Iberian Belt West (IBW) project in Spain is "set to deliver great news flow and likely surprise investors to the upside," Varun Arora, Clarus Securities analyst, reported in a Dec. 7 research note after a site visit.
"Significant IBW news flow should drive [a] strong rerating," Arora added. "Many mile markers will be passed in 2023 on the way to demonstrating IBW has what it takes to be a mine."
Good Time To Buy
Emerita is currently priced at about CA$0.79, and Clarus' target price on the stock is CA$4 per share, Arora indicated. The difference between these two amounts represents a remarkable, 406%, possible return for Emerita investors. In the most conservative of cases, the analyst pointed out, the potential for at least a 100% return exists.
The CA$4 target price is new, recently lowered from CA$5 when Clarus updated its valuation model on the company, Arora noted. Clarus revised its assumptions after the trial date concerning the ongoing dispute over the Aznalcóllar bid, in which Emerita is involved, was recently set for March 2025.
"We expect significant option value (about CA$2.75–$3 per share) to start showing in the share price as the trial date approaches," wrote Arora.
Clarus rates Emerita Speculative Buy.
"A disconnect due to the Aznalcóllar trial timing, management's messaging around the proceedings and tax loss selling is creating a buying opportunity," Arora purported.
Major Milestones Near
Emerita is on track to release a maiden resource for IBW in Q2/23. Encompassing only Romanera and La Infanta, the initial resource estimate could be as much as 20,000,000 tons of 10–12% zinc equivalent, Arora highlighted.
Later, in H2/23, Emerita is expected to release metallurgical test results and follow with a prefeasibility study by year-end 2023.
Continual News Expected
Along with this milestone news on the horizon, a long stream of drill and exploration results is expected from multiple targets at IBW given 14 rigs are active there, Arora wrote and noted the work Emerita is doing now and plans to do in the near term.
There will be drill results from Romanera and La Infanta, from at least 60 holes, half of which are completed and the remainder are underway. All will be included in the upcoming maiden resource. There is even further resource expansion potential from these two deposits as they remain open.
"Not all the mineralized area will make it into an underground resource, but with the current mineralized area being about two times the historic area, the chance of adding significant tonnage at Romanera seems high," wrote Arora.
There also will be results of exploration work at El Cura and Nuevo Tintillo. Emerita plans to start drilling at El Cura and Nuevo Tintillo's Santa Flora in Q1/23.
Further, should Emerita decide to also drill the regional targets it has identified, results from those efforts would add to the news flow.
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Disclosures For Clarus Securities Inc., Emerita Resources Corp., December 7, 2022
Clarus Securities Equity Research Disclosures: The analyst has visited the Company’s operations in Spain in November 2021. Partial payment or reimbursement was received from the issuer for the associated travel costs. Within the last 24 months, Clarus Securities Inc. has managed or co-managed a public offering of securities of this company. Within the last 24 months, Clarus Securities Inc. has received compensation for investment banking services with respect to the securities of this company.
General Disclosure: The information and opinions in this report were prepared by Clarus Securities Inc. (“Clarus Securities”). Clarus Securities is a whollyowned subsidiary of Clarus Securities Holdings Ltd. and is an affiliate of such. The reader should assume that Clarus Securities or its affiliate may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. The opinions, estimates and projections contained in this report are those of Clarus Securities as of the date of this report and are subject to change without notice. Clarus Securities endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, Clarus Securities makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to Clarus Securities or its affiliate that is not reflected in this report. This report is not to be construed as an offer or solicitation to buy or sell any security. No part of this report may be reproduced or re-distributed without the written consent of Clarus Securities.
Conflicts of Interest: The research analyst and/or associates who prepared this report are compensated based upon (among other factors) the overall profitability of Clarus Securities and its affiliate, which includes the overall profitability of investment banking and related services. In the normal course of its business, Clarus Securities or its affiliate may provide financial advisory and/or investment banking services for the issuers mentioned in this report in return for remuneration and might seek to become engaged for such services from any of such issuers in this report within the next three months. Clarus Securities or its affiliate may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. Clarus Securities, its affiliate, and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities discussed herein, or in related securities or in options, futures or other derivative instruments based thereon.
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