'There's quite a bit of stockpiling' - Adriatic Metals kicks off production into zinc, silver rally

There's a reason why Chinese industrial companies are stockpiling copper, said Paul Cronin, managing director and CEO of Adriatic Metals.

On Monday Cronin spoke to Kitco Mining.

Adriatic Metals (ASX:ADT) is advancing its Vares silver-zinc project in Bosnia & Herzegovina and the Raska zinc deposit in Serbia. The company announced a grand opening for Vares in March following the production of first concentrate the month prior.

Adriatic's production is hitting the markets at an opportune time with silver prices up for the year and zinc starting to recover. Zinc markets have seen mine closures due to low metal prices, but the market appears to be turning. In the last month, zinc has traded up 3.7% to $2,457 a tonne, and silver is up about 20% year to date.

"Zinc is heavily influenced by construction and industrial activity," said Cronin. "Chinese domestic construction has been quite suppressed for the last couple of years. We're not really seeing that changing; however, zinc prices are starting to recover as zinc inventories are declining, and zinc smelters are scrambling for material."

"There's an interesting dynamic going on. There appears to be quite a bit of stockpiling of material. I can understand why: Chinese industrial [companies] are stockpiling copper. They know the fundamentals of that commodity."

Following an exploration and development investment of $250 million, Adriatic Metals produced its first silver and lead concentrate and zinc concentrate from the newly constructed Vares Processing Plant in February. The Rupice Mine, from which the ore is sourced, commenced mining in July 2023. The company said it will now focus on plant optimisation and ramp up to consistent production. It is scheduled to reach nameplate capacity of 800,000 tonnes per annum in Q4 2024.

Adriatic had contracted out its mine operations. Last week Adriatic announced that it had commenced the transition process to take over as the mining operator at Rupice Mine.

0:00 - Taking over as the mining operator at Rupice Mine
1:24 - Started production in February
1:50 - Switching from contracting mining to directly running
3:30 - Labor shortage
4:50 - Social license
6:40 - Upside to silver prices
8:00 - Zinc markets
11:00 - Nickel market and closing mines.

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