Emerita Resources Corp. (EMOTF) has secured a significant financial boost for its Iberian Belt West (IBW) project in Spain. The company has entered into a loan financing agreement with Nebari Natural Resources Credit Fund II LP, securing up to US$15 million in non-dilutive capital. This funding will be crucial in propelling the IBW project forward, especially given the challenging equity market conditions currently facing resource companies.
The loan will be disbursed in three tranches: US$6 million, US$4.5 million, and another US$4.5 million. The initial tranche is mandatory, while the subsequent tranches are at Emerita’s discretion and contingent on meeting specific conditions. This flexible structure allows Emerita to manage its cash flow effectively and allocate funds as needed for project development.
David Gower, CEO of Emerita, highlighted the significance of this transaction, stating, “This transaction with Nebari gives Emerita access to up to US$15 million of non-dilutive capital in a challenging equity environment for resource companies and allows the company to maintain the momentum in developing its ongoing Spanish projects.” The funds will be directed towards exploration, geological drilling, environmental permitting, and general administrative costs associated with the IBW project.
The loan carries a floating interest rate, calculated as the Secured Overnight Financing Rate (SOFR) plus 11.50% per annum, offering flexibility in repayment. Emerita has the option to repay the loan before its maturity date. As part of the agreement, Emerita will also issue common share purchase warrants, with specific terms linked to the Canadian equivalent of each tranche.
The mining sector is experiencing a positive shift, with tailwinds emerging after a period of headwinds. Commodity prices, particularly for copper, gold, and critical transition materials like lithium and nickel, are showing signs of recovery. This trend could benefit resource companies like Emerita, bolstering their financial health and allowing them to maintain strong balance sheets while focusing on delivering returns to shareholders.
The loan agreement with Nebari positions Emerita for significant progress in the IBW project, particularly considering the ongoing legal cases surrounding the Aznalcollar project. The financing ensures that Emerita can continue developing its project without resorting to equity dilution, a significant advantage in the current market environment.
Steven Bowles, Managing Director at Nebari, expressed confidence in Emerita’s potential, stating, “Nebari is extremely excited to partner with Emerita Resources as it advances the IBW project. We are impressed with the experience and professionalism of the Emerita and IBW teams and have the utmost confidence in their ability to continue to unlock value at IBW and beyond.”
This financing strengthens Emerita’s position ahead of anticipated milestones in 2025, including the resolution of the Aznalcollar cases. The structured tranches allow Emerita the flexibility to draw funds as needed, aligning with the company’s project timelines and anticipated developments, thus providing additional security and potential value for shareholders.
Clarus Securities analyst Varun Arora conducted a detailed analysis of Emerita Resources Corp. following the release of a maiden resource estimate for its Iberian Belt West (IBW) project. In a research note dated June 24, Arora emphasized the significant potential of the IBW project, stating that it “puts it in the league of high-quality projects advancing toward production.” Based on this resource estimate, Clarus Securities assigned a target price for Emerita of CA$3.75, representing an over 400% increase from the price at the time of this article. Arora also maintained a “Speculative Buy” rating.
Arora highlighted the robust nature of the resource, stating, “We believe the maiden resource confirms our view that IBW will be a mine with our estimated CA$730 million (CA$730M) net present value.” He further pointed out that the resource is “comparable in size and grade to current advanced stage polymetallic projects that are trading at seven-plus times Emerita’s CA$110M market cap.”
Arora also discussed the resource’s composition, reporting that the global resource at IBW, including Measured and Indicated (M&I) plus Inferred resources, is 18.8 million tons (18.8 Mt) of about 8% zinc equivalent. He remarked, “With about 75% of the resource in the Measured and Indicated (M&I) category, we believe this is a robust resource.”
Additionally, Arora pointed out the potential for further resource expansion at Romanera and Infanta, which remain open for exploration, as well as at the El Cura deposit, where drilling recently commenced. He concluded that ongoing infill and expansion drilling at IBW with six rigs active could further enhance the project’s value.
According to Reuters, management and insiders own approximately 5.13% of Emerita. Michael Lawrence Guy holds 1.54% of the company, David Patrick Gower owns 1.12%, Joaquin Merino-Marquez owns 0.84%, Catherine Stretch owns 0.65%, and Marilia Bento owns 0.4%. Institutions own 1.19% of the company, with Merk Investments LLC holding 1.11%. Refinitiv reports that there are 247.39 million shares outstanding, with 234.7 million free float traded shares. The company has a market cap of CA$180.54 million and trades in a 52-week range of CA$0.23 and CA$0.78.
