Silver Miners Continue to Be Snapped Up
Adriatic the latest silver producer to be acquired
M&A in the silver space has continued to ramp up over the past 12 months.
The latest deal announced was the US$1.25 billion acquisition Adriatic Metals (LSE: ADT1/ASX: ADT) by Dundee Precious Metals Inc (TSX: DPM) on Friday.
It comes after the two companies confirmed discussions last month.
Adriatic shareholders will receive 0.159 of a Dundee share and 93 pence cash for each share held, representing a premium of 50.5% to Adriatic’s undisturbed UK share price and a 47.8% premium to the Australian CDI price before the negotiations were first revealed.
Adriatic shareholders will hold around 24.7% of the enlarged Dundee.
The offer is fully recommended by Adriatic’s board, with shareholders representing 37.23% expressing their support.
Adriatic operates the Vareš silver operation in Bosnia & Herzegovina, which was commissioned last year.
The operation is still in the ramp-up phase, with 2.2 million ounces of silver produced in the first four months of the year.
Commercial production is expected to be declared this month.
Dundee’s two operating mines are in Bulgaria but it also holds the advanced Timok and Čoka Rakita projects in Serbia.
Dundee said the deal would boost its production outlook from 308,000 gold equivalent ounces this year to 458,000oz in 2027 and its market capitalisation from US$2.6 billion to US$3.8 billion with the potential for a re-rate.
Canaccord Genuity analyst Jeremy Hoy said the acquisition was a positive for Dundee and lifted his price target by C$2 to C$25.
“We estimate that Vareš production would backfill the production dip that occurs as Ada Tepe winds down and support production growth to circa 500,000oz AuEq by 2029 (71% above our 2025 estimate),” he said.
“DPM remains a precious-metals-focused company, and we estimate gold and silver revenues dipping to circa 70% in 2028 but rebounding back to around 80% once Čoka Rakita is in production in 2029.”
Deals flowing
The Adriatic acquisition follows last month’s news that Pan American Silver Corp (NYSE/TSX: PAAS) was acquiring MAG Silver Corp (NYSE/TSX: MAG) in a cash and scrip deal valuing MAG at US$2.1 billion.
MAG’s primary asset is a 44% stake in the Juanicipio mine in Mexico, operated by Fresnillo (LSE: FRES).
Juanicipio is expected to produce 14.7-16.7 million ounces of silver this year at all-in sustaining costs of US$6-8 an ounce, generating free cashflow of at least US$200 million on a 100% basis.
The acquisition of MAG follows First Majestic Silver’s (TSX: AG) US$970 million purchase of Gatos Silver and Coeur Mining’s (NYSE: CDE) US$1.7 billion takeover of SilverCrest Metals in the fourth quarter of 2024.
On a smaller scale, Endeavour Silver (NYSE: EXK/TSX: EDR) recently announced the US$145 million acquisition of Peruvian producer Minera Kolpa.
Canaccord believes Andean Silver (ASX: ASL), owner of the Cerro Bayo project in Chile, could be a takeover target.
Cerro Bayo has a silver equivalent resource of 111Moz and existing infrastructure with an estimated replacement value of US$150 million.
“In our view, the appetite for quality silver/gold assets is high, and with ASL's growing resource base (scale and confidence), its significant infrastructure endowment and rapidly evolving greenfield/discovery story, we believe the company screens well for attracting corporate interest,” analyst Tim McCormack said recently.
The silver price has broken out this month, reaching a 13-year high of more than US$36/oz.