New Metallurgical Findings Would Boost Project NAV

Source: Varun Arora 12/30/2024

Improved metals recoveries make the economics of this three-deposit, polymetallic project in Spain compelling, noted a Clarus Securities report.

Emerita Resources Corp. (EMO:TSX.V; EMOTF:OTCQB; LLJA:FSE) released results of follow-up metallurgical testing at Romanera, one of three deposits at the company’s IBW polymetallic project in Spain’s Iberian Pyrite Belt, reported Clarus Securities Analyst Varun Arora in a Dec. 24 research note. To take into account the findings, Clarus revised its model to reflect the latest metallurgical update, and this led to a reduced target price.

“Overall, we think this is an impactful update that further strengthens our view of potential for compelling economics at IBW,” Arora wrote.

Potential 174% Uplift

Clarus’ new price target on Emerita is CA$3.15 per share, noted Arora. The Canadian mineral explorer was trading at the time of the report at about CA$1.15 per share, reflecting an implied return to target of 174%.

With several catalysts expected throughout the next roughly three to six months, “we think EMO will continue to rerate,” the analyst wrote.

Emerita remains a Speculative Buy.

Better Metals Recoveries

Arora provided the metallurgical results and discussed their implications for project economics. He reiterated that IBW is comprised of El Cura, flanked by Romanera on the west and La Infanta on the east.

As for Romanera, Emerita recently had additional metallurgical testing done there to determine if initial precious metals recovery rates could be improved upon. In fact, recoveries were better for all metals in this deposit.

Regarding gold specifically, preliminary test results indicated potential recoveries of 64.3% versus the 20% used in the 2023 maiden resource estimate, noted the analyst. According to Emerita management, 64.3% is likely at the low end, and recoveries should increase in ongoing testing.

“We are highly encouraged by the massive improvement in gold recoveries,” Arora wrote.

Specifically, he explained, a boost in recoveries to 64.3% from 20%, and using the existing Romanera resource that was based on the latter, economics would improve, just from gold (Au) alone, by an additional US$800 million (US$800M), or US$2,500 per Au ounce) in revenue over the life of mine. This assumes the entire gold resource, 734,000 ounces of 1.4 grams per ton, gets mined.

“Increasing gold recovery to 64% should result in higher tonnage without additional drilling,” Arora added.

With respect to the other metals at Romanera, new recovery rates were 91.3% for zinc (Zn), up 11.7%; 85.8% for copper (Cu), up 25.1%; and 80.5% for silver (Ag), up 33.7%.

Metallurgical testing at La Infanta showed strong recoveries. Even recoveries of precious metals were good using the conventional flotation method: 50.9% for Au and 88.2% for Ag.

As for El Cura, metallurgical testing is about to commence soon. Emerita management expects that, like at La Infanta, conventional flotation could be used and yield strong recoveries of both precious and base metals.

Trio of Resources

Arora summarized where the resource of each deposit currently stands. The current Romanera resource is 16,000,000 tons (16 Mt) of 7.5% zinc equivalent (Zn eq), based on a 20% gold recovery. Additional drilling, however, has been done since the 2023 mineral resource estimate, and it extended the deposit outside the current resource boundary at depth. This suggests the Romanera resource could be expanded further.

La Infanta’s current resource is 2.6 Mt of 13.5% Zn eq (in situ).

As for El Cura, recent drilling indicated potential for a couple million tons of high-grade resource. Hole EC028, for example, returned 13.15 meters of 4.7% copper equivalent (Cu eq), or 14% Zn eq, containing 1.1% Cu, 2.7 g/t Au and 54.6 g/t Ag.

Envisioned Operation

Given the known metallurgy, the proposed flowsheet for IBW consists of two stages. In the first, conventional flotation would be used to produce three different sellable concentrates, one for zinc, one for lead, and one for copper.

In the second stage, a post-flotation process would be done, including pyrometallurgy, on the residual 50–80% of material from stage one. A roaster would be used to oxidize and break down the pyrite and arsenopyrite crystals. Next, leaching would take place to recover gold, silver, and additional base metals.

Whereas stage two will require more capex and opex, “the quantum of improvement in the metallurgical recoveries will likely offset the cost implications,” Arora pointed out.

As for the mine plan, according to the analyst, La Infanta and El Cura could be mined first. Together, they could support 4–5 Mt of high-grade resource (+13% Zn eq in situ) or potentially four to five years of mine life at 1 Mt per year combined throughput.

Romanera could be pushed out to later in the plan. This means stage two capex also could be delayed, by about three or four years, and then funded by cash flows from La Infanta and El Cura.

Updates to Model

Arora reported the adjustments Clarus made to its model on IBW, which led to the decreased target price. For one, Clarus accounted for the latest metallurgical results. This reduced its net present value discounted at 5% (NPV5%) on the project by about 25% to US$407M, from US$544M.

“The decline in our estimated NPV is primarily a result of our prior optimistic assumptions for IBW,” explained the analyst. Previously, Clarus had assumed higher recoveries with conventional flotation and had not anticipated the need for roasting, which requires more capex and opex.

Two, Clarus updated its cost assumptions for IBW to account for inflation since initiating coverage on Emerita in July 2021.

Upcoming Catalysts

Arora pointed out some key events slated to happen in the near term, which could boost Emerita’s share price. An updated mineral resource estimate for IBW is in progress and expected to be completed in Q1/25, around February.

A preliminary economic assessment/prefeasibility study and environmental certificate for the project will follow.

As for the Aznalcollar project, which remains tied up in the courts, a trial date is expected to be assigned within the next six months.

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2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for Clarus Securities Inc., Emerita Resource Corp., December 24, 2024

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. General Disclosure The information and opinions in this report were prepared by Clarus Securities Inc. (“Clarus Securities”). Clarus Securities is a wholly-owned 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. Analyst’s Certification Each Clarus Securities research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst’s personal views about the Company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst’s compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report. Equity Research Ratings Buy: Attractively valued and expected to appreciate significantly from the current price over the next 12-18 months. Speculative Buy: Expected to appreciate significantly from the current price over the next 12-18 months. Financial and/or operational risk is high in the analyst’s view. Accumulate: Attractively valued, but given the current market price, is expected to appreciate moderately over the next 12 -18 months. Hold: Fairly valued and expected to trade in line with the current price over the next 12-18 months. Sell: Overvalued and expected to decline from the current price over the next 12-18 months. Under review: Pending additional review and/or information. No rating presently assigned. Tender: Company subject to an acquisition bid: accept offer. A summary of our research ratings distribution can be found on our website. Dissemination of Research Clarus Securities’ Equity Research is available via our website and is currently distributed in electronic form to our complete distribution list at the same time. Please contact your Clarus institutional sales or trading representative or investment advisor for more information. Institutional clients may also receive our research via THOMSON and REUTERS. For additional disclosures, please visit our website http://www.clarussecurities.com. © Clarus Securities Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.

( Companies Mentioned: EMO:TSX.V; EMOTF:OTCQB; LLJA:FSE, )

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