03-Nov-2020:  SFR: Adriatic Metals Investment Update   plus   ADT: Sandfire Resources Litigation Upate

SFR: Sandfire Resources Ltd (ASX: SFR) is pleased to advise that it has entered into a Deed of Settlement and Release with Adriatic Metals Plc (ASX: ADT) whereby both parties have agreed to settle the dispute relating to proceeding CIV 1820 of 2020 brought by Sandfire against Adriatic in the Supreme Court of Western Australia. Under the terms for settlement of the Proceedings, Adriatic will issue to Sandfire 4,830,156 Chess Depository Interests (CDIs) in Adriatic for approximately $8.65 million ($1.79 per CDI) to reinstate Sandfire to 16.2% voting power in Adriatic.

Sandfire and Adriatic have also agreed to having the Proceedings dismissed with no order as to costs.

Sandfire [now] intends to vote in favour of all resolutions at Adriatic's upcoming AGM.

--- end of excerpt ---

ADT: Adriatic Metals PLC (ASX: ADT, LON: ADT1) has entered into a Deed of Settlement and Release with Sandfire Resources Limited (ADT: SFR) where both parties have agreed to settle the dispute relating to proceeding CIV 1820 of 2020 brought by Sandfire against Adriatic in the Supreme Court of Western Australia, as announced on 31 July 2020. Sandfire has agreed to pay Adriatic A$8,649,360.35 in cash for the issue of 4,830,156 Chess Depository Interests (“CDIs”) in the Company, pursuant to Sandfire's anti-dilution right under the previously announced Collaboration and Strategic Partnership Deed.

---end of excerpt ---

[I hold SFR shares, but not ADT shares.  SFR are a substantial shareholder of ADT shares, and will soon own 16.2% of ADT once again.]

30-Oct-2020:  Adriatic Metals Drilling & Metallurgical Results at Kizevak

This announcement has been uploaded directly from ADT's website:  https://www.adriaticmetals.com/investors/asx-announcements/

27-Oct-2020:  Adriatic Metals Secures US$28 million Financing

That version of the ASX announcement is directly from the ADT website (https://www.adriaticmetals.com/investors/asx-announcements/) - because the ASX really messed up the first page of their version.

ADT went into a trading halt before the market opened this morning and announced that they'd secured the $28m at 5:39pm this afternoon.  I guess that's one of the big advantages of placements - they can happen very quickly.  And they cost a lot less obviously than SPPs or Rights Issues. 

In this particular case, they appear to have raised money at a premium to their last traded price also, rather than at a discount.  The European Bank for Reconstruction and Development (“EBRD”) subscribed for £6.2 million (~US$8 million) worth of LON: ADT1 ordinary shares of the Company at a price of £1.175 per share.  They last traded in London at £1.155 (and they closed at £1.115 the previous day - 26-Oct-2020). 

The other part of the raising was a US$20 million private placement of 8.5% unsecured convertible debentures to Queen's Road Capital Investment Ltd. (TSXV: QRC) which are unsecured and will have a four-year term from closing. If not otherwise converted earlier into Ordinary Shares, the Debentures are therefore expected to be refinanced as part of the development funding for the construction of the Vareš Silver Project, significantly before they become due for payment.

A cash coupon of 8.5% per annum is payable quarterly. The Debentures will be convertible at the holder's option into Ordinary Shares at a conversion price of A$2.7976, representing a 30% premium to the 20 day volume weighted average price (“VWAP”) of the Company’s Chess Depository Interests on the Australian Securities Exchange (“ASX”) to 23 October 2020. 

ADT are entitled to redeem the Debentures early at par plus accrued and unpaid interest (i) at any time that the 20-day VWAP on the ASX exceeds 125% of the Conversion Price; (ii) on or after the third anniversary of the date of the issuance of the Debentures, or (iii) from the proceeds of any project financing or other secured debt financing completed after the Closing Date.

While 8.5% p.a. interest seems a little steep in the current climate, this appears to give ADT some optionality and looks like bridging finance, since they intend to pay it back in full when they put together the financing/funding package for Vareš.

All in all, I don't mind it.  Obviously ordinary retail shareholders usually like to get the same opportunities to buy more shares and to be able to maintain their prior percentage ownership of the company - if they choose to - particularly when shares are offered to others at a discount, but there were no discounts on this occasion.

--- click on the link above for the full announcement ---

[I do not hold ADT shares, but I do hold SFR shares, and Sandfire owns ~16% of ADT, 15.87% at last notice, so I have some indirect exposure to ADT.  SFR is also on my Strawman.com scorecard, and ADT was removed (sold) with a +27% gain @ sell prices ranging from $1.26 to $1.31.  They are now trading around +60% higher than those levels - at $2.03/share.  Would have been a good one to have kept on the old scorecard, eh!?!  I am currently slightly underwater on SFR, which is a copper/gold producer (mainly copper) but as a producer they are substantially derisked compared to a project developer like ADT - and I like SFR for a copper price increase over the next couple of years.]

08-Oct-2020:  Tethyan Resource Corporation Acquisition Completed   plus   Completion of Tethyan Resource acquisition

That second announcement was actually lodged at 8:16am this morning, and then the first one (above) was lodged at 9:29am, so is the latest (hence I've put it first).  They are different, but both concern ADT's acquisition of Tethyan Resource Corp. (TSX-V: TETH). 

[I am not currently an ADT shareholder, however I own SFR shares, and SFR own 15.87% of ADT.]

02-Sep-2020:  Adriatic Metals adds Significant Footprint to Vares Silver Project

HIGHLIGHTS

• The Premier of the Zenica-Doboj Canton has approved Adriatic Metals’ application for a significant land extension to its current Concession Agreement.
• Land expansion amounts to some 32.12 square km.
• Land coverage incorporates historical targets known to the Company and is now subject to an aggressive exploration strategy in the coming months.
• Following a change in Cantonal Concession Fees, the fee payable on the expanded area has been substantially reduced.

--- click on link for more ---

01-Sep-2020:  Updated Mineral Resource Estimate

31-7-2020:  Litigation Proceedings Commenced by Sandfire Resources

Adriatic Metals Plc (ASX:ADT, LON:ADT1) refers to its previously announced Collaboration and Strategic Partnership Deed (“Deed”) with its major shareholder, Sandfire Resources Limited (“Sandfire”). 

Sandfire has commenced legal proceedings in the Supreme Court of Western Australia against the Company. Sandfire’s purported claims include a declaration that Adriatic has breached the Deed, specific performance of the Deed, damages, interest and costs.

Sandfire alleges that it was entitled to acquire a total of 4,127,139 shares in Adriatic, in the form of CHESS Depository Interests, at various issue prices pursuant to its anti-dilution right in the Deed.

The Company intends to vigorously defend these claims and will keep its securityholders informed of any material developments in this matter.

--- ends ---

[I do not hold ADT shares currently, but I do hold SFR shares]

We were speculating in recent weeks about why SFR removed their nominated director from the ADT Board.  Was it in preparation for a full takeover attempt, or was it that things had turned sour between the two companies - that their priorities were no longer fully aligned?  It appears to be the latter, but it could actually be both.  However, seeing as SFR are now taking ADT to court, a "friendly" takeover now seems less likely. 

I'm not convinced that SFR have entirely lost interest in taking over ADT, particularly as this court case is all about SFR being able to maintain their previous percentage holding in ADT (at prices that the two companies clearly do not agree on).  SFR believe that their CSPD (Collaboration and Strategic Partnership Deed) agreement had anti-dillution rights in it that guaranteed Sandfire the right to maintain their percentage holding of ADT even when ADT raised capital via private placements, or through any other means in which additional shares were issued by ADT.  It is likely that SFR's view of their agreement meant that SFR thought they should have been able to purchase ADT shares at the same price as the placement price on each occasion (or else at a pre-agreed lower price), but that ADT did not extend that offer to SFR on those occasions.  So, while the honeymoon appears to be over, the real marriage might still be to come.  It's just more likely to be an arranged marriage now, if it happens at all, and the bride might not be entirely happy about it.

11-July-2020:  I just noticed that the ASX issued ADT with a Speeding Ticket (aka "please explain", or, officially, an "ASX Price and Volume Query") yesterday morning and then published that with ADT's official response during the afternoon (just after 2pm).

In their response, ADT said the following:  "Prior to the commencement of trading on 9 July 2020, ADT announced the resignation of John Richards from the board of ADT.  Mr Richards was appointed as a Non-Executive Director of ADT following his nomination by Sandfire Resources Limited (SFR), under the terms of the Collaboration and Strategic Partnership Deed between ADT and SFR.  SFR had advised ADT that they have withdrawn their nomination of Mr Richards.  As a result of the withdrawal of its nominee Director, investors may be speculating as to SFR's intentions with respect to ADT, including potential corporate transactions. ADT advises that it is not in negotiations or discussions with SFR as to any potential further corporate transactions. ADT is not otherwise able to explain the recent trading in its securities."

A little heat came out of the ADT share price as a result of that.  They traded as high as $2.05 earlier in the day, which was +11.7% above their Thursday closing price of $1.835, after they had risen +17.63% on Thursday (from $1.56 to $1.835) on the speculation that they describe here (and that I described in my straw here on Thursdsay morning titled "ADT now in play??"), however - the heat did come out of the share price after the "Speeding Ticket" response was published - and they closed almost flat, down just -1.5 cents (or -0.8%) at $1.82, which was their low of the day.  Still, ADT closed up +20.5% for the week, so there are still some prepared to speculate on some M&A activity from SFR here. 

All we can glean from the ADT response to the ASX query is that SFR and ADT have NOT been in negotiations or discussions regarding a potential corporate transaction, but, as I said on Thursday, I would expect that SFR removing their nominated director from the ADT board might well be a preliminary (early) step in that process, so I wouldn't discount the possibility too much.  In other words, it might still happen.

However, as I also said, it could play out two ways.  The other way it could play out is that SFR are preparing to sell down their ADT stake (or sell out) to a level where they would no longer necesarily be entitled to have a nominated director on the ADT board.  The only time that the ADT share price has been this high before was for a couple of days in January this year, so ADT are basically trading at all time highs (or within a few percentage points of).  SFR have a working copper/gold mine in WA (De Grussa, near Meekatharra) where they are currently well into the high-grade Monty deposit that they found on Talisman Mining's land a couple of year ago (and then bought off TLM), they are actively searching for more viable deposits around De Grussa via a number of JVs with tenement holders, plus Sandfire are already well into the development of two other projects.  The most advanced is their Tshukudu Operations which include the T3 Copper-Silver Project located in the Kalahari Copper Belt in Botswana.  That came via their acquisition last year of MOD Resources.  Sandfire also have their Black Butte copper project in Montana USA.  I wouldn't put it past Karl Simich to take on a third development at the same time as he's developing T3 and Black Butte, but he could also just be positioning his company to realise some decent profit from their ADT investment.

As an SFR shareholder, I actually would prefer it to be the "take profits" option, because I think companies can spread themselves too thin if they try to do too many things at once in different parts of the world.  If SFR do buy out ADT, they would then be operating in Australia while developing projects in Southern Africa (Botswana), and the USA, and in the Balkan Peninsula in southeastern Europe.  And that could be a little too much to do all at once.

If I was an ADT shareholder, I would of course be hoping for the takeover, or I'd be selling into the expectation of one perhaps.

One thing remains fairly certain.  This is not over yet.

09-July-2020:  Resignation of Non-Executive Director John Richards

Interesting.  Sandfire (SFR), who owned 12.78% of ADT at last notice have withdrawn their director nomination (John Richards) on the ADT board, and Mr. Richards has resigned from the ADT board, which has just been announced.  And ADT is up over +10% today so far (at 10:38 eastern).  Not sure what that all means, but I'm following it. 

One possibility is that Sandfire are about to make a takeover bid for ADT, which would be less complicated if they don't have their own nominated director on the ADT board.  That director would obviously have to remove himself from all board discussions that relate to any move by Sandfire to take the company over.  Easier if he's not there at all.  The market might be betting on this being a likely scenario - and buying up ADT.

The opposite scenario is that ADT are preparing to sell out of ADT to realise profits, or to sell down to a level where they are no longer entitled to have their own director on the ADT board.

I own SFR shares, but not ADT.  This could get interesting.

03-June-2020:  Adriatic Metals MINEX Europe Presentation

While ADT is so far down around 4 to 5% today, it's a long game with these types of stocks, unless you want to trade them.  They are Explorers and Project Developers, not Producers, so speculation more than investment. 

Substantial shareholders in ADT include Sandfire Resources (SFR) with 12.78%, Datt Capital with 5.09%, their CEO/MD Paul Cronin with 12.88%, another Director, Milos Bosnjakovic, with 10.61% and Eric de Mori with 7.34%.  There is some smart money on the register as well as plenty of management "skin in the game".

ADT is on my Strawman.com scorecard, although I don't currently own any shares in them.  I do hold shares in Sandfire (SFR) however.

04-May-2020:  ADT - Massive Sulphide Mineralisation Continues at Rupice

23-Apr-2020:  Adriatic Record of Decision Received on Environmental Permit

Adriatic Metals (ADT) is pleased to advise that the Bosnian Federal Ministry of Environment and Tourism has issued a positive Record of Decision (“RoD”) to Adriatic’s subsidiary, Eastern Mining d.o.o., for the Veovaca Environmental Permit, one of the key approvals required for the issue of the Exploitation Permit. With the RoD received, the Environmental Permit will be issued by the Ministry as the RoD is final and cannot be challenged. 

--- click on link for more ---

17-Apr-2020:  Quarterly Activities Report update

08-Apr-2020:  Adriatic Metals Quarterly Activities Report and Cashflow

ADT QUARTERLY ACTIVITIES REPORT For the 3 months ended 31 March 2020:

HIGHLIGHTS:

• Additional mineralised drill intercepts confirmed a robust extension of the high-grade mineralisation, that remains open along strike.
• Further metallurgical test work produced a Copper concentrate grading 25.1% Copper and containing 9,550 g/t Silver and 20.9 g/t gold. A sequential locked cycle test also produced saleable lead, zinc and barite concentrates.
• Successfully negotiated an amendment to the Vares Project Concession Agreement thereby confirming the Company’s rights to gold, silver and copper.
• Reprocessing of gravity survey data over the Rupice and Jurasevac-Brestic areas highlighted several significant geophysical anomalies as drill targets.
• Drilling continues with 5 rigs with over 2,800m of the 2020 exploration program completed.
• Cash balance at 31 March 2019 of £11.8 million (A$23.8 million) ensuring continuity of operations from existing cash resources well into 2021.

...click on link above for more...

Disclosure:  I hold ADT shares.  I also hold SFR shares, and Sandfire owns 12.78% of ADT.  Highly speculative explorer, but for that small portion of your available capital that some people are happy to gamble with (rather than invest), ADT are one of the more active explorers, with a solid copper producer (in SFR) on the register.  ADT will likely give you some serious bang for your bucks based on my past experience with them.  Volatile share price, very news driven, but they tend to release news reasonably regularly - as you do when you've got 5 active drilling rigs operating.  You can trade them, or hold for the takeover that might come (from SFR), or, if you have a lower risk tolerance, you could avoid them altogether.  That would be the best course of action for the vast majority.  I do like a little excitement at the smaller (position) end of my main trading portfolio.  Of course, my larger positions are much bigger companies who are all profitable and reliable, pay dividends, and have very strong balance sheets.  Companies like ADT (and LEG more recently) just add some excitement and interest at the other end.