Emerita Resources (TSXV: EMO, OTCQX: EMOTF, FSE: LLJA) is one of those Canadian exploration mining companies which saw their market cap decrease to reach the undervalued area. Down 77% YoY, the company focused on the acquisition, exploration, research, and development of properties in Spain can provide a significant return on investment to its shareholders. Emerita has a focus on zinc, copper, silver, and gold.

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Company Overview

Interesting fact, the word Emerita doesn’t represent an area or a random name; it has a deeper meaning that digs into ancient civilizations. First, “Emerita” significates “deserving/worthy/entitled to/person of merit” in Latin. Furthermore, it also evocates Emerita Augusta, one of the major cities of the Roman Empire in Spain. Emerita Resources has 100% interest in the Iberian Belt West (IBW), located in the Iberian Pyrite Belt in Southern Spain.

The IBW project is hosted within the Iberian Pyrite belt, one of the world’s most productive VMS terranes. The project hosts three deposits, La Romanera, El Cura, and La Infanta, where it operates 14 drill holes. These projects are as old as the company’s name as they retrace Roman times. The Romanera deposit was drilled primarily by Minera Rio Tinto in the 1990s and is reported to contain 34 million tonnes grading 0.42% copper, 2.20% lead, 2.3% zinc, 44.4 g/t silver, and 0.8 g/t gold, within which there is a higher-grade resource of 11.21 million tonnes grading 0.40% copper, 2.47% lead, 5.50% zinc, 64.0 g/t silver and 1.0 g/t gold. The company announced further drilling results on December 7. Emerita intersected 19.7 meters, grading 10.9% zinc, 1.7% lead, and 74.6 g/t silver 150 meters east of historical drilling. The company expects further drilling to continue into early 2023. Regarding La Infanta zone, it is located 8 Km to the East of the La Romanera deposit. The zone has been drilled from the surface where it outcrops to a depth of approximately 100 meters, with numerous high-grade intercepted occurring within the zone. Both projects will be added to the NI 43-101 mineral resources estimate.

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Now, let’s focus on Aznalcollar and its unusual story. The area is regarded as one of the most undeveloped zinc deposits in the world, with a historical resource for the Los Frailes deposit estimated at 20 Mt grading +10% Zn+Pb (Ag) and remains open for expansion. The Aznalcóllar Project is a past-producing property within the Iberian Pyrite Belt that hosted the Aznalcóllar and Los Frailes open pit zinc-lead-silver mines. The project focuses on the redevelopment of the Los Frailes deposit, which was initially developed in the mid-1990s. As calculated by the previous mine operator, the historical open pit mineral resource was estimated to be 71 million tonnes grading 3.86% zinc, 2.18% lead, 0.34% copper, and 60 ppm silver.

Where is the unusual story? In October 2019, Emerita was granted the property by five judges of the Superior Court and indicated that the competing bid was disqualified because they didn’t meet the tender requirements, leading the judges concluding to a crime, and in conclusion, to the trial of 16 individuals. The commission of a crime automatically disqualifies the competing bids, leaving Emerita as the only bidder. The Court has reserved up to 40 sessions, including days in March, April, May, June, and July 2025.

“We are pleased that the Court has provided us with a court date and firm timeline for concluding the Aznalcóllar criminal case. It was a surprise to Emerita that the date was set so far in the future. The company is consulting with its external Spanish legal counsel to explore whether anything can be done to accelerate the process.”

David Gower, Chief Executive Officer of Emerita

Once the acquisition turns successful, the company will commence immediate work upon receiving appropriate permits to conduct drilling on the property and complete an NI 43 101 compliant mineral resource estimate required for the completion of a feasibility study to support the development of a mining operation at the site.

Share Structure / Financials

Emerita Resources probably has one of the best balance sheets amongst mining exploration companies. According to the company’s financial statement released for the period ending June 30, 2022, Emerita has more than $23M in cash for no liabilities. The company has high expenses ($2.2M for project evaluations), totaling $2.7M for the last quarter. Expressly, drilling, geophysics, and labor represent the most significant expenses. Besides, the solid cash-on-hand position prevents the company from short-term dilution.  

About the share structure, 204M shares are issued and outstanding, for 236M shares are fully diluted. 18M shares are in the bank for an estimated $22M. They range from $0.10 to $2.75. The company owns 9.3M warrants for a total value of $13M. Albeit they have a reasonable pricing, most of those warrants are above $1 and expire in July 2023. EMO is traded at $0.70 and went as low as $0.52 and up to $3.84 for 52-week ranges.

Bottom Lines

Emerita Resources (TSXV: EMO, OTCQX: EMOTF, FSE: LLJA) has everything to become a significant mining player. The company has a strong balance sheet with $23M in cash for no debt and is involved in a mining-friendly jurisdiction. Emerita is currently at an inflection point. Recent successful exploration and drilling will be incorporated into NI 43-101 mineral resource estimate and take the IBW Project to the next stage of development. At the same time, the company awaits a positive resolution of the Aznalcollar legal case. With the company being this undervalued, it would be too bad to miss this opportunity.

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