Adriatic lifts output, trims forecast pre-Dundee M&A

Adriatic Metals (ASX, LSE: ADT) reported strong gains in silver and gold production in the second quarter even as it lowered full-year projections ahead of its planned acquisition by Dundee Precious Metals (TSX: DPM).

The operator of the Vareš silver-zinc-lead project in Bosnia and Herzegovina said silver-equivalent output rose 23% to 1.7 million oz. in the three months to June 30, up from 1.4 million oz. in the first quarter. The total included 720,449 oz. of silver and 4,840 oz. of gold, both up from 595,993 and 3,998 oz., respectively.

Adriatic also reported increased zinc and lead production, and confirmed that commercial production at Vareš officially began on July 1, just after the quarter ended.

However, Adriatic cut its full-year silver-equivalent production forecast to between 9.5 million and 10.5 million oz., down from a previous range of 12 million to 13 million oz., though still higher year-on-year.

Shares in Adriatic were flat at £2.86 apiece on the earnings report Monday then declined to £2.80 on Tuesday afternoon, valuing the company at £971 million ($1.78 billion). Dundee Precious Metals stock fell 1.7% on Monday $22.80 in Toronto before rising Tuesday morning to $22.90 for a market capitalization of $3.82 billion. 

Veovača construction

The company completed construction of the Veovača tailings storage facility in March, with first tailings deposited in April. A dedicated road linking the plant to the facility became operational in June.

The company’s cash balance stood at US$59 million ($81.2 million) on June 30, down from US$76 million at the end of March.

Adriatic Metals accepted last month a $1.25 billion takeover offer from Dundee Precious Metals, a Canadian gold miner with operations in Bulgaria, Serbia and Ecuador.

“Following the board’s recommendation to accept the proposed acquisition of Adriatic by Dundee Precious Metals, we remain committed to maintaining positive operational momentum throughout this transactional period,” Adriatic Metals CEO Laura Tyler said in the statement.

The merged company will keep its global headquarters in Toronto, while Adriatic’s UK office will shut down.