Dundee Precious Metals (TSX: DPM) has entered into an agreement to acquire the UK-based Adriatic Metals, The purchase will see Dundee acquire Adriatic and their Vares mine for a figure of $1.3 billion.
The purchase follows Adriatic placing Vares, an underground silver-lead-zinc-gold mine in Bosnia and Herzegovina, into production just last year, with the operation still ramping to nameplate capacity of 0.8 million tonnes per annum.
At capacity, the operation is expected to production 90,000 tonnes per year of zinc concentrate and 65,000 tonnes per year of silver-lead concentrate over a 15 year mine life. That translates to 12 to 13 million ounces of silver equivalent production annualy, with efforts already underway for an expansion that would increase the operation to 20 million ounces of silver equivalent per year.
For Dundee, the acquisition is expected to grow DPM’s annual production to 425,000 ounces of gold equivalent by 2027, following the ramp up of Vares. In gold equivalent terms, Vares is expected to add 168,000 ounces of equivalent production a year to Dundee’s portfolio.
“Vareš is a logical fit with our portfolio, as it significantly increases DPM’s mine life while adding near-term production growth, a highly prospective land package, and cash flow diversification. We are well-positioned to leverage our expertise in underground mining, our regional presence, successful track record of building and ramping up new mines, as well as our strong financial position to further optimize the operation and realize Vareš’ full value potential, based on our analysis,” commented David Rae, CEO of Dundee Precious Metals.
Under the terms of the acquisition, Adriatic Metals shareholders are set to receive 0.159 of a common share of Dundee and 93 pence in cash for each share of Adriatic held, which equates to consideration of £2.68, which is a premium of about 32% based on the 30-day volume weighted average price of Adriatic. Post-transaction, Adriatic shareholders are expected to own an estimated 25% of Dundee Precious Metals.
The transaction remains subject to shareholder and regulatory approvals. The purchase is currently expected to close by the end of December.
Dundee Precious Metals last traded at $20.52 on the TSX.
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