Emerita Resources Corp. (EMO:TSX.V; EMOTF:OTCMKTS; LLJ:FSE) has prevailed at all levels of Spain's Criminal Court regarding its legal action concerning the Aznalcollar project, "a trend we firmly believe will continue," noted Clarus Securities analyst Varun Arora in a May 3rd research report.
"A favorable resolution on Aznalcollar will drive a step-change in the [company's] valuation," wrote Arora.
The analyst explained that the legal dispute began in March 2015, when Emerita appealed the granting of the Aznalcollar project tender to Minorbis-Grupo Mexico. COVID-19 and several judges taking early retirement stalled the progress of the case, and a final decision remains pending.
Should this be the outcome, as is expected, the Canadian company will gain in Aznalcollar a significantly derisked project.
However, the proceedings are in the last phase, oral hearings, a starting date for which is expected soon, noted Arora. A judge has been assigned for them, a sign the process is underway. Clarus anticipates the case will finally get resolved this year.
If the judge finds any of the 16 defendants guilty, the original Aznalcollar tender will be revoked and granted to the subsequent bidder, Emerita.
Should this be the outcome, as is expected, the Canadian company will gain in Aznalcollar a significantly derisked project, including a past-producing mine, which could be advanced quickly to underground production, in the next five years, of about 12.6% zinc equivalent, Arora highlighted.
"We expect the two assets to produce at a combined rate of 550,000,000–600,000,000 million ounces of zinc equivalent per year at the lowest quartile costs," Arora wrote and added that this would yield at least US$300 million in free cash flow annually.
Arora indicated that between now and the final court decision, investors could expect results from Emerita's Roman-era project, where drilling began last month with four rigs. They also can expect exploration updates from the company's El Cura and Nuevo Tintillo projects.
"Continued drilling success will drive continued rerating," wrote Arora.
Clarus has a Speculative Buy rating and a CA$5 per share target price on Emerita, the current share price of which is around CA$1.81.
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Disclosures for Clarus Securities Inc., Emerita Resources Corp., May 3, 2022
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