Research Capital Corp. lowered its target price on Emerita Resources Corp. (EMO:TSX.V; EMOTF:OTCMKTS; LLJ:FSE) to CA$1.20 per share from CA$3.75 on the news a March 2025 date has been set for the oral hearing portion of the Spanish criminal trial regarding the Aznalcóllar project bidding process, reported analyst Adam Schatzker in a Nov. 28 research note. Speculative Buy-rated Emerita is currently trading at CA$0.72 per share.
"This [date] is much further into the future than we had expected," Schatzker wrote.
Accounting For Uncertainty
The analyst noted that despite a date for the start of the trial now being on the court books, the timing, as well as the outcome, of the legal proceedings remains uncertain. The resulting overhang on Emerita's share price continues.
"We think it is unfortunate that the 'noise' of the criminal trial/tender process has had such a negative impact on Emerita's share price, and we believe that there remains significant fundamental value driven by the exploration assets in the Iberia Belt West project," Schatzker wrote.
Given the delay and the uncertainty, Research Capital has revalued Aznalcóllar as more of an option value than an exploration asset and revised other assumptions in its model on Emerita, wrote Schatzker.
For one, it now is valuing the in situ resource for Emerita using US$0.015 per pound versus the US$0.035 per pound it had been using.
Also, Research Capital reduced its precious metals price assumptions. For gold, it is now using US$1,750 per ounce versus US$1,850 previously, and for silver, US$22 per ounce, compared to US$25.50 per ounce previously.
Further, Research Capital now estimates the criminal trial over the Aznalcóllar tender will wrap up in three years, and the court will take between six and 18 months to render its decision, noted Schatzker.
These changes led to the new target price on Emerita of CA$1.20 per share.
Inherent Fundamental Value
Schatzker pointed out that if Aznalcóllar were not included in the model, Research Capital's target price on Emerita would be CA$0.90 per share, implying a return of about 50%.
Research Capital expects drilling to be successful at Romanera within and beyond the historic resource area.
"We think it is unfortunate that the 'noise' of the criminal trial/tender process has had such a negative impact on Emerita's share price, and we believe that there remains significant fundamental value driven by the exploration assets in the Iberia Belt West project," Schatzker wrote.
Those projects include Romanera, currently the "centerpiece of Emerita and offers significant upside potential for investors," described Schatzker. Research Capital expects drilling to be successful there within and beyond the historic resource area. There also is Infanta, which Research Capital believes has value "given the past successful exploration [there] and potential to increase the resource in the future."
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1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures For Research Capital Corp., Emerita Resources Corp., November 28, 2022
Analyst Certification: I, Adam Schatzker, certify the views expressed in this report were formed by my review of relevant company data and industry investigation, and accurately reflect my opinion about the investment merits of the securities mentioned in the report. I also certify that my compensation is not related to specific recommendations or views expressed in this report. Research Capital Corporation publishes research and investment recommendations for the use of its clients. Information regarding our categories of recommendations, quarterly summaries of the percentage of our recommendations which fall into each category and our policies regarding the release of our research reports is available at www.researchcapital.com or may be requested by contacting the analyst. Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report.
Adam Schatzker has visited Emerita Resources Corp. in the past 18 months.
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