This development has taken place against a backdrop of global inflation, challenging supply chain logistics and the significant ‘sell-off’ of high- risk companies in the second half of 2022.
To address these pressures during this critical period, Buchanan and Adriatic organised a site visit to Vares between 10-12 October 2022, combining key participants from the UK, European, Australian and North American capital markets.
With 30 attendees equally balanced between buy-side and sell-side, the purpose of the site visit was to commence the re-rating of the value of the equity ahead of Adriatic commencing production in Q3 2023.
The core objective of the site visit was to communicate that Adriatic remained on track to complete the construction of Vares, on time and on budget.
This would build confidence in Adriatic’s strategy of developing a high-return/high grade polymetallic asset, using this performance as a springboard for further growth in the Company’s current and prospective asset portfolio.
Increased confidence in the operational management of Adriatic would reduce the perceived risks towards their operations and address the significant discount the market was attributing to the Company at that time.
The narrowing of the gap between the Company’s NPV and its current valuation would largely be addressed through stimulating more buyers of the equity.
To achieve this aim, existing and new shareholders needed to be convinced that the Vares Project would deliver returns similar to those included in the feasibility study from 2021, notwithstanding current market volatility and the changes in pricing of silver, zinc, lead, copper and gold.
The other route to gaining further interest in their stock would be through the generation of ‘buy’ recommendations from existing analyst followers, as well as encouraging broader future coverage from additional independent analysts.
Buchanan commenced pre-marketing in July 2022, supported with the development of key investor materials that ensured the appreciation of Adriatic’s ESG commitments at the core of their business model and in the de-risking of the project.
The response from both the buy-side and the sell-side was overwhelmingly positive.
One of the key objectives was to position Adriatic as a highly competent, professional and efficient business. The logistical challenge of moving 30 guests seamlessly and safely around their operations, as well as the provision of quality materials and the timing of the construction update prior to the site visit, ensured that Adriatic came across as a highly proficient operator – the response from all attendees certainly confirmed that view.
For those investors who were already invested in Adriatic, the visit significantly reduced their perception of the risks which face the Company, and those who were not invested it made them more likely to invest.
From the sell-side, positive research notes were published by Stifel, Tamesis, Canaccord Genuity and BMO and with new independent brokers to soon initiate coverage on Adriatic.
This share price performance demonstrated that Adriatic Metals had already entered the re-rating process – with the share price rising from 95p per share in mid July to over 166p at the beginning of November, up almost 75% in less than four months – which should see further acceleration as the company gets closer to inaugural production in Q3 2023.
The site visit took place during what has been a period of significant volatility in global markets. These conditions had been exacerbated by extraordinary political events in the UK, rising interest rates to combat global inflationary pressures, falling metal prices in the face of global GDP slowdown, and combined with significant redemptions in equity funds within the small and mid cap sector.
Given that Adriatic Metals was at its most vulnerable point of its development to date, facing construction risk, supply chain disruption risks, materials inflation, and the ‘Lassonde Curve’ curse as a development company, Adriatic outperformed not only the market (FTSE 350 Precious Metals Index) but also the key metal prices of silver, zinc and lead in the previous quarter.