Sprott Report 9 June.

9 June 2021.

Ticker: EMR Net cash:(A$31m) Project:Okvau Market cap: A$546m Price: A$1.06/sh Country: Cambodia RECOMMEND.(unc): BUY TARGET (up): A$1.35/sh
A$75m equity raise seeing Ruffer, Franklin, ASA, Van Eck and CQS report notifiable holdings as COVID worsened. However, it was a team that had done it before, building Bonikro on time and on budget during the Ivory Coast civil war.

We wrote at the time that the company was ‘well placed to deliver first gold in 2Q21’, and it seems we are weeks away from hitting just that, and those investors are now enjoying +25% YTD and +116% 12M share price performances. For those that didn’t get involved back then –this is just the beginning. Firstly, at 2g/t Okvau is already far above peers such as Capricorn (0.9g/t), further management has built-in some many redundancies (rather than sweat the DFS) from grade to recovery and throughput that there is excellent potential for the project to beat the BFS metrics. Next, if Emerald finds a second operation in Australia, their home turf, franking credits on dividends from Okvau would make the stock more attractive, as would a second operation. As peers such as Ora Banda and Capricorn also approach commercial production, investor's thoughts should look beyond ‘will it work’ to ‘what next’ and Emeralds unmatched ability to build-cheaper gives them a strong advantage in that regard.

.At spot US$1,894/oz in steady-state, SCP e ~A$100m pa FCF. Outside M&A, first gold production will be followed by (i) near-mine drilling to lift reserves, with a high likelihood of (ii) an UG, ahead of (iii) ~US$3-6m pa exploration regionally –which is already underway –on strategic >1,200km2first-mover holdings. With the ability to operate in Cambodia, and Cambodia itself eminently de-risked, we lift our NAV multiple from 1.0x to 1.2x to capture the above upside.

As such, we maintain our BUY rating,lifting our 1.2xNAV5%-1850PT from 115cto 135c/sh.

The winning team comes: commissioning marks start of a bigger journey still. Emerald has commissioned the crushing circuit and is now processing the 245kt oxide ROM ore in start-up wet commissioning ahead of a maiden gold pour targeted for this month. The power station is electrified, TMF complete, and gold circuit ramping up, leading management to thank contractors and suppliers and their own development team. Hard-rock ore will be fed to the circuit in the coming weeks to commission the float regind circuit. (Back end is whole ore leach)

Why we like Emerald

• Vanilla open-pit CIL
• Management built six mines on time and on budget at Equigold and Regis
• Management aligned with holders as A$19m equity invested 
• Acquisition debt facility, and ‘low capex’ IP of management, should enable growth via M&A

Catalysts

• 2Q21: Regional drilling at Snoul (~25km NW of Okvau) then Okthung/Preak Klong (9km south)

• 2Q21: First pour

• 2H21: First exploration recently granted Memot licence (historic mechanised artisanal operation)

Brock Salier(London) M: +44 7400 666 913 [email protected]