exploration activities are ongoing in order to progress towards a JORC mineral resource.

The Raška Project is managed as a single project and if advanced to the production stage, it is anticipated that there would be a single processing plant. The project is therefore treated as a single cash generating unit, with the post-impairment value of $8.5m attributed to the Raška Project as a whole instead of to specific tenements.

No further indicators of impairment or reversal of previous impairment have been identified in the year to 31 December 2024, the carrying value of $8.5m remains unchanged from prior year.

15. Inventory

The Group recognises all inventory at the lower of cost and net realisable value, and did not have any slow-moving, obsolete, or defective inventory as at 31 December 2024, and therefore there were no write-offs to the income statement during the year (2023: Nil).

The total inventory recognised through the income statement was $11.9m (2023: Nil).

All ore stockpiles are expected to be processed in 12 months and are therefore current.

16. Trade and other receivables

Trade and other receivables are accounted for under IFRS 9 using the expected credit loss model and are initially recognised at fair value and subsequently measured at amortised cost less any allowance for expected credit losses. Due to the nature of its sales model and credit terms of 3-30 days, expected credit loss exposure to the Group is insignificant.

$4.6m (2023: $6.1m) of total prepayments relates to the Vareš Silver Operation prepayments and deposits which represent advance payments in respect of equipment purchases.

At 31 December 2023, Copper Stream deposit was subject to a day 1 fair value adjustment of $1.9m with a corresponding day one deferral in other debtors, which will be amortised over the life of the stream. Amortisation at 31 December 2024 amounts to $0.1m (2023: $0.1m), resulting in an unamortised balance of $1.7m of which $0.1m (2023: $0.1m) is current and $1.6m (2023: $1.7m) is non-current.

17. Trade and other payables

¹Refer to note 4.3 for details of the restatement of prior year results. 

The carrying value of all the above payables is equivalent to fair value. All trade and other payables are payable within less than one year for both reporting periods.

Accrued liabilities were higher at year-end due to an increase in employees and contractors causing an uplift in global employment taxes and social security contributions owed.

18. Rehabilitation provision

The Group provision for the asset retirement obligation associated with mining activities at Vareš Silver Operation at 31 December 2024 was $5.4m (2023: $3.7m).

The provision represents the net present value of the Company's best estimate of the Vareš Silver Operation's future closure, restoration and environmental obligations, based on the extent of land and other disturbance caused by construction and other activities.

The increase in estimate in relation to the asset retirement obligation is primarily due to additional estimated costs due to development in 2024 as well as an update to the discount rate to 4.9% (2023: 4.2%) and inflation rate to 2.0% (2023: 2.5%) using latest estimates.

The present value of the above provision is measured by unwinding the discount on expected future cash flows over the period up to closure, using a discount rate of 4.9% (2024: 4.3%) that reflects the risk-free rate of interest. The yield of US Treasury bonds with a maturity profile commensurate with the anticipated rehabilitation schedule has been used to determine the discount factor applied to anticipated future rehabilitation costs.

The sensitivity of the provision to a 1% change in the discount factor is shown below:

· a decrease from 4.9% to 3.9% would increase the provision by $0.95m with a corresponding increase in Property, plant and equipment; and

· an increase from 4.9% to 5.9% would decrease the provision by $0.8m with a corresponding decrease in Property, plant and equipment.

Future climate change risks could impact the rehabilitation provision both in terms of the nature of decommissioning and rehabilitation required, as well as the cost of these activities given its long-term nature. Climate change risks and mitigations have been considered in the TCFD Climate Disclosure within the Directors report.

19. Borrowings and Derivative Liability

a) Total borrowings and derivative liability

Year end balances are analysed below:

b) Orion Senior Secured Debt

On 10 January 2022, the Group announced the completion of a $142.5m debt financing package ("Orion Debt Finance Package"), with Orion Resource Partners (UK) LLP ("Orion") comprising:

• $120m Senior Secured Debt; and• $22.5m Copper Stream

Under the terms of this agreement, the Senior Secured Debt maturity date is 30 June 2027. Interest accrues daily at an annual rate equal to a margin of 7.5% plus the greater of (i) a floor of 0.26161% plus the CME Term SOFR for a period equal to three months and (ii) the floor of 0.26161%. Interest is payable on each interest repayment date, on the final maturity date, and on any earlier date on which a loan is prepaid in full or in part.

The First Repayment Date was the earlier of the Project Completion Longstop Date of 30 June 2024 and the last business day of the quarter following the quarter in which the Project Completion Date falls. The repayment schedule provides for the repayment of the loan in 10 equal quarterly instalments in each of the 10 successive quarters, with the first such quarterly repayment occurring on the First Repayment Date and the repayment in each successive quarter occurring on the last Business Day of the relevant quarter.

The Orion Debt Finance Package contains covenants and restrictive covenants typical for a project financing, including in relation to financial reporting. It also contains security customary for a project financing, principally security over the assets of Adriatic Metals BH d.o.o. and material project-related contracts held by the Adriatic Group. A DSCR covenant of above 1.25x is included in the Orion Debt Finance Package.

Secured Overnight Financing Rate ("SOFR") is a secured interbank overnight interest rate used as a reference rate by parties in commercial contracts, as an alternative to LIBOR which was discontinued in 2021. The CME SOFR is administered by the CME Group.

In January 2024, the Orion Senior Secured Debt fourth tranche of $30m was drawn net of a 2% fee of $0.6m and associated legal and other fees of $0.2m, with a net amount received of $29.2m. At 31 December 2024, these Orion fees and a further amount of transaction fees incurred by the Group totalling $0.8m were recognised as a deduction from the value of borrowings in accordance with IFRS 9, on the basis that they represented transaction costs directly attributable to the acquisition of the borrowings.

First Modification of Facility

On 22 January 2024, the Group amended the terms of the original Senior Secured Debt agreement as below:

· The Project Completion Longstop Date of 30 June 2024 was extended to 31 December 2024 and became the First Repayment Date;

· A fee applicable to the amendment ("the Front End Fee") of $0.8m was payable immediately following the utilisation date for the fourth draw down and added to the principal amount of the loans then outstanding;

· The Company was required to ensure that prior to 31 July 2024, the QRC Convertible Debt was finally, fully and irrevocably discharged or converted into equity without incurring financial indebtedness in relation to the same.

Additional Facility

On 21 April 2024, the Group negotiated an additional debt facility of $25m with an arrangement fee payable of $0.2m. These funds were to be made available in a single tranche during the period 1 September 2024 - 31 December 2024.

The tranche had to be repaid within six months of utilisation in cash or, at Orion's option, in silver credits. The amount of any silver credits used to repay the additional tranche was to be calculated by reference to market price discounted by 2%.

This facility was undrawn during 2024.

Second Modification of Facility

On 6 December 2024, the Group made further amendments to the terms of the original Senior Secured Debt agreement as below:

· The Project Completion Longstop Date of 31 December 2024 was extended to 31 March 2025 and became the First Repayment Date;

· The additional commitment of $25m made available under the terms of the Deed of Amendment was cancelled;

· A fee applicable to the amendment ("the Amendment Fee") of $0.5m became payable on the Amendment Date and was added to the principal amount of the loan then outstanding.

· Orion may elect to have the first repayment instalment paid in silver credits. If so, the amount of any silver credits used to repay the first repayment instalment is to be calculated by reference to market price discounted by 2%.

During 2024 the applicable CME Term SOFR has fluctuated between 4.60367% and 5.33156%, meaning that the total interest rate applicable has fluctuated between 12.36528% and 13.15643%. The first DSCR testing period is expected to be late-2025, and six monthly thereafter. The Company's forecasts show headroom above the requirement of 1.25x.

The Group is entitled to deduct the amount of any payment it makes to the Adriatic Foundation on behalf of the Lenders from any interest accrued in the last quarter of each year.

Post period on 28 March the Group made its first debt repayment of $19.5m to Orion Mine Finance.

c) Copper Stream

On 13 February 2023 the Company announced that all conditions precedent for the $22.5m Copper Stream had been satisfied and that the Copper Stream deposit funds had been received as a prepayment for the Copper Stream agreement with OMF Fund III.

During the year, Gold Royalty Corp announced that it had entered into a binding purchase and sale agreement with OMF Fund III to acquire the Copper Stream on the Vareš Silver Operation. The Company was not impacted by the transaction nor a party to it, and the terms of the Copper Stream have not changed.

In accordance with the Copper Stream agreement, the Group will deliver copper warrants purchased on the London Metal Exchange with a value equal to 24.5% of the payable copper in concentrates sold at the official LME copper cash price. Gold Royalty will pay 30% of the value of copper warrants with the remaining 70% being credited to the prepayment. Copper warrants are delivered monthly when the Group exceeds the threshold of 25 tonnes of payable copper contained in produced concentrates.

The agreement will be effective for an initial term of 40 years from the signing date and thereafter will automatically be extended for any successive 20 year additional periods unless there have been no active mining operations during the last 20 years of the initial term or throughout such additional periods, in which case the agreement will terminate at the end of the initial term or such additional period, as applicable. The agreement may also be terminated by the parties on mutual written consent or in the event of default.

The Group's obligations under the Copper Stream agreement are accounted for as a financial liability at fair value through profit or loss and comprise the following at 31 December 2024:

As the fair value of copper warrants depends on copper price volatilities and a risk-adjusted discount rate which are unobservable inputs, the financial liability above is classified within Level 3 of the fair value hierarchy.

The valuation of the Copper Stream financial liability was prepared by management on a nominal basis. The finance department performs the valuation, with support from external experts. The assumptions used were the life of mine based on latest mineral reserves, copper production, the nominal copper forward price curve and the nominal discount rate based on an adjusted Group weighted average cost of capital.

The following table contains sensitivities showing the impact of a 10%, 15% and 20% discount factor compared with the discount rate used by the Group of 14.65% (2023: 18.94%).

The following table contains sensitivity analysis showing the impact of a plus or minus percentage applied to the forecast nominal copper prices used in the Copper Stream valuation compared with those used by the Group.

d) QRC convertible debt

The Group issued $20m 8.5% convertible debt through a deed of covenant dated 30 November 2020. The debt was convertible into fully paid equity securities in the share capital of the issuer, subject to the conditions of the debt issue.

The debt was converted into shares on 4 March 2024 whereby the Group allotted 10,981,770 new ordinary shares of £0.013355 each which were issued to Queens Road Capital Investment Ltd following their decision to exercise their right to convert the bonds into equity. Following this conversion the Company's issued share capital increased to 306,222,045 ordinary shares of £0.013355 each.

e) Derivative liability on QRC convertible debt

Management have revalued QRC's option to convert the debt into equity at 4 March 2024. For valuations of non-property items required for financial reporting, including level 3 fair values, the finance department performs the valuation, with support from external experts.

It was concluded that the call option in the hands of the bondholder satisfied the conditions stipulated by IFRS 9 Financial Instrument - Recognition and Measurement for the recognition of a derivative liability in the Group accounts and require a separate fair valuation.

The redemption options in the hands of the Company were concluded to fall outside the exemptions of IFRS 9 and to be closely related to the debt host contract. Therefore, the redemption options need not be separated from the debt host contract and hence need not be valued separately. The Group has accounted for both the embedded option and liability at fair value through profit and loss and at amortised cost respectively.

The Black Scholes model was chosen as the most appropriate pricing model to value QRC's option to convert the debt into equity and the valuation was updated at 4 March 2024. The main assumptions and inputs used in the options pricing model were as follows:

· Dividend yield - assumed to be nil because the Group has not declared or paid any dividends in prior years on ordinary shares.

· Strike price - The initial conversion price of AUD 2.7976 per ordinary share.

· Expected term - Judgement applied to assign probability to the various redemption and put options in the contract. Expected term of redemption calculated as 0.01 years from the valuation date.

· Expected volatility - Weekly volatility over the 0.01 years (

· Risk-free rate - Risk free yield obtained from Australian Treasury bond issues converted into continuous compound yields.

· Value of underlying common stock price - The closing price of ordinary shares AUD 3.280 on the valuation date on the ASX.

Using the assumptions set out above, the Black Scholes value of the call option in the hands of the debt holder at the date of conversion was $3.5m.

20. Net debt and borrowings

An analysis of net debt and borrowings, including lease liabilities, and movements in each year is shown below.