Australian Financial Review
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Street Talk
Adriatic Metals a hot M&A prospect post Sandfire retreat
Anthony Macdonald, Yolanda Redrup and Kanika Sood
Oct 14, 2021 – 9.34pm
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ASX-listed explorer Adriatic Metals’ shareholder register has been blown open for the first time, paving the way for some big mining sector names to take a closer look at the company and its projects.

Adriatic Metals is likely to attract M&A interest as Sandfire Resources cleans out its stake in the company. Supplied
UK-based Adriatic Metals wants to dig for silver and other metals in Bosnia and Herzegovina. Its flagship project, Vares, was said to be worth $US1 billion on a net present value basis (discounted at 8 per cent), could deliver 113 per cent internal rate of return post tax and require $US173 million of capex, according to its definitive feasibility study.
Adriatic is a relatively new entry to the ASX, listing in May 2018 at 20¢ a share for a $26 million market capitalisation. Three years later, it has a $516 million market cap.
Throughout its short-listed life, Sandfire Resources was sitting on a strategic stake, starting with 7.65 per cent on its listing day and building it up to 16 per cent. But this changed on Wednesday, when Sandfire cleaned out, deciding instead to focus on its new $2.57 billion copper and Zinc project MATSA in Spain.
With Sandfire gone, Adriatic Metals’ share register is much more open, and is expected to prompt some opportunistic types to take a look.
RELATED QUOTES
ADTAdriatic Metals PLC
$2.780 -16.52%
1 year1 day
Oct 20Jan 21Apr 21Oct 211.8002.7003.600
Updated: Oct 15, 2021 – 12.23am. Data is 20 mins delayed.
View ADT related articles
SFRSandfire Resources
$5.630 4.84%
Oct 20Jan 21Apr 21Oct 213.8005.7007.600
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Emanuel Datt’s fund owns 4 per cent of Adriatic Metals. Tash Sorensen
Datt Capital’s Emanuel Datt, whose fund owns 4 per cent of Adriatic, says the company would draw plenty of attention and could fetch a price in the US$1 billion range if a bidding war was to ensue.
“For low-quality assets we see M&A transaction values of about 50 per cent of NPV8 and that goes up to 100 per cent for high-quality assets of Adriatic’s calibre. In Adriatic’s case, if a situation arises and [people] bid up, we could see a potential $US1 billion plus acquisition,” he said.

Datt thinks South32 would be the prime candidate, given its existing similar assets and its publicly stated desire to increase base metal exposure.
Others like Rio Tinto, Zijin Mining and Dundee Resources, who already have operations in Eastern Europe, could also be interested.
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He said after Sandfire’s reversal, no other single shareholder owns more than 8 per cent of Adriatic.
“Their register is truly open,” he said.
As Adriatic’s merits, he counted its even balance between precious and base metals revenues, longer mine life of about 10 years, and low initial capital requirement until it starts producing metal.
Lastly, once the mine is running, it can pay back its expenses faster compared to peers at eight months versus three years, Datt said.
Paragon Funds Management chief investment officer John Deniz, who has been invested in Adriatic since it listed, is also bullish on the prospect of a takeover.
“Most of the market knew Sandfire were desperately after Adriatic. But they didn’t have the ability to pay cash at a premium, and many investors including us would not have wanted Sandfire paper,” Deniz said.
Deniz said Adriatic has strong free cashflow potential, and could be attractive to many mid-tier peers and even larger metal miners.
“All of them [mid-tier miners] have depleting assets at the moment, some with short mine lives. The only thing will be some Australian companies may not want to go acquire an asset overseas,” he said.
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