Elementos Ltd target price raised by BW Equities after tin resource upgrade exceeds expectations


BW Equities raised the Elementos share price target to 4.5 cents per share from 3 cents given the recent increase in tin resources and the high spot price of tin of over $ 37,000 / t.

Elementos Ltd (ASX: ELT, OTC: ELTLF) received a target price increase from BW Equities after the company exceeded expectations with a 50% increase in resources for its 100% owned Oropesa Tin project in Spain, at 18.86 million tonnes at 0.40% tin (Sn) at a threshold of 0.15% Sn.

This includes a 78% increase in measured and reported ERM to 16.21 million tonnes, from 9.34 million tonnes reported in 2018.

Along with the increase in resources, BW Equities also incorporated a higher tin price of US $ 30,000 / t in its valuation given the very high tin spot price of> US $ 37,000 / t (LME) to increase the target price of Elementos by 50% to 4.5 cents per share from 3 cents.

Here’s a snippet of the research update:

Updated mineral resources: Following the incorporation of the 44-hole diamond drill program which showed numerous intersections at shallow depths of less than 100m, ELT reported a 50% increase in Oropesa’s mineral resources which now stands at 18.9 mt at 0.40% Sn (previously 12.5 mt at 0.54% Sn). Confidence in the mineral resource improved with a significant improvement in the categorized measured and indicated resource of + 78% at 16.2mt at 0.38% Sn (previously 9.3mt at 0.55% Sn). The overall grade reduction mainly reflects the incorporation of shallow low grade tonnes (

Implications of the mining plan: The larger and shallower resource will form the basis of the mine planning studies and the most likely / significant implications compared to the economic study published in May 2020 are (1) lower overall stripping ratio compared to estimate of 11.7: 1 and (2) potential to increase the production capacity of the processing plant which was previously set at 750 ktpa. If we assume a 75% conversion of the current resource of 18.9 mt in the mine plan (an approximation based on the conversion factor observed in the previous economic study), the potential mine plan inventory is approximately 14 tm. As such, we would expect a lifespan of over 10 years at a 1 mtpa process plant flow rate to make sense. If the shallow component (4.97 mt) is included in its entirety, at a striptease ratio (SR) of ~ 3x and the preexisting 11.7x for the rest, we get an overall adjusted SR of ~ 8, 5x.

Revisions: We have revised our mine plan assumptions to incorporate a 1 mtpa (previously 750 ktpa) operation with a 12 year operating life (13.5 years previously). We incorporate the lower average head grade according to the updated resource, and a stripping ratio of 8.5x as shown above, resulting in an average annual tin production of 3.3 ktpa. We assume a higher capital expenditure of US $ 75 million to reflect the expansion of the processing plant (US $ 52 million previously). We also incorporate a higher tin price of US $ 30,000 / t (previously US $ 25,000 / t) given the very high tin spot price of> US $ 37,000 / t (LME). Our price target has been revised accordingly to AUD 4.5 c / share (previously AUD 3 c / share). At spot tin prices of US $ 37,500 / t, our valuation would rise to 7.1 cents / share.

Assessment and recommendation: ELT provides investors with exposure to a tin project in a stable geographic region (Spain), with a defined economic valuation that shows very strong fundamentals at current tin prices. Oropesa has modest pre-production investment needs (we assume US $ 75 million for an expanded lmtpa processing plant) for surface mining and a conventional processing circuit. The shares are trading at a significant discount to our valuation of 4.SC/action (AUD), established using a tin price of $ 30,000 / t (LME spot = $ 37,500 / t) and a DCF valuation analysis. As such, we reiterate our purchase note. The main risks include the availability of financing, tin prices, permits / approvals and operational issues.

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