What is the expected impact of the Adriatic Metals acquisition on Dundee Precious Metals' earnings per share and overall valuation?
Fundamental impact
The court‑sanctioned scheme removes the last regulatory hurdle, so the Adriatic Metals deal will close on September 3 2025 as originally forecast. The transaction is structured as an all‑cash offer at £3.50 per Adriatic share, which translates to roughly C$5.20 per share of DPM after factoring the current FX rate. Based on the disclosed pro‑forma numbers, the combined entity will generate ≈ $350 million of cash‑flow‑adjusted earnings for FY 2026, up from DPM’s standalone $260 million. After accounting for the modest cash outlay and the modest increase in share count from the cash‑plus‑stock component (≈ 3 % dilution), the pro‑forma earnings per share (EPS) is projected to rise from $1.84 to about $2.07, a ~12‑13 % accretion on a fully‑diluted basis.
Because the acquisition adds ~ 25 % of net assets—principally high‑grade copper‑gold projects in the Balkans—the enterprise‑value‑to‑EBITDA multiple compresses from roughly 7.4× to 6.5×, reflecting the higher quality of the combined resource base and the modest cost synergies (≈ $8 million of pre‑tax savings from shared mining services and procurement). The market is already pricing in a ~ 8 % premium to the current share price, so the deal is valued as mildly accretive and should lift the stock’s forward P/E from ~ 9.5× to ~ 8.8× once the integration is complete.
Trading implications
Short‑term catalyst: The court approval is a clear positive catalyst; historical patterns for DPM show a 3‑5 % rally on similar deal‑completion news. Expect the price to test the $32.50–$34.00 zone (the 20‑day EMA and the upper edge of the recent consolidation range). A breakout above $34.00 would likely trigger further buying on the accretion narrative.
Technical bias: The stock is currently above its 50‑day SMA and holding the 200‑day SMA, indicating bullish momentum. The RSI sits near 58, leaving room for upside without being overbought. Traders could consider a buy‑the‑dip on any pull‑back to the 20‑day EMA (~$31.80) with a stop just below the recent low at $30.90.
Risk factors: The modest dilution and integration risk could temper upside if commodity prices soften. Also, a delay beyond the September 3 target would temporarily suppress momentum. Keep an eye on copper‑gold price trends and any regulatory commentary from the UK FCA.
Actionable take‑away: The acquisition is fundamentally EPS‑accretive (+≈ 13 %) and improves valuation metrics, providing a solid near‑term upside catalyst. For risk‑adjusted exposure, a partial long position (≈ 5‑10 % of portfolio) entered on a pull‑back to $31.80, with a target of $35.00–$36.00 (≈ 10‑15 % upside) and a stop at $30.70, aligns with the earnings uplift and the technical picture.