Toronto-listed Dundee Precious Metals (DPM) will acquire London- and Sydney-listed Adriatic Metals in a cash-and-stock deal valuing the silver-focused miner at about $1.25-billion, the companies said on Friday.

The Vareš silver operation in Bosnia and Herzegovina is Adriatic’s flagship asset. DPM already operates mines in the Balkans and sees the addition of Vareš as a strategic complement to its portfolio.

“The Vareš is a logical fit with our portfolio, and adds near-term production growth and mine life, a highly prospective land package, and cash flow diversification,” said DPM CEO David Rae.

“We are well-positioned to leverage our expertise in underground mining and our strong financial position to further optimise the operation and realise Vareš' full value potential, based on our analysis.”

Adriatic CEO Laura Tyler added that the Vareš operation remained on track to become a low-cost precious metal producer, underpinned by a long mine life, a high-grade deposit and strong exploration potential. “This transaction brings together complementary strengths to create a dynamic and diversified mining company with meaningful scale," she said.

Last year, the Vareš operation completed construction and produced first concentrates that were sold to customers. The company is producing silver/lead and zinc concentrates that are sold to European smelters and beyond. The operations are ramping up production to nameplate capacity to 0.8-million tonnes a year, which is expected in the second half of 2025. Adriatic is undergoing expansion studies to potentially increase production to 1.3-million tonnes a year.

Under the agreed terms, Adriatic shareholders will receive 0.1590 new DPM shares and 93p in cash for each Adriatic share, implying a value of 268p a share based on DPM’s closing price of C$20.33 on Wednesday.

The offer represents a premium of 50.5% to Adriatic’s closing price on the LSE on May 19 and 47.8% to the ASX closing price on May 20, prior to the start of the offer period. 

DPM has secured support for the transaction from Adriatic directors and shareholders representing 37.23% of the company. DPM directors and executives holding a combined 0.19% of DPM shares have also agreed to vote in favour of the deal.

DPM said the transaction would be accretive to cash flow per share in the first year after completion and aligned with its capital return policy. The company expects further upside from full ramp-up of Vareš and corporate and operational synergies.

Analysts at SP Angel say in a note that they believe it is a good deal for Adriatic shareholders, following an extended ramp-up process at Vareš. "We are fans of the Dundee team and see the potential for the pro-forma entity to build an exciting Balkan story, hitting nameplate at Vareš and bringing Coka Rakita into production by 2027," they say.

"Focus will be on optimising the Vareš processing plant, regional exploration and sustaining the current high-margin Bulgarian operations. Zijin may be a potential interloper, given their presence in the region, although we see this as an unlikely outcome," the analysts' note states.