In a June 15 research note, analyst Adam Schatzker reported that Research Capital Corp. initiated coverage on Emerita Resources Corp. (EMO:TSX.V; EMOTF:OTCMKTS; LLJ:FSE) with a Speculative Buy rating and a CA$2.30 per share target price. In comparison, the stock is currently trading at about CA$0.91 per share.
"Emerita is an excellent exploration vehicle for investors seeking exposure to high quality zinc exploration assets with excellent infrastructure, a solid mining culture and low political risk," Schatzker wrote.
He described Emerita and qualified it as a "new Iberian Pyrite Belt, zinc-focused company." Spain's Iberian Pyrite Belt (IPB) is one of the world's largest and most prolific volcanogenic massive sulfide areas, Schatzker noted. In the IPB, Emerita owns the Iberian Belt West (IBW) concession, having acquired in 2020 through a tender process with the Spanish government.
"The IBW project is, in our view, a highly prospective land package with the potential of hosting at least one economic base metal mine," Schatzker wrote.
Emerita's IBW property contains two projects, La Infanta and Romanera, both offering exploration upside. La Infanta has a historical resource estimate of 800,000 ton grading 1.77% copper, 6.91% lead, 12.66% zinc and 148 grams per ton (148 g/t) silver. Because historical drilling was limited at La Infanta, the resource there could likely be expanded. At the project, Emerita plans to drill 30 holes over 5,000 meters and have magnetic and electromagnetic geophysical surveys conducted there.
As for Romanera, its historical resource estimate is 34,000,000 tons grading 2.3% zinc, 2.2% lead, 0.42% copper, 44.4 g/t silver and 0.8 g/t gold. Emerita aims to expand this deposit through drilling.
"We believe that the company is worthy of investment based on the IBW project alone. However, the real upside for shareholders would be realized should Emerita successfully acquire the Aznalcóllar project through the tender process," Schatzker wrote.
To date, litigation has hindered and delayed the Aznalcóllar-related tender process since 2014, but Schatzker noted it seems as though an outcome will finally occur this year. If Emerita's acquisition of the previously mined Aznalcóllar project goes through, the company will gain a "world-class, brownfield zinc development project" also in the IPW. Additionally, Research Capital would increase its price target on Emerita to $3.30 per share, reflecting a potential 263% return, and the mining company may become a takeout target.
"Upside will be driven by both exploration and the results of the tender process," Schatzker wrote.
As for finances, Schatzker noted that Emerita has enough funds to cover its IBW exploration plans and, should the acquisition go through, initial work at Aznalcóllar. The company has about $8 million in cash as of March 31, 2021 and another roughly $8.6 million in money warrants and options.
