ADRIATIC METALS PLC — Audit Report / Information 2021

Mar 31, 2021

National Storage Mechanism | Additional information RNS Number : 0323U Adriatic Metals PLC 31 March 2021 Adriatic Metals PLC ('Adriatic Metals' or 'Company') Annual Report and Audited Financial Statements for the Six Months Ended 31 December 2020 Adriatic Metals PLC (ASX:ADT & LSE:ADT1) is pleased to announce its Annual Report and Audited Financial Statements for the six months ended 31 December 2020. The Board advises all shareholders and interested stakeholders that the Company's Annual Report including the audited results for the six months ended 31 December 2020 is available on the Company's website: https://www.adriaticmetals.com/investors/financial-reports-2/ An abridged version of the results for the six months ended 31 December 2020 is included below. By order of the Board Geoff Eyre Chief Financial Officer and Joint Company Secretary Consolidated Statement of Financial Position AS AT 31 DECEMBER 2020 (In GBP) Note 31 December 2020 (Restated) 30 June 2020 Assets Current assets Cash and cash equivalents 29,580,538 9,942,729 Other receivables and prepayments 5 654,514 451,546 Financial asset at fair value through profit and loss 6 - 1,241,514 Total current assets 30,235,052 11,635,789 Non-current assets Property, plant and equipment 8 969,464 910,920 Right of use asset 12 236,349 251,898 Exploration and evaluation assets 9, 10 36,479,724 9,045,169 Total non-current assets 37,685,537 10,207,987 Total assets 67,920,589 21,843,776 Equity and liabilities Current liabilities Accounts payable and accrued liabilities 11 1,900,437 682,402 Lease liability 12 35,609 10,530 Option Liability 10 2,515,399 - Borrowings 7 105,515 - Total current liabilities 4,556,960 692,932 Non-current liabilities Lease liability 12 219,731 255,091 Borrowings 7 11,590,172 - Derivative Liability 7 3,045,213 - Total non-current liabilities 14,855,116 255,091 Total liabilities 19,412,076 948,023 Capital and reserves attributable to shareholders of the parent Share capital 15 2,772,186 2,401,777 Share premium 15 51,471,748 23,992,967 Share-based payment reserve 15 5,756,069 4,426,185 Warrants Reserve 15 2,797,086 - Other Equity 10 (2,515,399) - Foreign currency translation reserve 225,580 219,805 Retained deficit (13,995,045) (10,144,981) 46,512,225 20,895,753 Non-controlling interest 10 1,996,288 - Total equity 48,508,513 20,895,753 Total equity and liabilities 67,920,589 21,843,776 See note 24 for details of the restatement of the prior year comparatives. The above Consolidated Financial Statements 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 2021 and were signed on its behalf by: Paul Cronin Managing Director & Chief Executive Officer Geoff Eyre Chief Financial Officer & Joint Company Secretary Consolidated Statement of Comprehensive Income FOR THE SIX MONTHS ENDED 31 DECEMBER 2020 (In GBP) Note Six Months Ended 31 December 2020 Year Ended 30 June 2020 Exploration costs 17 (798,028) - General and administrative expenses 18 (2,115,707) (3,315,634) Share-based payment expense 15e (2,267,239) (3,443,359) Other income 21 4,816 6,131 Operating loss (5,176,158) (6,752,862) Finance income 19 - 203,131 Finance expense 19 (197,039) (11,580) Revaluation of fair value asset 6,7 (322,987) 322,987 Loss before tax (5,696,184) (6,238,324) Tax charge 16 1,681 - Loss for the period (5,694,503) (6,238,324) Other comprehensive income that might be reclassified to profit or loss in subsequent periods: Exchange gain arising on translation of foreign operations 5,775 145,563 5,775 145,563 Total comprehensive loss for the period (5,688,728) (6,092,761) Total comprehensive loss attributable to: Owners of the parent (5,169,617) (6,092,761) Non-controlling interest (519,111) - (5,688,728) (6,092,761) Net loss per share Basic and diluted (pence) 15f (2.99) (3.69) The above Consolidated Financial Statements should be read in conjunction with the accompanying notes. Consolidated Statement of Changes in Equity FOR THE SIX MONTHS ENDED 31 DECEMBER 2020 (In GBP) Note Number Of Shares Share Capital (Restated) Share Premium Share- Based Payment Reserve Warrants Other Equity Foreign Currency Translation Reserve (Restated) Retained Earnings Capital And Reserves Attributable To Owners Of The Parent Non- Controlling Interest Total Equity 30 June 2019 150,782,587 2,013,701 11,084,777 1,714,826 - 74,242 (4,638,657) 10,248,889 - 10,248,889 Comprehensive income for the year: Loss for the year - - - - - (6,238,324) (6,238,324) - (6,238,324) Other comprehensive income - - - - - 145,563 - 145,563 - 145,563 Total comprehensive loss - - - - - 145,563 (6,238,324) (6,092,761) - (6,092,761) Contributions by and distributions to owners: Issue of share capital 15 25,083,400 334,989 13,015,388 - - - - 13,350,377 - 13,350,377 Share issue costs 15 - - (797,655) - - - - (797,655) - (797,655) Exercise of options 15 3,975,000 53,087 690,457 (732,000) - - 732,000 743,544 - 743,544 Issue of options 15 - - - 3,443,359 - - - 3,443,359 - 3,443,359 30 June 2020 179,840,987 2,401,777 23,992,967 4,426,185 - 219,805 (10,144,981) 20,895,753 20,895,753 Comprehensive income for the Period: Loss for the period - - - (5,175,392) (5,175,392) (519,111) (5,694,503) Other comprehensive income - - - - - 5,775 - 5,775 - 5,775 Total comprehensive loss - - - - - 5,775 (5,175,392) (5,169,617) (519,111) (5,688,728) Contributions by and distributions to owners: Issue of share capital 15 5,276,595 70,469 6,129,531 - - - - - 6,200,000 6,200,000 Settlement Placement 15 4,830,156 64,507 4,791,547 - - - - - 4,856,054 4,856,054 Share issue costs - (1,598,603) - - - 151,402 (1,447,201) (1,447,201) Exercise of options 15 4,350,000 58,093 1,203,817 (1,173,926) - - - 1,173,926 1,261,910 1,261,910 Issue of options 15 - - - 2,267,239 - - - - 2,267,239 2,267,239 Acquisition of subsidiary 15 13,278,937 177,340 16,952,489 236,571 2,797,086 (2,515,399) - - 17,648,087 2,515,399 20,163,486 31 December 2020 207,576,675 2,772,186 51,471,748 5,756,069 2,797,086 (2,515,399) 225,580 (13,995,045) 46,512,225 1,996,288 48,508,513 See note 24 for details of the restatement of the prior year comparatives. The above Consolidated Financial Statements should be read in conjunction with the accompanying notes. Consolidated Statement of Cash Flows FOR THE SIX MONTHS ENDED 31 DECEMBER 2020 (In GBP) Note Six Months Ended 31 December 2020 Year Ended 30 June 2020 Cash flows from operating activities Loss for the period (5,694,503) (6,238,324) Adjustments for: Loss on Disposal of Fixed Asset 1,106 - Depreciation of property, plant and equipment 8 36,157 52,645 Amortisation of exploration & evaluation assets 9 11,469 23,317 Amortisation of right-of-use assets 12 15,549 13,714 Share-based payment expense 15 2,267,239 3,443,359 Finance income 19 - (203,131) Finance expense 19 197,039 11,580 Revaluation of fair value asset and liability 6,7 322,987 (322,987) Changes in working capital items: Increase in other receivables and prepayments (151,833) (85,438) Increase in accounts payable and accrued liabilities 687,582 498,074 Net cash used in operating activities (2,307,208) (2,807,191) Cash flows from investing activities: Cash acquired on acquisition 10 311,964 - Purchase of property, plant and equipment 8 (90,864) (235,117) Purchase of exploration & evaluation assets 9 (3,052,019) (4,942,689) Sale of Property, plant and equipment 1,970 - Loans issued 6 (723,300) (876,201) Interest received - 37,742 Net cash used in investing activities (3,552,249) (6,016,265) Cash flows from financing activities: Net proceeds from the issue of ordinary shares 15i 12,317,964 13,296,266 Gross proceeds from loans and borrowings 7 14,956,849 - Transaction costs arising from financing activities 15i (1,447,201) - Interest paid on lease liabilities (10,523) (11,580) Net cash flows from financing activities 25,817,089 13,284,686 Net increase in cash and cash equivalents 19,957,632 4,461,230 Exchange (losses) / gains on cash and cash equivalents (319,823) 111,740 Cash and cash equivalents at beginning of the period 9,942,729 5,369,759 Cash and cash equivalents at end of the period 29,580,538 9,942,729 The above Consolidated Financial Statements 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 detailed in Section 3 (collectively, the Group) for the period ended 31 December 2020. Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England & Wales. The Registered office has changed during the year. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham GL50 1HX, United Kingdom. The Group's principal activity is precious and base metals exploration and development. The Group owns the world-class advanced Vares Silver Project in Bosnia & Herzegovina. The Vares Silver Project consists of two high-grade polymetallic deposits, located at Rupice and Veovaca. The Group expanded its exploration activities to Serbia during the period with the acquisition of the Tethyan Resource Corp to order to advance the former Kizevak and Sastavci polymetallic mines in the Raska District of southern Serbia. Bosnia & 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. The Vares Silver Project's captivating economics and impressive resource inventory have attracted Adriatic's highly experienced team, which is expediting exploration efforts to expand the current JORC resource. Results of a recent Pre-Feasibility study indicate an NPV8 of US$1,040 million and IRR of 113%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the project into the development phase and through to production. 2. Basis of preparation a Statement of compliance These consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee, and there is an ongoing process of review and endorsement by the European Commission. The Consolidated Financial Statements were authorised for issue by the Board of Directors on 30 March 2021. b Basis of measurement These Consolidated Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value. These Consolidated Financial Statements are presented in Great Britain Pounds ("GBP"). The functional currency of the Company is the Great Britain Pound. c Going Concern The Group incurred a loss in the period of ��5,694,503 (30 June 2020 - ��6,238,324). However, the Group also had a net asset position at the balance sheet date of ��46,512,225 (30 June 2020 - ��20,895,753 ). The Company and Group continue to meet their working capital requirements with the support of investors completed a ��6.2 million equity private placement with the European Bank for Reconstruction and issue of US$20 million in convertible debentures to Queens Road Capital during Q4 2020. The results from the October 2020 Vares Silver Project Pre-Feasibility study indicated a project NPV8 of US$1,040 million and IRR of 113% further underline the Group's future potential as producing mine generating health cash flows. The Group's operations have been largely unaffected by COVID-19 with exploration and development work continuing with only minor disruption. The Vares Silver Project's economics, the resource based of which includes a substantial element attributable to precious metals, remain attractive notwithstanding the impact that COVID-19 has had on commodity prices and demand. Cash flow forecasts prepared inclusive of discretionary expenditure, based on planned levels of future activity including commencement of construction of the Vares Silver Project, indicate that the Group will need to raise additional finance within the next 12 months. However, the Directors' believe that the Group can secure the additional funding necessary to continue in operational existence for the next 12 months at planned activity level from the date of this report and would defer the acceleration in cash burn rate that would arise on the commencement of construction until adequate funding is in place to do so. Cash flow forecasts prepared based on current committed expenditure and non-discretionary spend only, indicate that the Company has sufficient cash resources to continue in operation for a period in excess of 12 months from the date of signing the Consolidated and Parent Company Financial Statements. The Directors therefore believe there is not a material uncertainty regarding going concern that it is appropriate to prepare the financial statements on a going concern basis. 3. Significant accounting policies The preparation of Consolidated Financial Statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgement in applying the Group's accounting policies. Below are the significant accounting policies applied by management. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in note 4. a Basis of consolidation Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including: ��� The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights ��� Substantive potential voting rights held by the company and by other parties ��� Other contractual arrangements ��� Historic patterns in voting attendance. The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. The Consolidated Financial Statements comprise the Financial Statements of the Company and following subsidiaries at 31 December 2020: Name of subsidiary Country of incorporation Shareholding on 31 December 2020 Shareholding on 30 June 2020 Nature of business Eastern Mining d.o.o. Bosnia and Herzegovina 100% 100% Mineral exploration & development Tethyan Resource Corp Canada 100% 0% Holding company - financing mining exploration of subsidiary Tethyan Resources Limited England & Wales 100% 0% Holding company - financing mining exploration of subsidiary Tethyan Resources Jersey Ltd Jersey 100% 0% Holding company - financing mining exploration of subsidiary Taor d.o.o. Serbia 100% 0% Mineral exploration and development Tethyan Resources d.o.o. Serbia 100% 0% Mineral exploration and development Global Mineral Resources d.o.o. Serbia 100% 0% Mineral exploration and development Tethyan Resources Bulgaria EOOD Bulgaria 100% 0% Mineral exploration and development Kosovo Resource Company Kosovo 100% 0% Mineral exploration and development Ras Metals d.o.o. Serbia 10% 0% Mineral exploration and development * The Group holds 10% of the equity in Ras Metals d.o.o. and has an option to acquire remaining 90% it does not hold. The Group has substantive control of Ras Metals d.o.o. and has consolidated the net assets into the Group financial statements. The Group also owns 10% of the equity in EFPP d.o.o. with an option to acquire the remaining 90%. However, the Group does not have substantive control over this entity and has not consolidated the net assets into the Group financial statements. See Section 4 for more details on critical accounting judgements. Entities in which the Group has a shareholding that are not included in consolidation are as follows: Name of subsidiary Country of incorporation Shareholding on 31 December 2020 Shareholding on 30 June 2020 Nature of business EFPP d.o.o. Serbia 10% 0% Mineral exploration and development b Standards, amendments and interpretations adopted During the period, the following new standards and amendments have been implemented. Standard Detail Effective date IAS 1 IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Disclosure Initiative - Definition of Material) 1 January 2020 IFRS 3 Business Combinations (Amendment - Definition of Business) 1 January 2020 N/A Conceptual Framework for Financial Reporting (Revised) 1 January 2020 IFRS 9, IFRS 7, IFRS 4 and IFRS 16 IBOR Reform and its Effects on Financial Reporting - Phase 1 1 January 2020 IFRS 16 Covid-19-Related Rent Concessions - Amendment to IFRS 16 1 June 2020 c Standards, amendments and interpretations effective in future periods At the date of authorisation of these Consolidated Financial Statements, the following new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group. Standard Detail Effective date IFRS 17 Insurance contracts 1 January 2021 IAS 1 Amendment - regarding the classification of liabilities 1 January 2022 IAS 37 Onerous Contracts - Cost of Fulfilling a Contract 1 January 2022 IAS 16 Property, Plant and Equipment: Proceeds before Intended Use 1 January 2022 IFRS 1, IFRS 9, IFRS 16 and IAS 41) Annual Improvements to IFRS Standards 2018-2020 1 January 2022 IFRS 3 References to Conceptual Framework 1 January 2022 Management anticipates that all the pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. The group does not expect these Standard or Interpretation to have a material impact on the entity's financial statements in the period of initial application. d Foreign currency transactions and translations The Group's consolidated financial statements are presented in GBP (��), which is considered to be the Company's functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency which is the currency of the primary economic environment in which the entity operates ('the local functional currency'). i) Transactions and balances Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. 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 GBP (��) at the rate of exchange prevailing at the reporting date and their income statements are translated at average exchange rates prevailing during the period. The exchange differences arising on translation for consolidation are recognised in other comprehensive income. e Cash and cash equivalents Cash and cash equivalents are comprised of cash held on deposit and other short-term, highly liquid investments with original maturities of three months or less. These deposits and investments are readily convertible to known amounts of cash and subject to an insignificant risk of change in value. f Other 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. g Exploration and evaluation assets Pre-license costs Pre-license 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 period 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: �� 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 �� Conducting market studies License costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over the term of the permit. Where the purchase of a business or group of assets provides the group exploration rights, these costs are capitalised in exploration and evaluation expenditure. Once the legal right to explore has been acquired, exploration and evaluation expenditure is charged to profit or loss as incurred, unless the Group concludes that a future economic benefit is more likely than not to be realised. These costs include directly attributable employee remuneration, materials and fuel used, surveying costs, drilling costs and payments made to contractors. In evaluating whether the expenditures 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 on licenses where a JORC-compliant resource has not yet been established is expensed as incurred until sufficient evaluation has occurred in order to establish a JORC-compliant resource. Costs expensed during this phase are included in '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 particular license 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 JORC-compliant reserves are established and development is sanctioned, exploration and evaluation assets are tested for impairment and transferred to 'Mines under construction' which is a sub-category of 'Mine properties' and will be subsequently amortised in line with the useful economic life of the mine and rate of depletion of resources. Exploration and evaluation assets are not amortised during the exploration and evaluation phase and are considered to have an indefinite life until determine as part of a mine plan. h Property, plant and equipment i) Land Land is held at cost less accumulated impairment losses. Once JORC-compliant reserves are established and development is sanctioned, land is tested for impairment and transferred to 'Mines under construction' which is a sub-category of 'Mine properties' and will be subsequently depreciated in line with the useful economic life of the mine and rate of depletion of resources. Land is not depreciated during the exploration and evaluation phase and is considered to have an indefinite life until determine as 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 and an estimate of the costs of dismantling and removing the item and restoring the site on which it is located. iii) Depreciation and amortisation Land is not depreciated. All other short-lived property, plant and equipment depreciation is provided at rates calculated to expense the cost of property, plant and equipment, less their estimated residual value, using the straight-line method over their estimated useful life of the asset giving the following rates: Land Not depreciated Buildings & Leasehold improvements Shorter of 10% or lease term Plant and equipment 15% - 33% Assets under construction Not depreciated The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively if appropriate. i Leases The Group applied IFRS 16 for the first time in the comparative period using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 July 2019), without restatement of comparative figures. There were no adjustments to prior periods as a result of the application of this standard because the Group did not have any leases in the prior year. The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. i) Transition Method and Practical Expedients Utilised The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 July 2019), without restatement of comparative figures. The Group elected to apply the practical expedient to not reassess whether a contract is, or contains, a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. The definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 July 2019. IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17: �� Apply a single discount rate to a portfolio of leases with reasonably similar characteristics; �� Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if IFRS 16 had been applied since the commencement date; �� Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under IAS 36 as at the date of initial application; and �� Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application. As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less. ii) Group as a lessee The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets which, are either expensed as incurred though the income statement or capitalised in exploration and evaluation assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. iii) Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are amortised on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. The Company has a single right of use asset, relating to the lease of an office premised in the UK. Given the nature of the asset, the amortisation charge is included in general and administrative expenses. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. iv) Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities 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. v) 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 value 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 value 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. j 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, 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 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. Currently the Group has not done any significant mining and thus management have assessed that no rehabilitation provision is necessary. k Interest income Interest income is recorded on an accrual basis using the effective interest method. l 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. Except for trade and other receivables which do not contain a significant financing component, 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 Financial assets are 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 classification are met the asset is classified as fair value through the profit and loss or unless management elect to do so provided the classification eliminates or significantly reduces a measurement or recognition inconsistency. a) Cash and cash equivalents and trade and other receivables 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. b) Fair value through profit or loss Financial assets measured at fair value through profit or loss are subsequently measured at fair value with changes in those fair values recognised in the profit and loss statement. Assets held at fair value through profit or loss comprise of the convertible loan asset. 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 profit and loss 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. The Group's financial liabilities initially measured at fair value and subsequently recognised at amortised cost include accounts payables and accrued liabilities, and the liability associated with the right of use asset (note 11). Iii) Convertible debt The proceeds received on issue of the Group's convertible debt are allocated into their liability 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 bond. The remainder of the proceeds is allocated to the conversion option and is recognised as a derivative liability. m 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 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 profit and loss statement. With the exception of goodwill, 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 profit and loss statement. n 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, and 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. The Group has no deferred tax assets or liabilities. o Earnings/loss per share Basic loss per share is calculated by dividing the loss attributable to the common shareholders of the Group by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all dilutive potential common shares, which comprise share options and warrants granted. p Share premium Share premium represents the excess of proceeds received over the nominal value of new shares issued. q Share-based payments & 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 grants warrants to institutions issued as part of an equity raise as part of overall in connection with the acquisition of Tethyan. 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 as 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 profit and loss statement over the vesting period. 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. 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, share-based payments to 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 premium if applicable together with any associated balance in share-based payments reserve are transferred to retained earnings. The dilutive effect of outstanding options is reflected as additional dilution in the computation of diluted earnings per share. r Non-controlling Interest The Group has the choice, on a transaction by transaction basis, to initially recognise any non-controlling interest in the acquiree which is a present ownership interest and entitles its holders to a proportionate share of the entity's net assets in the event of liquidation at either acquisition date fair value or, at the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets. Other components of non-controlling interest such as outstanding share options are generally measured at fair value. The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests. s Segmental reporting The reportable segments identified make up all of 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 has reviewed its operating segments following the acquisition of the Tethyan Resource Corp and subsidiaries in October 2020 and as a result of the expansion in the group's range to operating activities and determined that there are now three distinct reporting segments as follows: �� Bosnia (principally the Vares Project) �� Serbia (principally the Raska Project) �� Corporate (which supports the activities of the other two segments) The Vares and Raska projects operate in two separate distinct jurisdictions and are at different points in their respective project life cycles. 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. Non-current segment assets comprise the non-current assets used directly for segment operations, including intangible assets and property, plant and equipment. Current segment assets comprise the current assets used directly for segment operations, including other receivables and deferred costs. 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. 4. Critical accounting estimates and judgements The preparation of the Consolidated Financial Statements in accordance with IFRS requires management to make certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from these estimates. Information about the significant judgements, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are discussed below. Estimates a Exploration and evaluation asset impairment testing The Group reviews and tests the carrying value of exploration and evaluation assets when events or changes in circumstances suggest that the carrying amount may not be recoverable in terms of IFRS 6. Indicators of impairment the group assesses for are as follows: a) the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed. b) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. c) 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. d) sufficient data exist 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. When such indicators exist, management determine the recoverable amount by performing value in use and fair value calculations. These calculations require the use of estimates and assumptions. When it is not possible to determine the recoverable amount for an individual asset, management assesses the recoverable amount for the cash generating unit to which the asset belongs. The key estimates made includes discount rates, being the Group's weighted average cost of capital, future prices, E&E costs, production levels and foreign currency exchange rates. b Convertible loan valuation The financial instrument was valued at fair value through the profit and loss account in the prior year. The Group has utilised the Black-Scholes Option Pricing Model to estimate the fair value of the conversion option associated with a loan granted to Tethyan Resource Corp. The use of the Black-Scholes option pricing model requires management to make various estimates and assumptions that impact the value assigned to the loan granted to Tethyan Resource Corp. including the forecast future volatility of the share price and the risk-free interest rate. This financial instrument was eliminated on consolidation on the acquisition of Tethyan Resource Corp in the current period for the Group. The conversion option was not enacted, the loan agreement was amended to remove this option and the conversion value was released to the profit and loss in the current period. c Convertible bond valuations The Group issued USD 20 million 8.5% Convertible bonds through a deed of covenant dated 30 November 2020. The bonds are convertible into fully paid equity securities in the share capital of the issuer, subject to and in accordance with the Conditions and the Deed of Covenant. Management engaged experts to assist with the valuation of the bond holders call option imbedded within this agreement. The option is recognised as a derivative liability in the Group and company accounts and required a separate fair valuation. See note 6 for further details regarding these inputs. d Share-based payments 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 the Black-Scholes Option Pricing 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 share which will vest. See note 15 for further details regarding these inputs. Judgements a Functional currency The Group transacts in multiple currencies. The assessment of the functional currency of each entity within the consolidated Group involves the use of judgement in determining the primary economic environment each entity operates in. The Group first considers the currency that mainly influences sales prices for goods and services, and the currency that mainly influences labour, material and other costs of providing goods or services. In determining functional currency, the Group also considers the currency from which funds from financing activities are generated, and the currency in which receipts from operating activities are usually retained. When there is a change in functional currency, the Group exercises judgement in determining the date of change. This assessment is driven by the primary economic environment of each entity including products, labour, materials and professional services and the currency they are primarily transacted in. Name of entity Country of incorporation Functional currency Adriatic Metals PLC England & Wales GBP Eastern Mining d.o.o. Bosnia and Herzegovina BAM Tethyan Resource Corp Canada CAD Tethyan Resources PLC England & Wales GBP Tethyan Resources Jersey Ltd Jersey GBP Taor d.o.o. Serbia RSD Tethyan Resources d.o.o. Serbia RSD Global Mineral Resources d.o.o. Serbia RSD Tethyan Resources Bulgaria EOOD Bulgaria EUR Kosovo Resource Company Kosovo EUR Ras Metals d.o.o. Serbia RSD * Bosnian Marks (BAM) and Republic of Serbia Dinars (RSD) currencies are pegged to the Euro. b Capitalisation of exploration costs The group uses its judgement to determine whether costs meet the capitalisation requirements in terms of the standard and its accounting policy on exploration and evaluation assets to determine whether exploration and evaluation costs should be capitalised or expensed based on whether the activities performed are directly attributable to increasing the value of the project. c Option Agreement Treatment - Control of Ras Metals As part of the Tethyan Resource Corp acquisition, the Group became the beneficiary of three mutually exclusive option agreements under which it could acquire, at its sole discretion, the entire share capital of Ras Metals d.o.o., EFPP d.o.o. and Deep Research d.o.o. The Group assessed each option agreement to determine whether it provided the Company with control over each respective entity and if so from what point in time as follows: i. Ras Metals d.o.o. (Ras) The Group determined that Ras was controlled by the Group from 8 October 2020, being the date at which Tethyan Resource Corp (the option holder) was acquired by the Company, because the Group had the ability and intent to acquire the remaining equity interest in Ras. On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras further details of which are provided in note 25. The consideration paid in order to exercise right to purchase of the remaining equity contains both fixed and variable elements. As a result of the variable element of the consideration payable the Group did not have access to present returns in Ras at 31 December 2020 and has therefore recognised a non-controlling interest in this. ii. EFPP d.o.o. (EFPP) EFPP was determined to be outside the control of the Group because the option agreement holder, Tethyan Resource Corp, was unlikely to exercise its rights under the agreement. This position was further justified when on 22 February 2021, the Group disposed of its 10% equity stake in EFPP for a nominal amount. iii. Deep Research d.o.o. (DR) DR was determined to be outside of the control of the Group because although Tethyan Resource Corp (the option agreement holder) had the ability to control DR via exercise of the option it did not have the intent to do so at present until further exploration work has been completed to determine the economic value of DR to the Group relative to the consideration that would be payable on exercise of the option. 5. Other receivables and prepayments (In GBP) 31 December 2020 30 June 2020 Other receivables 8,729 17,853 Prepayments and deposits 138,088 95,202 Taxes receivable 507,698 338,491 Total 654,514 451,546 All receivables are due within one year. The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia. Split of other receivables and prepayments as follows as at 31 December 2020: Bosnia Serbia Corporate Total Other receivables 829 7,900 - 8,729 Prepayments and deposits 29,475 38,196 70,416 138,088 Taxes receivable 300,426 109,200 98,072 507,698 Total 330,730 155,296 168,488 654,514 Split of other receivables and prepayments as follows as at 30 June 2020: Bosnia Serbia Corporate Total Other receivables 790 N/A 17,063 17,853 Prepayments and deposits 47,999 N/A 47,203 95,202 Taxes receivable 300,997 N/A 74,994 338,491 Total 349,786 N/A 139,260 451,546 6. Financial assets at fair value through profit and loss Tethyan Resources Corp Loan As part of the agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. via a plan of arrangement in British Columbia, the Company provided a convertible loan facility to Tethyan during the prior year and had advanced ���1.8 million under the facility to the date of acquisition on 8 October 2020. Effective the same date this loan was amended removing the convertible option from the loan and the conversion value was released to the profit and loss in the current period. As at 31 December 2020, this financial instrument was eliminated on consolidation for the Group. (In GBP) Tethyan Loan Receivable At 30 June 2019 - Additions 876,201 Interest 12,624 Foreign exchange gain 29,702 Revaluation of fair value asset through profit and loss 322,987 At 30 June 2020 1,241,514 Additions 723,300 Interest 7,129 Foreign exchange gain 32,091 Revaluation of fair value asset through profit and loss (322,987) Acquisition (loan eliminated on consolidation) (1,681,047) At 31 December 2020 - The loan is revalued at its fair value each period end using the following inputs to the Black-Scholes valuation model: 31 December 2020 30 June 2020 Term - 1 year Share Price (CAD) - CAD 0.22 Exercise Price (CAD) - CAD 0.15 Volatility - 140% Risk Free rate - 0.17% 7. Financial liabilities at fair value through profit and loss QRC Convertible Loan The Group issued USD 20 million 8.5% Convertible bonds through a deed of covenant dated 30 November 2020. The bonds are convertible into fully paid equity securities in the share capital of the issuer, subject to and in accordance with the Conditions and the Deed of Covenant. Key terms and conditions of the Bond agreement between the Company and Queens Road Capital (QRC) is provided below. Voluntary conversion The bonds shall be convertible into equity securities of the company at the option of the bondholder at any time from the issue date 1 December 2020 until 30 November 2024. The number of equity securities to be issued on exercise of a conversion price in effect on the relevant conversion date. The initial conversion price is AUD 2.7976 per ordinary share. Redemption and Purchase a) Final redemption: Where the bonds are not converted, redeemed, purchased, or cancelled by the company prior to the final maturity date, the bonds shall be redeemed by the company at their principal amount b) Redemption at the option of the issuer: Option to the issuer to redeem all the bonds outstanding, prior to the final maturity date, at their principal amount together with accrued but unpaid interest to such date if: a. At any time prior to maturity date, the volume weighted average price of the equity securities for 20 consecutive days has exceeded 125% of the Conversion Price; b. The issuer delivers an optional redemption notice that contains an optional redemption date which falls on or after the third anniversary of the issue date; or c. A project refinancing has occurred c) Redemption at the option of bondholder in change of control event: the bondholder receives an option to require the issuer to redeem the bonds prior to the final maturity date. In the event of a change of control, the bonds shall be redeemed at: a. 130% of the principal amount, if the change of control event occurs on or prior to the second anniversary of the issuance date, together with accrued and unpaid interest till such date b. 115% of the principal amount, if the change of control event occurs after the second anniversary of issuance date, together with accrued and unpaid interest till such date d) Redemption at the option of the bondholder in the event of project financing: In any event where the company secures a project financing before the final maturity date of the bonds, the bondholder can require the issuer to redeem the bonds at its principal amount together with the accrued but unpaid interest to such date Accounting Consideration and Results QRC's option to convert the bonds into equity and the associated potential issue of shares give rise to a variable amount of cash that would be received by the Company and therefore the bonds fail to meet the requirements to be classified as equity. The conversion feature of the bonds has therefore been accounted for as a derivative liability, with the value of the conversion feature dependent on foreign exchange rates and other factors as set out below. Management engaged external experts to review the terms of the agreement and perform a valuation. 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 as a derivative liability in the Group and company accounts and required a separate fair valuation. The redemption options in the hands of the bondholder were concluded to be falling outside of the exemptions of IFRS 9 and 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 elected to account for both the imbedded option and loan liability at fair value in the profit and loss. Valuation Model The Black Scholes model was chosen as the most appropriate pricing model to value the company call options. The main assumptions and inputs used in the options pricing model were as follows: �� Dividend yield - assumed to be nil because the Company 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. The Group will be seeking to raise finance to progress the Vares project. Expected term of redemption calculated as 1.15 years from the valuation date. �� Expected volatility - Weekly volatility over the 1.15 years (60 weeks) was calculated as 74.65% prevailing on ASX as of the valuation date. �� 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 2.33 on the valuation date on the ASX Using the assumptions set out above, Black Scholes value of call option in hands of Bondholder is ��3,045,213. Sensitivity Analysis Inputs to the Black Scholes model are based on management judgements regarding probabilities of future events. The results are sensitive to changes in key assumptions, namely the expected term of the bonds and the volatility of the Company's share price. Sensitivity of the loan value to reasonably possible changes in the assumptions of expected term and volatility of the Company's share price are as follows: Change in volatility of Company's share price 50% Unchanged (74.65%) 100% Change in expected term 26 Weeks ��2.15m Decrease ��1.73m Decrease ��0.45m Decrease Unchanged (60 weeks) ��1.28m Decrease - ��1.27m Increase 91 Weeks ��0.67m Decrease ��0.89m Increase ��2.38m Increase (In GBP) QRC Loan Payable At 30 June 2020 - Additions (14,956,849) Interest (105,515) Foreign Exchange gain 321,464 Recognition of fair value embedded option 3,045,213 At 31 December 2020 (11,695,687) Short term borrowings at 31 December 2020 are ��105,515 (30 June 2020: ��nil). Long term borrowings at 31 December 2020 are ��11,590,172 (30 June 2020: ��nil). Derivative liabilities as at 31 December 2020 are ��3,045,213 (30 June 2020: ��nil). 8. Property, plant and equipment Cost (In GBP) Land & Buildings Plant & Machinery Total 30 June 2019 630,978 105,341 736,319 Additions 97,989 139,554 237,543 Foreign exchange difference 7,987 1,296 9,283 30 June 2020 736,954 246,191 983,145 Acquisition Assets - 87,648 87,648 Additions 29,037 61,827 90,864 Disposals - (9,378) (9,378) Foreign exchange difference (10,500) (2,649) (13,465) 31 December 2020 755,491 383,639 1,139,130 Depreciation 30 June 2019 - 15,191 15,191 Charge for the year 14,481 38,164 52,645 Foreign exchange difference 68 4,321 4,389 30 June 2020 14,549 57,676 72,225 Acquisition Assets 0 70,004 70,004 Charge for the period 6,769 29,388 36,157 Disposals - (6,054) (6,054) Foreign exchange difference (342) (2,323) (2,665) 31 December 2020 20,976 148,691 169,667 Net Book Value 30 June 2019 630,978 90,150 721,128 30 June 2020 722,405 188,515 910,920 31 December 2020 734,516 234,948 969,464 The Group has three reporting segments and two operating locations which are Bosnia & Herzegovina and Serbia. Split of Land and buildings net book value as follows: Bosnia Serbia Corporate Total 30 June 2019 630,978 N/A - 630,978 30 June 2020 705,951 N/A 16,454 722,405 31 December 2020 718,939 15,577 734,516 Split of Property Plant and equipment assets net book value as follows: Bosnia Serbia Corporate Total 30 June 2019 67,664 N/A 22,487 90,151 30 June 2020 157,840 N/A 30,675 188,515 31 December 2020 185,129 24,317 25,502 234,948 9. Exploration and evaluation assets Cost (In GBP) Vares Silver Project in Bosnia Raska Project in Serbia Exploration & Evaluation Assets 30 June 2019 4,055,997 - 4,055,997 Additions 5,048,523 - 5,048,523 Foreign exchange difference 49,522 - 49,522 30 June 2020 9,154,042 - 9,154,042 Acquisition (note 10) - 24,456,506 24,456,506 Additions 3,052,019 - 3,052,019 Foreign exchange difference (63,870) (63,870) 31 December 2020 12,142,191 24,456,506 36,598,697 Amortisation 30 June 2019 84,787 - 84,787 Charge for the year 23,317 - 23,317 Foreign exchange difference 769 - 769 30 June 2020 108,873 - 108,873 Charge for the period 11,469 - 11,469 Foreign exchange difference (1,369) - (1,369) 31 December 2020 118,973 - 118,973 Net Book Value 30 June 2019 3,971,210 - 3,971,210 30 June 2020 9,045,169 - 9,045,169 31 December 2020 12,023,218 24,456,506 36,479,724 Exploration and evaluation assets include amount of ��24,456,506 added in the period in respect of Tethyan exploration rights for the TAOR d.o.o. Kremice licence (measured at historical cost ��1,587,934) and Ras Metals d.o.o. licences Kizevak & Sastavci measured as the consideration paid for the combined Tethyan group minus the net book value of assets, being 22,868,571. The remaining exploration and evaluation assets are in respect of the Vares Silver Project concession, located in Bosnia & Herzegovina. The concession is 100% owned by Eastern Mining d.o.o. From 25 May 2020, the Vares Silver Project became subject to a minimum annual concession fee of ���199,325 per annum. Concession fees are included in additions to exploration and evaluation assets and amortisation charged over the life of the concession granted. All other exploration and evaluation assets are not amortised until beginning of the production phase. Additions during the period include BAM 481,800 paid to the Zenica-Doboj Canton following the award of the new concession area in October 2020 which adds some 32.12km2 of land in close proximity to the existing Rupice and Veovaca deposits of the Vares Project. 10. Acquisition note On 11 May 2020, the Company entered into an agreement to acquire 100% of TSX-V listed Tethyan Resource Corp. (TSX-V:TETH) (Tethyan) via a plan of arrangement in British Columbia. The acquisition was finalised on 8 October 2020. The Transaction confirms the enlarged Company as the leading Balkan polymetallic explorer and developer expanding the Company operations to the Raska region of Serbia by bringing the Kizevak & Sastavci projects into the group. As part of the agreement the Company provided a secured convertible loan facility of ���1.8 million to Tethyan was advanced. The funding provided to Tethyan is being used for confirmation and expansion drilling, geophysics, baseline environmental studies at the Raska project in Serbia and general working capital purposes. Tethyan had entered into an option agreement with EFPP d.o.o. (EFPP) the holders of the Kizevak & Sastavci licences, first closing was completed on 14 May 2020 to acquire 10% equity in EFPP d.o.o. Immediately prior to the completion of the acquisition of Tethyan by the Company the Kizevak & Sastavci licences were spun out to a newly formed company Ras Metals d.o.o. (Ras) in which Tethyan also held a 10% equity interest, which had been a condition precedent to closing of Tethyan acquisition. As at 31 December 2020 Tethyan continued to hold a 10% equity interest in Ras and EFPP with the option to acquire the remaining 90% equity in each. On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras, further details of which are provided in note 25, and also disposed of its 10% equity stake in EFPP for a nominal amount. Management performed an assessment and deemed that substantive control of the Tethyan Group, including Ras, was obtained on 8 October 2020. The acquisition of Tethyan was classified as an asset acquisition due to not meeting the definition of a business in line with IFRS 3. See Significant estimates note for further details. Cost of Acquisition Total cost of acquisition is measured as follows: Consideration Value Shares issued ��17,129,828 Share options issued ��236,571 Warrants issued ��2,797,086 Total equity consideration ��20,163,485 Value of consideration payable under Ras Metals d.o.o. option ��2,515,399 Total consideration to be paid ��22,678,884 Adriatic has allotted 13,278,937 new ordinary shares pursuant to the Arrangement. The opening LSE share price on the acquisition date was ��1.29 giving value of total shares issued ��17,129,828. Pursuant to the Arrangement, on Admission Adriatic will also issue 4,128,633 warrants and 469,779 options to Tethyan warrant holders and Tethyan option holders. Management used the Black-Scholes formula to determine the fair value of the warrants and options issued under IFRS 2. The following assumptions were used: �� Strike price & length of contract determined by each individuals option contracts �� Underlying price (��1.29) determined by the opening share price on date of transaction �� 82.3% volatility determined by 100 day LSE ADT1 volatility �� Risk free rate 0.01% used (on basis of short term UK gilt rate giving negative rates) Fair value of options issued ��236,571, fair value of warrants issued ��2,797,086. At any time within 12 months of the first closing, the Company may acquire the remaining 90% ownership stake in Ras Metals by: �� making a payment of ���1,375 to the sellers of Ras; �� grant a 2% NSR over the licenses �� issue 664,000 shares of the Company to the sellers in four equal tranches every six months commencing on second closing; and �� make a EUR 500,000 payment on the two-year anniversary of the first closing. With the exception of the 2% NSR grant over the licenses which can't be reliably estimated at this stage, the fair value of remaining consideration payable under Ras Option agreement was estimated at ��2,515,399 Measurement of assets and liabilities IFRS 10 requirement to record assets acquired at cost; cost is allocated over the group of assets at relative fair value. In the case of an asset acquisition (rather than business combination), the consideration equals the combined fair value of assets acquired. Consideration above the historical book value of assets should be recognised as an exploration and evaluation asset (representing the value of the rights contained within licenses acquired). The Kremice and Kaznovice licenses were historically accounted for as an asset acquisition by the Tethyan Group when originally acquired. The fair value of the consideration paid was determined and allocated as to Exploration and evaluation assets of 250,000 EUR cash plus 12,000,000 shares issued in Tethyan, equating to ��1,587,934. The net asset position of 100% owned Tethyan companies when acquired was (��189,687) which includes the aforementioned exploration and evaluation assets. The Kizevask & Sastavci licenses held by Ras Metals d.o.o. have been assigned the balancing value between Tethyan net assets (��189,687) and the total consideration payable ��22,678,884, being ��22,868,571. The combined exploration and evaluation assets capitalised totals ��24,456,505. Treatment of Ras Metals Option Agreement The company recognises an investment for the fair value of the equity acquired (being 10% share of Ras Metals and 100% share of equity in all other Tethyan entities) totalling ��2,097,170. The excess value of the transaction over the investment is recognised as a call option asset totalling ��20,581,714. The fair value of the remaining consideration to be paid of ��2,515,399 has been recognised as an option liability. When the option liability is paid the amount will be capitalised in exploration and evaluation assets and any difference arising from future foreign exchange movements will be recognised in the profit & loss. Apportioned fair value to Ras Metals d.o.o. 10% owned ��2,286,857 Total investment recognised in company accounts ��2,097,170 Remaining fair value apportioned to 90% call option Ras Metals ��20,581,714 Total Fair Value of Consideration to be paid ��22,678,884 Net liability position of Tethyan 100% owned 189,687 Exploration assets included within the net assets of Tethyan 100% owned entities ��1,587,934 Total exploration and evaluation asset value ��24,456,505 Asset Acquisition The net cash used in the acquisition of subsidiaries and the provisional fair value of assets acquired and liabilities assumed on the acquisition date is detailed below: Fair Value Cash and cash equivalents ��311,964 Other receivables and prepayments ��56,349 Property, plant and equipment ��17,644 Exploration & evaluation asset ��1,587,934 Accounts payable and accrued liabilities (��506,900) Related party borrowings (��1,640,838) Other Equity (��15,840) Total Assets acquired (��189,687) Management have determined there is no present access to returns in Ras Metals d.o.o. owing to the variable consideration included in the exercise price. As such the Group recognises a 90% non-controlling interest in Ras Metals d.o.o. totalling ��2,515,399 measured as the balancing figure between the fair value of the acquisition, fair value of Tethyan assets acquired, the investment recognised in the company accounts. Total assets acquired net of consolidation adjustments (��189,687) Investment eliminated for Group accounts (��2,097,170) Mining and intangible assets recognised on acquisition ��24,456,505 Non-controlling Interest recognised ��2,515,399 Total loss attributable to non-controlling interest post 8 October 2020 acquisition in the period totals (��519,111), combined with the amount recognised on acquisition of ��2,515,399, the balance of non-controlling interest at 31 December 2020 was 1,996,288. 11. Accounts payable and accrued liabilities (In GBP) 31 December 2020 30 June 2020 Trade payables 1,222,012 466,610 Accrued liabilities 639,743 132,826 Other payables 38,682 82,966 1,900,437 682,402 12. Right of use asset Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: (In GBP) Land & buildings 30 June 2019 - Additions 265,612 Amortisation (13,714) 30 June 2020 251,898 Amortisation (15,549) 31 December2020 236,349 The right of use asset relates to the new lease for the Group's head office. Under IFRS 16 this has been recognised as a right of use asset. Set out below are the carrying amounts of lease liabilities and the movements during the year: (In GBP) 30 June 2019 - Additions 265,612 Interest expense 11,580 Payments (11,571) 30 June 2020 265,621 Interest expense 10,523 Payments (20,803) 31 December2020 255,341 Of this amount, ��35,609 is recognised as a current liability and the remainder ��219,731 is shown within non-current liabilities. The following are the amounts recognised in profit or loss: Cost (In GBP) 31 December 2020 30 June 2020 Depreciation expense of right-of-use assets 15,549 13,714 Interest expense on lease liabilities 10,523 11,580 Total amount recognised in profit or loss 26,072 25,294 13. Financial instruments IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: �� Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). �� Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). �� Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3) Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction. Set out below are the financial instruments held at amortised cost and fair value through profit or loss and their fair value measurement hierarchy (excluding short term assets and liabilities). See note referenced for further detail on inputs to fair value for each financial instrument. As at 31 December 2020 (In GBP) Note At amortised cost At fair value through profit or loss Total Fair Value Hierarchy Financial assets Cash and cash equivalents 29,580,538 - 29,580,538 N/A Other receivables and prepayments 5 146,816 - 146,816 N/A Total financial assets 29,727,354 - 29,727,354 - Financial liabilities Accounts payable and accrued liabilities 11 1,900,437 - 1,900,437 N/A Borrowings 7 11,695,687 11,695,687 Level 3 Borrowings - derivative liability 7 - 3,045,213 3,045,213 Level 3 FV Option Liability -acquisition of Ras Metals 10 - 2,515,399 2,515,399 Level 3 Lease liabilities 12 255,341 255,341 Level 3 Total financial liabilities 13,851,465 5,560,612 19,412,077 Net financial assets 15,875,889 (5,560,612) 10,315,277 As at 30 June 2020 (In GBP) Note At amortised cost At fair value through profit or loss Total Fair Value Hierarchy Financial assets Financial asset at fair value through profit and loss 6 - 1,241,514 1,241,514 Level 3 Cash and cash equivalents 9,942,728 - 9,942,728 N/A Other receivables and prepayments 5 113,055 - 113,055 N/A Total financial assets 10,055,783 1,241,514 11,297,297 Financial liabilities Accounts payable and accrued liabilities 11 682,402 - 682,402 N/A Lease liabilities 12 265,621 - 265,621 Level 3 Total financial liabilities 948,023 - 948,023 Net financial assets 9,107,760 1,241,514 10,349,274 14. Financial risk management a Credit risk Credit risk arises from the risk that a counter party will fail to perform its obligations. Financial instruments that potentially subject the Group to concentrations of credit risk consist of cash and cash equivalents and other receivables. Due to the nature of the business, the Company's exposure to credit risk arising from routine operating activities is currently inherently low. However, the Audit & Risk Committee considers the risks associated with new material counterparties where applicable to ensure the associated credit risk is of an acceptable level. The Group's cash is held in major UK, Australian, Serbian and Bosnian financial institutions, and as such the Group is exposed to credit risks of those financial institutions. Under Standard & Poor's short-term credit ratings, the Group's cash balances are all held in institutions with either an A-1 or A-2 rating and as such are considered to have low credit risk. The total carrying amount of cash and cash equivalents, other receivables and the fair value financial asset in respect of Tethyan Resource Corp. represents the Group's maximum credit exposure. The Group's other receivables predominantly relate to value added tax receivables due from governments in the UK and Bosnia. These amounts are excluded from the definition of financial instruments in the accounts and in and event are considered to have low credit risk. Of the remaining other receivables and prepayments, any changes in management's estimate of the recoverability of the amount due will be recognised in the period of determination and any adjustment may be significant. The Board of Directors, with input from the Audit & Risk Committee is ultimately responsible for monitoring exposure to credit risk on an ongoing basis and does not consider such risk to be significant at this time. As such, the Group considers all if its accounts financial assets to be fully collectible. b Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses. The following table illustrates the contractual maturity analysis of the Group's gross financial liabilities based on exchange rates on the reporting date. Contractual gross financial liabilities, shown below, are undiscounted estimated cash outflows which were applicable includes estimated future interest payments. As at 31 December 2020 (In GBP) Within 30 days 30 days to 6 months 6 to 12 months Over 12 months Accounts payable and accrued liabilities 2,172,496 - - - Borrowings 105,515 11,590,172 Derivative liability 3,045,213 Lease liabilities - 17,805 17,805 219,731 2,172,496 123,320 17,805 14,855,116 As at 30 June 2020 (In GBP) Within 30 days 30 days to 6 months 6 to 12 months Over 12 months Accounts payable and accrued liabilities 682,402 - - - Lease liabilities - - - 369,745 682,402 - - 369,745 c Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, commodity prices, and interest rates will affect the value of the Group's financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximising long term returns. The Group conducts development and exploration projects in Bosnia. As a result, a portion of the Group's expenditures, other receivables, cash and cash equivalents, accounts payables and accrued liabilities are denominated in Bosnian Marks, Great Britain Pounds, Australian Dollars, US Dollars, and euros and are therefore subject to fluctuation in exchange rates. As at 31 December 2020, a 10% change in the exchange rate between the Great Britain Pound and the Bosnian Mark and Serbian Dinar, which is a reasonable estimation of volatility in exchange rates, would have an approximate ��0.1 million change to the Group's total comprehensive loss. d Fair values The fair value of cash, other receivables, accounts payable and accrued liabilities approximate their carrying values due to the short-term nature of the instruments. Fair value measurements recognised in the statement of financial position subsequent to initial fair value recognition can be classified into Levels 1 to 3 based on the degree to which fair value is observable. Level 1 - Fair value measurements are those derived from quoted prices in active markets for identical assets and liabilities. Level 2 - Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly, or indirectly. Level 3 - Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data. The level 3 fair value for the loan receivable is disclosed in note 6. There were no transfers between any levels of the fair value hierarchy in the current or prior years. e Capital management The Group's objectives in managing capital are to safeguard its ability to operate as a going concern while pursuing exploration and development and opportunities for growth through identifying and evaluating potential acquisitions of assets or businesses. The Company defines capital as the equity attributable to equity shareholders of the Company which at 31 December 2020 was ��29,526,658 (30 June 2020: ��20,895,753). The Group sets the amount of capital in proportion to risk and corporate growth objectives. The Group manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of the underlying assets. 15. Equity a Authorised share capital The authorised share capital of the Company consists of an unlimited number of voting ordinary shares with a nominal value of ��0.013355. b Common shares issued Shares Share Capital (In GBP) (Restated) Share Premium (In GBP) 30 June 2019 150,782,587 2,013,701 11,084,777 Issue of share capital 25,083,400 334,989 13,015,388 Share issue costs - - (797,655) Shares issued on exercise of options and performance rights 3,975,000 53,087 690,457 30 June 2020 179,840,987 2,401,777 23,992,967 Issue of share capital 5,276,595 70,469 6,129,531 Shares issued on acquisition of subsidiary 13,278,937 177,340 16,952,489 Settlement placement 4,830,156 64,507 4,791,547 Share issue costs 0 (1,598,603) Shares issued on exercise of options and performance rights 4,350,000 58,093 203,817 31 December 2020 207,576,675 2,772,186 51,471,748 The average price paid for shares issued in the period was ��1.06 per share (30 June 2020: ��0.49 per share) c Share options and performance rights All share options and performance rights are issued under the Group's share option plan. The following tables summarise the activities and status of the Company's share option plan as at and during the six months ended 31 December 2020 Weighted average exercise price of options (A$) Number of options Number of performance rights Total options and performance rights 30 June 2019 0.33 19,200,000 - 19,200,000 Issued 1.19 4,000,000 6,560,000 10,560,000 Exercised 0.42 (3,225,000) (750,000) (3,975,000) Expired 0.60 (375,000) (2,000,000) (2,375,000) 30 June 2020 0.46 19,600,000 3,810,000 23,410,000 Issued 2.20 1,000,000 2,575,000 3,575,000 Acquired Tethyan Acquisition 0.66 469,779 - 469,779 Exercised 0.61 (3,700,000) (650,000) (4,350,000) Expired - - (2,000,000) (2,000,000) 31 December 2020 0.53 17,369,779 3,735,000 21,104,779 On exercise, holders of performance rights are required to pay ��0.013355 for each performance right exercised, being the nominal value of one ordinary share. Options and performance rights granted in the Period were valued using the Black-Scholes method (section f). As at 31 December 2020 Grant date Options outstanding Exercise price Weighted average remaining contractual life (Years) Expiry date Number exercisable 27 April 2018 9,000,000 A$0.20 2.5 1 July 2023 9,000,000 27 April 2018 1,900,000 A$0.30 0.5 1 July 2021 1,900,000 27 April 2018 1,000,000 A$0.40 0.5 1 July 2021 1,000,000 29 May 2018 1,000,000 A$0.40 0.4 5 June 2021 1,000,000 29 November 2019 1,000,000 A$1.00 1.9 28 November 2022 1,000,000 29 November 2019 2,000,000 A$1.25 1.9 28 November 2022 2,000,000 8 October 2020 182,600 GBP ��0.88 0.6 16 August 2021 182,600 8 October 2020 27,666 GBP ��0.85 1.0 21 December 2021 27,666 8 October 2020 88,533 GBP ��1.06 1.9 5 December 2022 88,533 8 October 2020 29,880 GBP ��1.06 2.0 3 January 2023 29,880 8 October 2020 91,300 GBP ��1.80 3.2 28 February 2024 39,010 8 October 2020 24,900 GBP ��2.22 3.2 7 March 2024 2,490 8 October 2020 24,900 GBP ��1.20 3.6 19 August 2024 2,490 6 November 2020 1,000,000 A$2.20 2.9 7 November 2023 1,000,000 17,369,779 17,272,669 As at 30 June 2020 Grant date Options outstanding Exercise price Weighted average remaining contractual life (Years) Expiry date Number exercisable 27 April 2018 9,000,000 A$0.20 3.0 1 July 2023 9,000,000 27 April 2018 2,500,000 A$0.30 1.0 1 July 2021 2,500,000 27 April 2018 3,100,000 A$0.40 1.0 1 July 2021 3,100,000 29 May 2018 1,000,000 A$0.40 0.9 5 June 2021 - 29 November 2019 1,000,000 A$1.00 2.4 28 November 2022 1,000,000 29 November 2019 2,000,000 A$1.25 2.4 28 November 2022 2,000,000 29 November 2019 500,000 A$1.25 2.4 28 November 2022 500,000 29 November 2019 500,000 A$1.25 2.4 28 November 2022 - 19,600,000 18,100,000 As at 31 December 2020 Grant date Performance rights outstanding Weighted average remaining contractual life (Years) Expiry date Number exercisable 29 November 2019 1,160,000 1.9 28 November 2022 410,000 12 June 2020 250,000 4.0 6 January 2025 - 6 August 2020 1,000,000 3.0 31 December 2023 - 6 August 2020 500,000 4.0 31 December 2024 18 November 2020 825,000 2.0 31 December 2022 - 3,735,000 410,000 As at 30 June 2020 Grant date Performance rights outstanding Weighted average remaining contractual life (Years) Expiry date Number exercisable 29 November 2019 1,310,000 2.4 28 November 2022 - 28 February 2020 2,000,000 0.1 31 July 2020 - 12 June 2020 250,000 3.5 6 January 2024 - 12 June 2020 250,000 4.5 6 January 2025 - 3,810,000 - On exercise, holders of performance rights are required to pay ��0.013355 for each performance right exercised, being the nominal value of one ordinary share. There were no performance rights outstanding at 30 June 2019. d Warrants reserve Warrants were issued as part of Tethyan Resource Corp acquisition. The following table presents changes in the Group's warrants reserve during the six months ended 31 December 2020: (In GBP) Share-based payment reserve 30 June 2020 - Issue of Warrants on acquisition of Tethyan 4,128,633 31 December 2020 4,128,633 As at 31 December 2020 Grant date Warrants outstanding Exercise price Weighted average remaining contractual life (Years) Expiry date Number exercisable 8 October 2020 413,642 A$1.23 0.3 20 April 2021 413,642 8 October 2020 328,671 A$1.23 0.5 29 June 2021 328,671 8 October 2020 527,800 A$1.23 0.6 16 August 2021 527,800 8 October 2020 2,858,520 A$0.88 3.1 30 January 2024 2,858,520 4,128,633 4,128,633 e Share-based payment reserve The following table presents changes in the Group's share-based payment reserve during the six months ended 31 December 2020: (In GBP) Share-based payment reserve 30 June 2019 1,714,826 Exercise of share options (732,000) Expired options (1) - Share-based payment expense 3,443,359 30 June 2020 4,426,185 Exercise of share options (1,173,926) Acquisition of subsidiary 236,571 Share-based payment expense 2,267,239 31 December 2020 5,756,069 (1) Expired in the same accounting period as they were granted. f Share-based payment expense During the year ended 31 December 2020; the Group recognised ��2,267,239 (30 June 2020: ��3,443,359) of share-based payment expense. The fair value of the share-based compensation was estimated on the dates of grant using the Black-Scholes option pricing model with the following weighted average assumptions: For the year ended 31 December 2020 30 June 2020 Risk-free interest rate 0.01% 2.01% Expected volatility (1) 63.65% - 97.76% 78.14% - 115.82% Expected life (years) 0.85 - 4.41 0.42 - 5.18 Fair value per option ��0.55 - ��1.29 ��0.39 - ��0.68 (1) Expected volatility is derived from the Company's historical share price volatility. With the exception of 1,000,000 options granted to non-executive directors during the year (30 June 2020: 3,000,000) that vested immediately, all options and performance rights have both market and non-market vesting conditions. Non-market vesting conditions include group and individual performance targets such as permitting milestones, exploration drilling rates or completion of business improvement projects. Details of the vesting condition relating to options and performance rights issued to executive Directors are included in the Remuneration Committee Report. g Per share amounts 6 months ended 31 December 2020 Year ended 30 June 2020 Loss for the period attributable to owners of equity (In GBP) 5,694,503 6,238,324 Weighted average number of common shares for the purposes of basic loss per share 190,619,399 168,915,249 Weighted average number of common shares for the purposes of diluted loss per share 213,827,441 185,645,660 Basic loss per share (pence) (2.99) (3.69) 3,375,000 (30 June 2020: 5,160,000) options and performance rights have not been included in the calculation of diluted EPS because their exercise is contingent on the satisfaction of certain criteria that had not been met at 31 December 2020. h Foreign Currency Translation Reserve (In GBP) Foreign Currency Translation Reserve 30 June 2019 74,242 Other comprehensive income 145,563 30 June 2020 219,805 Other comprehensive income 5,775 31 December 2020 225,580 i Cash flow from financing activities Net cash flow proceeds from the issue of ordinary shares in the period was ��12,317,964 (30 June 2020: ��13,296,266). Transaction costs arising from financing activities totals ��1,447,201 (30 June 2020: ��1,447,201). 16. Taxation a Current taxation The tax charge for the period comprises: (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Current tax expense - - Prior year tax expense 1,681 - Overseas tax - - Deferred tax expense - - Adjustments to deferred tax liability - - Total tax expense 1,681 - The reasons for the difference between the actual tax charge for the period and the standard rate of corporation in the United Kingdom applied to loss for the year is as follows: (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Loss before tax 5,696,184 6,238,324 Expected income tax recovery at 19% (2019 - 19%) 1,082,275 1,185,282 Expenses not deductible for tax purposes 19,384 (654,238) Different Tax rates applied in overseas jurisdictions (46,601) - Unrecognised taxable losses and timing differences (1,055,058) (531,043) Adjustment for under/(over) provision in previous periods (1,681) - Total income taxes (1,681) - b Deferred tax The Group has no recognised deferred tax balance or gain/loss for the year ended 30 June 2020 or 2019 because of uncertainty regarding future taxable profits. As at 31 December 2020, the Group has, for tax purposes, non-capital losses available to carry forward to future years as follows: (In GBP) 31 December 2020 30 June 2020 Expiry Date UK 12,323,011 4,752,719 Not applicable Bosnia 1,417,043 1,258,100 5 years Serbia 3,073,548 - 5 years Canada 960,972 - 20 years 17,774,574 6,010,819 The expiry of non-capital losses available to carry forward in Bosnia and Serbia is as follows: (In GBP) 31 December 2020 Serbia Bosnia Within one year 514,525 108,477 1-2 years 49,436 205,596 2-3 years 653,104 220,180 3-4 years 722,580 392,646 Within 5 years 1,133,903 490,144 3,073,548 1,417,043 As a result of the Tethyan acquisition, Tethyan Resource Corp was acquired, this company is incorporated in Canada, non-capital losses available to carry forward to future years is ��960,972 with year of expiry 2040. 17. Exploration activities expensed Exploration and evaluation expenditure incurred on licences where a JORC-compliant resource has not yet been established is expensed as incurred until sufficient evaluation has occurred in order to establish a JORC-compliant resource. (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Exploration activities expensed 798,028 - 18. General and administrative expenses (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Wages and salaries 616,278 350,526 Consultancy fees 468,047 676,149 Cash remuneration in respect of qualifying services 1,084,325 1,026,675 Professional fees 313,760 1,051,354 Amortisation 27,017 37,031 Depreciation 36,157 52,645 Audit fee 100,175 47,289 Marketing 75,250 161,003 Stock exchange fees 136,166 358,663 Other costs 342,857 580,974 2,115,707 3,315,634 19. Finance income and expense (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Interest income - 50,366 Foreign exchange gain - 152,765 Finance income - 203,131 (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Interest Expense 82,744 - Interest expense on lease liabilities 10,523 11,580 Foreign exchange loss 103,772 - Finance expense 197,039 11,580 20. Segmental information It is the opinion of the Directors that there are three reporting segments within the operations of the Group which are assessed when evaluation performance Split of performance is below: Segmental Split (In GBP) Six months ended 31 December 2020 Year ended 30 June 2020 Bosnia Serbia Corporate Total Bosnia Corporate Total Exploration activities expenses (5,015) (793,013) 0 (798,028) 0 0 General and administrative expenses (249,932) (425,935) (1,440,840) (2,115,707) (465,903) (2,849,731) (3,315,634) Share-based payment expense 0 (2,267,239) (2,267,239) (3,443,360) (3,443,360) Other income 4,816 4,816 6,131 6,131 Operating Loss (254,947) (1,217,948) (3,703,263) (5,176,158) (465,903) (6,286,960) (6,752,863) Finance income - - 203,131 203,131 Finance expense (197,039) (197,039) (11,580) (11,580) Revaluation of fair value asset (322,987) (322,987) 322,987 322,987 Loss before tax (254,947) (1,217,948) (4,223,289) (5,696,184) (465,903) (5,772,422) (6,238,325) Tax charge 0 0 1,681 1,681 0 0 Loss after tax (254,947) (1,217,948) (4,221,608) (5,694,503) (465,903) (5,772,422) (6,238,325) (In GBP) Period Ended 31 December 2020 Year Ended 30 June 2020 Bosnia Serbia Corporate Total Bosnia Corporate Total Exploration and evaluation assets additions capitalised 3,052,019 24,456,506 - 27,456,506 5,048,523 - 5,048,523 21. Related party disclosures a Related party transactions The Group's related parties include key management personnel, companies which have directors in common and their subsidiaries. The Company engaged Swellcap Limited, a related party controlled by Paul Cronin to provide the Company with corporate office facilities and services, payments totalled ��18,972 for the six months ended 31 December 2020 (30 June 2020: ��34,622). Following the Company entering in to a lease for office premises in December 2019 the Company invoiced Swellcap Limited ��4,816 for office facilities and services for the six months ended 31 December 2020 (30 June 2020: ��6,131). Balances outstanding with related parties was ��13,899 at 31 December 2020 (30 June 2020: ��nil) Transactions with key management personnel are disclosed below. b Key management personnel compensation Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. Key management personnel are considered to be the Non-Executive Directors, the Chief Executive Officer and the Chief Financial Officer, their remuneration is presented below: (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Board fees 104,767 243,594 Consultancy fees 172,991 539,629 Cash remuneration in respect of qualifying services 277,758 783,223 Share based payments expense 736,715 2,880,487 Social security costs 15,030 16,835 1,029,503 3,680,545 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 15f of the accounts. Consultancy fees above include the following amounts paid to related party companies controlled by key management personnel: (In GBP) Related party Controlling party 6 months ended 31 December 2020 Year ended 30 June 2020 Swellcap Limited Paul Cronin 84,999 198,998 GPE Consulting Limited Geoff Eyre 87,992 80,830 Gumtree Limited Sean Duffy - 72,718 There were no balances outstanding with related parties as at 31 December 2020 (30 June 2020: ��nil). 22. Directors and employees Employees of the Group are all employees including Directors, key management personnel and personnel in management positions engaged via management services contracts. The below information relates to all employees and all costs, including those capitalised. (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Gross salaries 724,217 416,930 Consultancy fees 305,914 882,432 Cash remuneration in respect of qualifying services 1,030,131 1,299,362 Social security costs 80,813 62,407 Defined contribution pension cost 2,306 2,975 Share based payments expense 2,267,239 3,443,359 Total 3,380,489 4,808,103 Average number of employees 73 39 Average number of employees has increased to 73 in the period (30 June 2020 - 39 employees) due to increasing staff numbers as the Vares Project progresses as well as the acquisition of Tethyan group. 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 15f of the accounts. Directors' remuneration totalled the following: (In GBP) 6 months ended 31 December 2020 Year ended 30 June 2020 Board fees 104,767 243,594 Consultancy fees 84,999 386,081 Cash remuneration in respect of qualifying services 189,766 629,675 Average number of Directors 6 6 Additionally, the monetary value of directors' share awards that vested in the period, calculated as the number of awards vested multiplied by the share price on the vesting date less options exercise price or performance rights nominal value payable, was ��66,244 (30 June 2020: ��853,978) of which ��66,244 relates to Non-Executive Directors (30 June 2020: ��233,247). The highest paid Director in the six months ended 31 December 2020 received cash remuneration, excluding notional gains on share options or performance rights, of ��106,859 (30 June 2019: ��238,897). The highest paid Director in the year ended 30 June 2020 received remuneration, inclusive of the monetary value of share awards that vested in the year, of ��106,859 (30 June 2020: ��858,889). Of the total amount incurred as Directors remuneration, ��nil (30 June 2020: ��nil) remains in accounts payable and accrued liabilities on 31 December 2020. 23. Commitments and contingencies The Group had no significant commitments as at 31 December 2020 (30 June 2020: ��nil), other than the lease of the Group's head office disclosed in note 12 and annual concession fees disclosed in note 9. 24. Prior year adjustment During the year ended 30 June 2020 (the comparative reporting period) the exercise of share options which had previously generated a cumulative share based payment expense of ��732,000 within the share based payment reserve. On exercise the ��732,000 cumulative charge was incorrectly transferred against the share premium account. Under the provisions of the accounting standards and Companies act, when new shares are issued in connection with an employee share scheme, the share premium account will normally need to reflect only the cash subscribed for the shares. The amount recognised as a cumulative share based payment expense should be credited to a reserve other than share premium. The basis for this is that the services undertaken by the employee do not, as a matter of law, form part of the consideration received for the shares issued on exercise of the options. The adjustment to the comparative figures for the year ended 30 June 2020 represents a change in classification within equity only. With a ��732,000 decrease in the share premium account and an equal increase in retained earnings. There is no impact on the Group and Parent Company Net assets, profit or loss or cash flow statement for the year ended 30 June 2020. 25. Subsequent events On 23 February 2021, the Company completed the acquisition of the entire issued share capital of Ras Metals d.o.o. (Ras) under an agreement held by Tethyan Resource Corp, a wholly owned subsidiary of the Company. The consideration paid for the remaining 90% of the shares in Ras that the Company did not already hold was EUR 1,365,000 in cash plus the allotment of 166,000 Ordinary shares of ��0.013355 each in the Company. Additionally, deferred consideration of EUR 500,000 in cash, is payable on 14 May 2022, and 498,000 Ordinary shares in the Company that will be allotted in three equal tranches on or around 22 August 2021, 22 February 2022 & 22 August 2022. Parent Company Statement of Financial Position AS AT 31 DECEMBER 2020 (In GBP) Note 31 December 2020 (Restated) 30 June 2020 ASSETS Current assets Cash and cash equivalents 27,983,443 9,577,188 Other receivables and prepayments f 5,118,660 139,261 Financial asset at fair value through profit and loss j - 1,241,514 Total current assets 33,102,103 10,957,963 Non-current assets Investment in subsidiaries i 17,324,405 11,021,333 Fair value option asset on acquisition j 20,581,714 - Property, plant and equipment g 41,079 47,129 Right of use asset o 236,349 251,898 Total non-current assets 38,183,547 11,320,360 Total assets 71,285,650 22,278,323 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities h 3,740,393 314,047 Lease liabilities p 35,609 10,530 Option liability j 2,515,399 Borrowings j 105,515 Total current liabilities 6,396,916 324,577 Non-current liabilities Lease liabilities p 219,731 255,091 Borrowings j 11,590,172 Derivative Liability j 3,045,213 Total non-current liabilities 14,855,116 255,091 Total liabilities 21,252,032 579,668 Shareholders' equity Share capital l 2,772,186 2,401,777 Share premium l 51,471,748 23,992,967 Share-based payment reserve l 5,756,069 4,426,185 Warrants reserve expense l 2,797,086 - Retained earnings l (12,763,471) (9,122,274) Total shareholders' equity 50,033,618 21,698,655 Total liabilities and shareholders' equity 71,285,650 22,278,323 See note 24 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives. The Company's loss after tax for the six months ended 31 December 2020 was ��4,957,675 (year ended 30 June 2019: ��5,782,084). The Parent Company Financial Statements of Adriatic Metals PLC, registered number 10599833, were approved and authorised for issue by the Board of Directors on 30 March 2021 and were signed on its behalf by: Paul Cronin Managing Director & Chief Executive Officer Geoff Eyre Chief Financial Officer & Joint Company Secretary Parent Company Statement of Changes in Equity FOR THE SIX MONTHS ENDED 31 DECEMBER 2020 (In GBP) Note Number of shares Value (Restated) Share premium Share-based payment reserve Warrants Reserve (Restated) Retained earnings Total equity 30 June 2019 150,782,587 2,013,701 11,084,777 1,714,826 - (4,072,190) 10,741,114 Loss for the year - - - - - (5,782,084) (5,782,084) Total comprehensive loss - - - - - (5,782,084) (5,782,084) Issue of share capital 15 25,083,400 334,989 13,015,388 - - - 13,350,377 Share issue costs 15 - - (797,655) - - - (797,655) Exercise of options 15 3,975,000 53,087 690,457 (732,000) - 732,000 743,544 Issue of options 15 - - - 3,443,359 - - 3,443,359 30 June 2020 179,840,987 2,401,777 23,992,967 4,426,185 - (9,122,274) 21,698,655 Loss for the period - - - - - (4,957,675) (4,957,675) Total comprehensive loss - - - - - (4,957,675) (4,957,675) Issue of share capital 15 5,276,595 70,469 6,129,531 - - - 6,200,000 Settlement Placement 15 4,830,156 64,507 4,791,547 - - - 4,856,054 Share issue costs 15 - - (1,598,603) - - 142,551 (1,456,052) Exercise of options 15 4,350,000 58,093 1,203,817 (1,173,926) - 1,173,927 1,261,911 Issue of options 15 - - - 2,267,239 - - 2,267,239 Acquisition of subsidiary 13,278,937 177,340 16,952,489 236,571 2,797,086 - 20,163,486 31 December 2020 207,576,675 2,772,186 51,471,748 5,756,069 2,797,086 (12,763,471) 50,033,618 See note 24 of the Consolidated Financial Statements for details of the restatement of the prior year comparatives. See note t for details of the restatement of the prior year comparatives. Parent Company Statement of Cash Flows FOR THE SIX MONTHS ENDED 31 DECEMBER 2020 (In GBP) Note Six months ended 31 December 2020 Year ended 30 June 2020 Cash flows from operating activities Loss for the period e (4,957,675) (5,782,084) Adjustments for: Depreciation of property, plant and equipment g 6,969 16,946 Amortisation of right-of-use assets o 15,549 13,714 Share-based payment expense l 2,267,239 3,443,359 Finance income - (193,468) Finance expense 134,504 11,580 Revaluation of fair value asset 322,987 (322,987) Changes in working capital items: Increase in other receivables and prepayments (3,110,904) (42,015) Increase in accounts payable and accrued liabilities 3,407,207 211,350 Net cash used in operating activities (1,914,124) (2,643,605) Cash flows from investing activities: Investment in subsidiaries (3,309,554) (5,390,808) Purchase of property, plant and equipment (919) (48,789) Loan issued (1,881,641) (876,201) Interest received - 28,079 Net cash used in investing activities (5,192,113) (6,287,719) Cash flows from financing activities Issues of ordinary shares l 12,317,964 13,296,266 Transaction costs arising from financing activities l (1,447,201) Proceeds from loans and borrowings q 14,956,849 - Interest paid on lease liabilities (10,523) (11,580) Net cash flows from financing activities 25,817,089 13,284,686 Net increase in cash and cash equivalents 18,710,852 4,353,362 Exchange (losses) / gains on cash and cash equivalents (304,597) 123,062 Cash and cash equivalents at beginning of the period 9,577,188 5,100,764 Cash and cash equivalents at end of the period 27,983,443 9,577,188 Notes to the Parent Company Financial Statements a. Corporate information These Financial Statements represent the individual financial statements of Adriatic Metals PLC (the "Parent Company"), the parent company of the Adriatic Metals Group for the six months ended 31 December 2020. Adriatic Metals PLC (the Company or the parent) is a public company limited by shares and incorporated in England & Wales. The registered office is located at Ground Floor, Regent House, 65 Rodney Road, Cheltenham, GL50 1HX. b. Basis of preparation i) Statement of compliance These Parent Company Financial Statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively "IFRS") adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006. IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee, and there is an ongoing process of review and endorsement by the European Commission. The Parent Company Financial Statements were authorised for issue by the Board of Directors on 30 March 2021. ii) Basis of measurement These Financial Statements have been prepared on a historical cost basis, except for certain financial instruments that have been measured at fair value. The presentation currency of these Financial Statements is Great Britain pounds ("GBP"). The functional currency of the Company is deemed to be the GBP under IAS 21. iii) Going concern Refer to accounting policies in note 3 of the notes to the Consolidated Financial Statements. c. Accounting policies In addition to the accounting policies in note 3 of the notes to the Consolidated Financial Statements, the following accounting policies are relevant only to the Parent Company Financial Statements. i) Investments in subsidiaries Unlisted investments are carried at cost, being the purchase price, less provisions for impairment. Additional consideration paid when subscribing for new shares, which is the primary mechanism used for funding the subsidiary, are made via capital contributions and recorded as additions to investments in subsidiaries. d. Critical accounting estimates and judgements The preparation of the Parent Company's Financial Statements in accordance with IFRS requires management to make certain judgements, estimates, and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from these estimates. In addition to the critical accounting estimates and judgements in note 4 of the Consolidated Financial Statements, the following information about the significant judgements, estimates, and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses that are relevant only to the Parent Company Financial Statements are discussed below. i) Value of investments in subsidiaries The Parent Company, investments in subsidiary, which are made via capital contributions, are reviewed for impairment if events or changes indicate that the carrying amount may not be recoverable. When a review for impairment is conducted, the recoverable amount is assessed by reference to the net present value of expected future cash flows of the relevant generating unit or disposal value if higher. No impairment indicators were identified in the six months ended 31 December 2020. e. Loss for the period The Parent Company has taken advantage of the exemption under section 408 (3) of the Companies Act 2006 and thus has not presented its statement of comprehensive income in these Parent Company Financial Statements. The Parent Company's loss after tax for the period is ��4,957,675 (Year ended 30 June 2020 - ��5,782,084). f. Other receivables and prepayments Other receivables contain amounts receivable for VAT, prepaid expenses and deposits paid. All receivables are held at cost less any provision for impairment. A provision for impairment is made where there is objective evidence that the receivable is irrecoverable. All receivables are due within one year. (In GBP) 31 December 2020 30 June 2020 Other receivables - 17,063 Prepayments and deposits 70,415 47,203 Taxes recoverable 98,072 74,995 Amounts receivable from subsidiaries (note m) 4,950,173 - 5,118,660 139,261 g. Property, plant and equipment Cost (In GBP) Land & Buildings Plant and machinery Total 30 June 2019 - 26,454 26,454 Additions 17,425 27,405 44,830 30 June 2020 17,425 53,859 71,284 Additions - - - 31 December 2020 17,425 53,859 71,284 Depreciation 30 June 2019 - 3,968 3,968 Charge for the period 970 19,217 20,187 Disposals - - - 30 June 2020 970 23,185 24,155 Charge for the period 878 6,091 6,969 31 December 2020 1,848 29,276 31,124 Net Book Value 30 June 2019 - 22,486 22,486 30 June 2020 16,455 30,674 47,129 31 December 2020 15,577 25,502 41,079 h. Accounts payable and accrued liabilities (In GBP) 31 December 2020 30 June 2020 Trade payables 238,940 233,058 Accrued liabilities 405,205 74,474 Other payables 14,570 6,515 Amounts payable to subsidiaries (note m) 3,081,678 - 3,740,393 314,047 i. Investments in subsidiaries The breakdown of the investments in subsidiaries is as follows: Cost (In GBP) Eastern Mining d.o.o. Tethyan Resource Corp. Total 30 June 2019 5,623,315 - 5,623,315 Additions 5,398,018 - 5,398,018 30 June 2020 11,021,333 - 11,021,333 Additions 4,205,902 2,097,170 6,303,072 31 December 2020 15,227,235 2,097,170 17,324,405 The list of subsidiaries of the Company is presented in note 3a of the notes to the consolidated financial statements. j. Financial Instruments The Company's financial assets and liabilities are classified as follows: As at 31 December 2020 (In GBP) Note At amortised cost At fair value through profit or loss Total Financial assets - - - Related Party Receivables m 1,868,495 1,868,495 FV Option Asset on acquisition r 20,581,714 20,581,714 Cash and cash equivalents 27,983,443 27,983,443 Other Receivables and prepayments f 70,416 70,416 Total financial assets 29,922,354 20,581,714 50,504,068 Financial liabilities Accounts payable and accrued liabilities h 658,715 658,715 Borrowings q 11,695,687 11,695,687 Derivative Liability q 3,045,213 3,045,213 FV Option Liability on acquisition r 2,515,399 2,515,399 Lease liabilities p 255,340 255,340 Total financial liabilities 12,609,742 5,560,612 18,170,354 Net financial assets 17,312,612 15,021,102 32,333,714 As at 30 June 2020 (In GBP) At amortised cost At fair value through profit or loss Total Financial assets Cash and cash equivalents 9,577,188 - 9,577,188 Other receivables f 139,261 - 139,261 Financial asset at fair value through profit and loss n - 1,241,514 1,241,514 Total financial assets 9,716,449 1,241,514 10,957,963 Financial liabilities Accounts payable and accrued liabilities h 314,047 - 314,047 Lease liabilities p 265,621 - 265,621 Total financial liabilities 579,668 - 579,668 Net financial assets 9,136,781 1,241,514 10,378,295 k. Financial Risk Management The Company is exposed to risks that arise from its use of financial instruments. The principle financial instruments used by the Company, from which financial risk arises, are set out in note k. The types of risk exposure the Company is subjected during the year are as follows: i) Credit risk The credit risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 13 of the notes to the Consolidated Financial Statements. ii) Liquidity Risk The liquidity risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 13 of the notes to the Consolidated Financial Statements. The following table illustrates the contractual maturity analysis of the Company's gross financial liabilities based on exchange rates on the reporting date. As at 31 December 2020 (In GBP) Within 30 days 30 days to 6 months 6 to 12 months Over 12 months Accounts payables and accrued liabilities 658,716 - - - Borrowings - 105,515 - 11,590,172 Derivative Liability - 3,045,213 Lease liabilities - 17,805 17,805 219,731 658,716 123,320 17,805 14,855,116 As at 30 June 2020 (In GBP) Within 30 days 30 days to 6 months 6 to 12 months Over 12 months Accounts payable and accrued liabilities 314,047 - - - Lease liability - - - 369,745 314,047 369,745 iii) Market risk The market risk that the Parent Company is exposed to, and the mitigation thereof, is substantially the same as that of the Group as a whole. Further details are provided in note 14 of the notes to the Consolidated Financial Statements. As at 31 December 2020, a 10% change in the exchange rate between the Great Britain Pound and the Australian Dollar, which is a reasonable estimation of volatility in exchange rates, would have an approximate ��0.6 million change to the Parent Company's total comprehensive loss. iv) Fair values The fair value of cash, other receivables, and accounts payable and accrued liabilities and joint venture obligation approximate their carrying values due to the short-term nature of the instruments. Fair value measurements recognised in the Statement of Financial Position subsequent to initial fair value recognition can be classified into Levels 1 to 3 based on the degree to which fair value is observable. Level 1 - Fair value measurements are those derived from quoted prices in active markets for identical assets and liabilities. Level 2 - Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly, or indirectly. Level 3 - Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data. The level 3 fair value for the convertible loan asset is disclosed in note 6 of the Consolidated Financial Statements. There were no transfers between any levels of the fair value hierarchy in the current period or prior years. l. Equity The movements in share capital, share premium, share based payment reserve, warrants reserve are as detailed in note 15 of the notes to the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions. m. Related party disclosures The Company's related parties include key management personnel, companies which have directors in common and its subsidiaries. Transactions with its Directors and key management personnel and transactions with companies which have directors in common during the period have been disclosed in note 21 of the notes to the Consolidated Financial Statements. The Company had the following related-party balances and transactions during the six months ended 31 December 2020 and the year ended 30 June 2020. (In GBP) Six months ended 31 December 2020 Year ended 30 June 2020 At 31 December 2020 At 30 June 2020 Subsidiary Nature of transaction Transaction amount Transaction amount Balance owed by / (owed to) Balance owed by / (owed to) Eastern Mining d.o.o. Trading 3,081,678 - 3,081,678 - Eastern Mining d.o.o. Capital contribution 4,205,902 5,398,018 (3,081,678) - Tethyan Resources Corp. Loan 1,518,929 - 1,632,007 - Tethyan Resources Limited Loan 236,488 - 236,488 - Tethyan Resources Jersey Loan 55,700 - - - Intercompany loan receivables are assessed for impairment at period end. Intercompany loans were made to fund both corporate costs and exploration projects undertaken by subsidiaries. In company subsidiaries other than Eastern Mining (who hold a JORC resource), exploration expenditure is expensed as incurred and not capitalised, as a result these companies net asset position is lower than their loans payable to the company and not recoverable in the short term. Company policy is to impair intercompany loans provided to fund corporate costs but not to impair intercompany loans provided to fund exploration projects on the basis that these exploration projects will add additional long term value. Management will assess for any impairment indicators on an ongoing basis. n. Financial assets at fair value through profit and loss The movements in Financial assets at fair value through profit and loss are as detailed in note 6 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions. o. Right of use asset The movements in right of use asset are as detailed in note 12 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions. p. Lease liabilities The movements in lease liabilities are as detailed in note 12 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions. q. Borrowings and Derivative Liability The movements in external loans and imbedded derivative liability are as detailed in note 7 of the Consolidated Financial Statements. There are no differences between this and the Parent Company's transactions. r. Fair Value of Option Asset and Liability The movements in fair value of option asset and fair value of option liability are as detailed in note 10 of the Consolidated Financial Statements. The Company may acquire the remaining 90% ownership stake in Ras Metals d.o.o. The excess value of the Tethyan transaction over the investment recorded is recognised as a call option asset totalling ��20,581,714. Value of remaining consideration payable under Ras Option agreement being ��2,515,399 held as a call liability. These balances are eliminated in the Consolidation Group accounts which includes Ras Metals d.o.o. s. Commitments Commitments relating to the Parent Company have been disclosed in note 23 of the Consolidated Financial Statements. t. Subsequent events Subsequent events relating to the Parent Company have been disclosed in note 25 of the Consolidated Financial Statement ends* Market Abuse Regulation Disclosure The information contained within this announcement is deemed by Adriatic (LEI: 549300OHAH2GL1DP0L61) to constitute inside ���information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. The person ���responsible for arranging and authorising the release of this announcement on behalf of Adriatic is Paul Cronin, Managing Director and CEO. For further information please visit www.adriaticmetals.com, @AdriaticMetals on Twitter, or contact: Adriatic Metals PLC Paul Cronin / Thomas Horton Tel: +44 (0) 7866 913207 Tavistock Communications Limited Charles Vivian Tel: +44 (0) 7977 297903 Edward Lee Tel: +44 (0) 7736 220565 Gareth Tredway Tel: +44 (0) 7785 974264 The Capital Network Julia Maguire/Lelde Smits Tel: +61 2 8999 3699 ABOUT ADRIATIC METALS Adriatic Metals Plc (ASX:ADT, LSE:ADT1) is a precious and base metals explorer and developer that owns the world-class Vares Silver Project in Bosnia & Herzegovina and the Raska Project in Serbia. The Vares project's captivating economics and impressive resource inventory have attracted Adriatic's highly experienced team, which is expediting exploration efforts to expand the current JORC resource. Results of a recent pre-feasibility study announced on 15 October 2020 indicate a post-tax NPV8% of US$1,040 million and IRR of 113%. Leveraging its first-mover advantage, Adriatic is rapidly advancing the project into the development phase and through to production with significant cornerstone investment of US$28 million from Queen's Road Capital Investment and EBRD. There have been no material changes to the assumptions underpinning the forecast financial information derived from the production target in the 15 October 2020 announcement and these assumptions continue to apply. There have been no material changes to the assumptions and technical parameters on the updated Mineral Resource Estimate announced on 1 September 2020 and these assumptions continue to apply. Adriatic Metals acquired TSX-V listed Tethyan Resource Corp in 2020, to advance the former Kizevak and Sastavci polymetallic mines in the Raska District, southern Serbia. DISCLAIMER Forward-looking statements are statements that are not historical facts. Words such as "expect(s)", "feel(s)", "believe(s)", "will", "may", "anticipate(s)", "potential(s)"and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to statements regarding future production, resources or reserves and exploration results. All of such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of the Company, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include, but are not limited to: (i) those relating to the interpretation of drill results, the geology, grade and continuity of mineral deposits and conclusions of economic evaluations, (ii) risks relating to possible variations in reserves, grade, planned mining dilution and ore loss, or recovery rates and changes in project parameters as plans continue to be refined, (iii) the potential for delays in exploration or development activities or the completion of feasibility studies, (iv) risks related to commodity price and foreign exchange rate fluctuations, (v) risks related to failure to obtain adequate financing on a timely basis and on acceptable terms or delays in obtaining governmental approvals or in the completion of development or construction activities, and (vi) other risks and uncertainties related to the Company's prospects, properties and business strategy. 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