Silver lining for Adriatic as Canadian group lobs buyout offer

A pursuit of the RBC-advised Adriatic by Dundee could be just the start of a growing interest in companies which produce silver.

Australia’s precious metal miners are expected to increasingly benefit from a move by investors towards safe haven commodities, as the $1.7bn listed Adriatic Metals looks to be the latest to capitalise on the trend.

Adriatic announced ahead of the weekend that its directors had recommended a $US1.25bn ($1.9bn) buyout offer from Canada’s Dundee Precious Metals, which is listed in Canada with a $C3.4bn market value.

Dundee will offer $5.56 a share, comprising 0.159 Dundee shares and 93p cash per Adriatic share.

The offer equates to a 47.8 per cent premium to the May 20 closing price of Adriatic on the ASX a day before Dundee’s proposal.

A pursuit of the RBC-advised Adriatic by Dundee could be just the start of a growing interest in companies which produce silver, after gold miners have already been in favour with the commodity price hitting fever pitch this year.

Dundee’s interest in Adriatic stems from the fact that its flagship Vares Silver operation is based in Serbia, where Dundee also operates, with its other assets in Bulgaria.

The Vares operation is ramping up production to nameplate capacity of eight million tonnes per annum in the second half of 2025 and Adriatic has been carrying out expansion studies for increased production.

The Wall Street Journal reported this month that silver notched a fresh 13-year high and was up 23 per cent this year, to $US35.689, the highest level since 2012.

It has risen on demand from industrial users, especially solar-panel makers, as well as from ­nervous investor piling into precious metals.

Dundee confirmed on May 20 that it was in talks regarding a possible offer for the Adriatic business. With the UK takeover rules, where Dundee also trades, a party must make a formal offer for the target within 28 days after its intentions become public.

Both can agree to request an extension to the time frame.

Analysts at Bank of America had recommended their clients stock up on silver given how the market had recently adjusted production levels, as well as booming solar-panel demand, The Wall Street Journal reported.

While silver may be the next best thing for investors to gold and rising in popularity amid a period of geopolitical instability, there are not as many opportunities for Australian groups to capitalise as there are in the gold space.

Australian silver producers are few and far between, with Mexico being one of the world’s largest producers, along with other South America nations.

There’s Silver Mines, that has an asset near Mudgee in NSW, but it has been struggling to gain permitting. Another is Mithril Resources, which is an explorer, and Andean Silver, with a market value under $200m.

A buyout of Adriatic would come just weeks after South Africa’s Harmony Gold agreed to buy MAC Copper for $1.6bn.