Elementos Ltd (ASX:ELT, OTC:ELTLF)’s Oropesa Project in Spain was recently named one of the seven significant mining projects assigned to the Government of Andalucía’s Project Accelerator Unit.
The Accelerator Unit was formed to centralise and streamline regulatory assessments and provide further government support to ensure the successful start-up and execution of projects.
“Most significant regulatory step in the project’s development to date”
The Accelerator Unit’s scope of action includes promoting strategic projects that, due to their importance or nature, contribute to the achievement of the objectives of Andalusía.
Elementos managing director Joe David said he was appreciative of the Junta’s support, describing it as the most significant regulatory step in the project’s development to date.
David added: “It affirms the project’s significance to the region and the strong working relationship we have formed with regulators.
“We look forward to now working even closer with the Junta de Andalucía to bring the Oropesa Tin Project into operation for the benefit of the region and all stakeholders.”’
“The Unit will also assist coordinating with the different ministries with powers over the procedures that affect investment initiatives, as well as with the corresponding local administrations,” David said.
He said that as part of Oropesa’s Definitive Feasibility Study currently underway, an Optimisation Study was due for release within a month and would confirm Oropesa’s size and scale as well as serve regulatory submissions.
“Applications for both the Environmental Impact Assessment (EIA) and Exploitation (Mining) Licence are also in an advance drafting status,” he added.
Shares reiterated a ‘buy’
Following the assignment of Oropesa to the Andalucían Government’s Project Accelerator Unit, BW Equities reiterated its ‘buy’ recommendation for Elementos.
The following is an extract from the research update:
Accelerated Regulatory Pathway: ELT has announced that an application to the Andalucian Government's "Project Accelerator Unit" has been successful, placing Oropesa into a small group of only 7 mining projects in the region to be admitted to the program. This paves the way for a streamlined approvals process for Oropesa and highlights the strength of the established partnership between ELT and relevant local authorities. We note the elections scheduled for later this year and think that the move signals the political imperative emerging for the need to stimulate regional jobs and investment. As the economics of Oropesa are highly attractive in the current tin price environment, a faster than expected approvals process provides a potentially expediated pathway for the project over the near-term.
Tin Price Update: The London Metal Exchange tin price has achieved fresh record highs of US$50,000/t (cash) (~US$22.68/lb) in early March and has since corrected to the current price of US$42,700/t. Extreme volatility has emerged in recent weeks across commodities markets as conflict between Russia and Ukraine has escalated, which has cast significant uncertainty on the supply of many key commodities. While we expect volatility is likely to continue over the course of this year, we note that the current tin price is more than double that assumed in the May 2020 Economic Assessment completed for the Oropesa project (US$19,750/t), and significantly above the current base-case tin price assumption adopted in our financial modelling (US$30,000/t). Assuming spot tin prices (US$42,700/t) are received over the project life in our DCF analysis, implies a valuation of $2.00/share for ELT shares.
2022 Milestones: Completion of the DFS for Oropesa is scheduled for "the second half of 2022" and by the end of this month ELT will release an optimisation/scoping study which will provide an indicative look at the updated project specs. We believe an 18-24-month timeline to construct the project will follow a positive DFS, putting Oropesa on track to achieve first production in 2025.
Valuation & Recommendation: ELT provides investors with exposure to a tin project in a stable geographic region (Spain), with a defined economic assessment which shows very strong fundamentals at current tin prices. Oropesa has modest pre-production capex requirements (we assume US$75m for an expanded 1 mtpa process plant) for an open-pit mining operation and conventional processing circuit. The shares trade at a significant discount to our $1.00/share (AUD) valuation, set using a tin price of US$30,000/t (spot LME = ~US$42,700/t) and DCF valuation analysis. As such we reiterate our Buy rating. Key risks include the availability of funding, tin prices, permitting/approvals and operational issues.