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, down from CA$3.50, noted Arora. The Canadian mineral explorer is now trading at 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 would yield strong recoveries of both precious and base metals.
Trio of Resources
Arora summarized where the resource of each deposit stands currently. 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 costs 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.
| Want to be the first to know about interesting Base Metals, Silver and Gold investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
