In an Aug. 13 research note, analyst Adam Schatzker reported that Research Capital Corp. raised its target price on Emerita Resources Corp. (EMO:TSX.V; EMOTF:OTCMKTS; LLJ:FSE) to CA$2.65 per share from CA$2.40 (the current price is about CA$2.08) for two reasons. Emerita released positive initial drill results from IBW's La Infanta deposit, thereby increasing Research Capital's confidence in its potential size. Also, additional news from the court case regarding the Aznalcollar project tender was positive.
Schatzker addressed both developments. Regarding the drill results, the initial two holes drilled in La Infanta hit mineralization, he said. One of them, IN004, which Schatzker described as "very good," returned 7.45 meters (7.45m) of 90.1 grams per tonne (90.1 g/t) silver, 0.49 g/t gold, 1.67% copper, 6.01% lead, and 11.49% zinc from 62.55m downhole. These grades are comparable to those of the historic resource.
Hole IN001, which Emerita drilled nearer to surface and 100m from IN004, was less impressive, likely due to the mineralization there having been leached over time, according to Emerita. IN001 showed 11.5 g/t silver, 0.07% copper, 1.68% lead, and 3.4% zinc from 24.3m downhole in addition to 2.8m of 12.95 g/t silver, 0.02% copper, 3.79% lead, and 7.5% zinc from 32.3m downhole.
Overall, however, Schatzker noted, the results indicate the La Infanta deposit could be as big as Emerita estimates it to be, about 1.2 kilometers long in strike and at least 300m deep. Accordingly, Research Capital increased the deposit's projected size in its model.
"While two drill holes do not make a deposit (especially when one intersects a shallow, leached portion of the deposit), we believe the confirmation of the historic grades helps improve our confidence level of the historic drilling and potential for the deposit to increase in size," Schatzker wrote. "La Infanta itself could become a material, economic deposit for Emerita."
As for Aznalcollar, given the recent news that seems to indicate an eventual favorable resolution for Emerita, Research Capital, in its model, lowered the discount it ascribes to the asset to 20% from 30%, Schatzker noted. Should Emerita be awarded the project tender, Research Capital will remove any discount, which would increase the implied target price for the exploration company to CA$3 per share.
In the meantime, Schatzker pointed, Emerita continues to offer additional upside even though its stock has been doing well. Research Capital maintains its Speculative Buy rating on it.
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Disclosures from Research Capital Corp., Emerita Resources Corp., Update, August 13, 2021
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1. Relevant disclosures required under Rule 3400 applicable to companies under coverage discussed in this research report are available on our web site at www.researchcapital.ca.
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