Emerita Resources Corp.EMO-TSX.V: $1.81 (mid-market)Rating: Speculative BuyTarget: $5.00Maintaining Conviction in Emerita’s Ability to Deliver on Aznalcollar
We highlight the consistent progress EMO has made towards delivering on milestones in respect to the IBW (now 100% owned) and Aznalcollar projects. We believe the progress to date firmly validates two critical points:
1. The Spanish legal system works;
2. Emerita management’s ability to successfully navigate the Spanish legal system.
Overall, the company’s progress to-date gives us confidence in the Spanish judicial system with regard to the Aznalcollar case and in Emerita’s ability and strategy to resolve the legal dispute under Spanish law.
In the attached PDF, we lay out the progression of events to date. As a reminder, the prevailing market/investor opinion at the start of these journeys was very cynical, with Emerita not expected to win either of these projects. We highlight that Emerita was awarded the IBW project in Sep. 2020, after a six year long legal administrative dispute against the then Junta government. While the wheels of justice grind slower than anticipated in Spain, we believe the Aznalcollar case is in its final stages of Oral hearings (read sentencing) in the Criminal Court case, with a date for the hearings expected to be announced in the ‘Spanish’ near-term. The process so far has been delayed due to COVID and several judges taking early retirement. Importantly, a lead judge (ngel Mrquez Romero) has now been assigned for the criminal case, indicating that this final process is now well underway. If any of the 16 individuals are found guilty, the original tender will be disqualified, and the property will be awarded to the next qualified bidder at the time of the initial tender, which is Emerita in this case.
The Criminal Court is the higher court vs Administrative Court. As a result, we feel it was a prudent strategy for Emerita to request the Administrative Court to align its ruling with the Criminal Court to minimize risk on the final outcome of the dispute (refer Clarus note dated May 2, 2022). We further note that all levels of the Criminal Court to date have ruled in Emerita’s favour, confirming criminal charges on the members of the former Junta gov and Minorbis – a trend we firmly believe will continue.
As investors wait for the court decisions, drilling/exploration news flow will be ramping up from the recently permitted Romanera and El Cura projects as well as from the 100% owned Neuvo Tintillo asset located near Aznalcollar.