Adriatic Metals (ADT-ASX/ADT1-LSE) confirmed on 21 May that it is in discussions with Dundee Precious Metals (DPM-TSX:C$22.07| BUY, TP $23.00 | Jeremy Hoy, Canaccord Genuity Corp, Canada) regarding a possible offer for the issued capital in ADT, i.e. a takeover. The ADT share price has since appreciated +40% off the news. To facilitate such discussions, ADT has provided DPM with access to limited due diligence information. Both companies have flagged that discussions remain ongoing and there can be no certainty that any firm offer will be made. Who is DPM?DPM is a geographically diversified precious and base metals producer. It produced 50koz Au and 5.9Mlbs Cu for AISC of US$1,244/oz inQ1/25. It operates the Chelopech (Au-Cu) and Ada Tepe (Au) mines in Bulgaria, ~500km southeast of ADT Vareš Silver Mine in Bosnia, and has advanced stage projects at Čoka Rakita (Au) in Serbia and Loma Larga (Au-Cu) in Ecuador. DPM finished Q1/25 with US$763m of cash (up from US$634m in Q4/24), no debt and US$150m available on the undrawn credit facility (plus a US$100m accordion feature). Sensible transaction:DPM has always screened strongly as a potential suitor for ADT, given similarities in its European assets. However, we suspect other parties may also be interested in ADT's high-grade, low-cost operation, which is nearing commercial production levels following a drawn out ramp-up phase. What is ADT worth?Our prior valuation for ADT was A$4.55/sh, which was risked to 80% with a discount rate of 10% applied given the ramp-up status. This implied a ~US$1bn valuation. Removing the risking, which could be viewed as being taken out of play given the M&A interest in ADT, in our view, our valuation is A$5.50/sh or US$1.25bn (A$1.92bn). Our unrisked valuation at an 8% discount rate (what we would use for peers in steady state production) is A$6.25/sh or US$1.4bn, but ADT is not quite at this stage yet. Valuation and recommendation:We note that ADT ended the MarQ'25 with US$76m in cash and debt of US$100m (excluding liabilities of ~US$47.5m relating to prepayments/streams received). Given the M&A interest, we have removed our risking but maintain our 10% discount rate. Our price target has increased to $5.50 (from $4.55) and we move to a HOLD recommendation on valuation grounds. Our NAV is $6.25 using an 8% discount rate. | 
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