(EMO.V) (EMOTF-OTC) After waiting 6 years Emerita has finally begin their first drill program on the three deposit within The Paymogo Project which is located in Southwestern Spain. Geologically, the project is underlain by rocks of the Iberian Pyrite Belt (IPB) which is a prolific VMS terrane with numerous current and past producers of base metals sulphides. Paymogo hosts three previously deposits named La Infanta, El Cura and the Romanera, all these deposits remain open.

Important Facts to Remember: 

1. This is the first time in history those 3 deposit are contained in a single land package. 
2. No drilling has been preformed in 20 years. 
3. The historical resources total +14 million tons of high-grade Zinc, Lead, Gold, Silver, Copper were drilled out by Rio Tinto and Phelps Dodge 
4. Most of the historical resources across these deposits didn't include assaying for all Gold and Silver.
   

The results are outstanding to say the least now that all the gold and silver are included. Gold was ever assayed for at La Infanta prior

La Infanta Results: Multiple samples exceeding $2000 USD

Metal Values: $1470, $565, $2146, $2447, $2002, $2415, $1979, $1577

La Infanta assays broken down: 

Lowest value = $565.76 

Highest = $2446.88 

Average including all gold and silver = $1825.46.  

Historically Resource Average = $1000/ton

On average 82% higher then in historically resource grade and  grade increasing as they step out along strike at surface.

NOTE: Remember the furthest hole along strike at La Infanta intercepted $1696/ton in value over 5.3 meters 

 Every new 1 million tons added at La Infanta at average grade from samples = $1.825 Billion in gross metal. 

$250-300/t is generally good, the historically average at La Infanta $1000/ton is ultra high-grade. The step out along strike sampling averaged ultra-ultra high grade at a whooping $1826/ton increasing strike by 800 meters to a total of 1200 meters.

Why did the past owner stop drilling if it was so good?

Great question, that was answered prior in David’s YouTube interview, prior when the La Infanta was owned by Phelps Dodge it was a small postage size property,  the last historical hole 5.3 meters @ $1696/Ton was drilled at the property boundary. 

The Highest Value to date isn't at surface, it's in the mineralized resource body below:  $2671.70/ton, @ .43 meters, very mineable and high grade when diluted to a min. width of 2 meters = +$500/ton

Now all 3 deposits are in 1 land package for the first time in history and can be expanded to their full potential and developed into 3 mines feeding 1 mill, 100% owned with zero royalties, that economies of scale with 14 million tons combined worth +$6.5 billion at a grade +450/ton, beginning at surface at mineable widths.

Romanera Assays: Multiple samples with the gold and silver alone +$400 USD The highlighted area show the incredibly high gold and silver credits in the samples.

Metal Values: $984, $999, $515, $670, $418, $1159, $721, $973, $656

Romanera Assays explained: 

Low = $418.25 

High = $1159.47

Average including all gold and silver = $788.42 

Historically Resource Average = $375/ton 

On average +100% higher due to full assays for gold and silver. this is the first time that was ever done. 

The implications are huge to the upside due to extremely high values of gold and silver shown above because most the 11.2 million tons of historical resource wasn't assays fully for gold and silver.  That means those tons are most likely worth a lot more than reported historically.

This also bodes extremely positively for the expansion of resource through drilling later this year.

Remember the last hole drilled along strike intercepted a +20 meters of  high-grade mineralization. See below.

  

NOTES:

The expansion and upgrading of the existing average value per ton at both La Infanta and Romanera is a very, very reasonably conclusion given the extremely high value found in the sampling program that now INCLUDED gold and silver in the assays. 

These full assays from samples at both deposits including gold and silver can reasonably add 25%-35% to just the historically resource value, increasing it by +$1.7 billion USD to +$2.6 billion USD to a total metal value across the 3 deposit of approx. $8.1 billion USD to $8.8 billion USD on this 100% owned and royalty free land package. 

These assays also go along way to increase confidence that not only will the historical high-grade resource be proven up to be 43-101 compliant but also that the grade will far exceed the historical resource grade now that all the gold and silver is being assayed.

The blended value of these already historically defined 14 million tons of resource that would feed a single mill once all gold and silver is included should exceed $600/ton with rich PM credits. 

The below doesn't contemplate the adding more tons through drill bit, which they obviously will.  The 5.3 meter wide zone at La Infanta and +20 meter wide zone at Romanera intercepted in the furtherest historical drill holes along strike won't just suddenly disappear, there are more high grade tons to be added yet, that's certain. 

The adding of tons has already begun at La Infanta, the 5000 meters drill program is underway, those assays due in 3-4 weeks then Emerita will drill 5000 meters at Romanera later in season.

WHAT IT'S WORTH?

**Using todays spot prices for Gold, Silver, Zinc, Lead, Copper**

La Infanta, El Cura and Romanera alone are worth a MARKET CAP OF  +$300 Million USD. 

***THIS IS A CONDENSED FINANCIAL MODEL: the discounted fcf rate, associated costs, taxes, mining, G&A,  maintenance, gains on depreciation expense, capitalization of fixes assets and development, tax losses carried forward, etc,  are bundled together. The model assumes in the end  $.70 of every $1 generated goes into those items. Currently, there is no FS or PEA to go by. Assigning 70% of revenue covers all expenses in my opinion over states the ultimate cost and understates the FCF of the life of the mine due to it's high-grade, mineralization begins at surface and that these 3 deposits are extremely close together.***

14 million tons historically INCLUDING THE GOLD AND SILVER perviously not assayed = $8.5 billion in gross metal value x 80% blended recovery factor = Net Recovered Payable Metal $6.8 Billion USD 

 Assumption: Cap Ex of $300 USD million for a 3000t/d Mill and mine development

Mine Life = 12.78 year mine life 

Annual Rev = $532 million USD

30% Cashflow Margin over life of mine due to high-grade, beginning at surface, all three deposits occurs across a 7km line  = $1.95 Billion USD Cashlfow

$1.95 Billion USD Cashlfow - Cap Ex $300 million USD =  Free Cashflow/ NPV $1.65 Billion USD

Yearly Free CashFlow = $128 Million USD

EMO/EMOTF

Current Market Cap: $66 Million USD

 5.5 million in Cash Canadian

IMPORTANT POINT TO BE CONSIDERED

Even without increasing tons or increasing the value per historical ton from full gold and silver assays the historical resource of 14 million tons already has a blended average value of $464/ton USD and the shares are undervalued by a factor of 4x-6x .  Understand the Model assumes that 70% of all the payable metal goes into the cost of running the mine, that's aggressive but drives the point home.

$6.5 Billion Gross Metal  x .8 Recovery Factory= $5.2 Billion USD Payable Metal

$5.2 Billion Payable Metal x .3 cashflow margin = $1.56 Billion USD Cashflow

 $1.56 Cashflow  - 300 Million Cap Ex c = NPV $1.26 billion USD

Annual Rev: 407 Million USD

Yearly Free Cashflow = $99 Million USD

Mine Life: 12.78 Years

1.26 Billion USD NPV x .2 Market Multiple  = $252 million USD Market Cap.

Implied Upside = 3.8x

$1.26 Billion USD NPVx .3 Market Multiple =$ 378 miilion USD Market Cap.

Implied Upside 5.7x

That's known today, without any drilling to expand, I only assume conformation drilling to make the historic resource 43-101 compliant which has begun.

This is an owned land package, no royalties, mineralization comes to surface, no pre-stripping, at surface, high grade ore, lots of gold and silver, zinc, lead, copper. 3 deposits,  7km apart feeding 1 mill in the future and Romanera is already at a PFS stage. 

This is the starting point before expansion of tons from this years drill programs. 

I believe they will be successful in adding 7-9 million tons increasing the mine life to 20 years. 

Where's the downside? Maybe the ore isn't there? I don't think so, the samples proved exception grades on the deposits and Rio Tinto and Phelps Dodge did the historical drilling and resource reports. 

I think this is why Eric Sprott invested $3 million, taking 10% of the company just 3 hours after they were awarded the land by the Spanish Court.  I believe he knew his downside risk was next to nothing compared the the value of historical resources on these 3 deposits, especially when not all the gold and silver were included.  On its own, The Paymogo Project is worth multiple of the current share price.   

Then later in June, If (more like "when" based on the data) Emerita is awarded the Aznalcollar project the upside compounds drastically.   

Once current 5000 meter drill program confirms historical grades at La Infanta in 3-4 weeks when the first assays are due to hit the market. The model will be verified and a repricing of that risk removed will occur.

Oh, don't forgot about the Aznalcolliar Project upside.